[Federal Register Volume 77, Number 34 (Tuesday, February 21, 2012)]
[Notices]
[Pages 10026-10033]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-3902]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66394; File No. SR-CBOE-2012-005]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change Related to 
Stock-Option Processing

February 14, 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 February 7, 2012, the Chicago Board Options Exchange, 
Incorporated (``Exchange'' or ``CBOE'') filed with the Securities and 
Exchange Commission (the ``Commission'') the 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange is proposing to amend its complex order processing 
rules to revise the procedures for electronically processing stock-
option orders. The text of the rule proposal is available on the 
Exchange's Web site (http://www.cboe.org/legal), at the Exchange's 
Office of the Secretary and at the Commission.

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

    In its filing with the Commission, the self-regulatory organization 
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 those 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 parts of such statements.

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

1. Purpose
    The Exchange proposes to revise is [sic] procedures for 
electronically processing stock-option orders under Rule 6.53C in order 
to (i) revise the procedures for routing the stock leg of a stock-
option order; (ii) modify the procedure for executing for [sic] stock-
option orders to no longer permit ``legging,'' except in one limited 
context; (iii) modify the default electronic allocation algorithm 
applicable for stock-option orders in the complex order book (``COB'') 
and the complex order RFR auction (``COA''); \3\ (iv) incorporate an 
additional price check parameter specific to the electronic processing 
of stock-option orders and modify an existing price check parameter and 
re-COA features (described in more detail below) to apply to stock-
option orders; and (v) make other changes to reorganize and simplify 
the rule text. In addition, the Exchange is proposing certain changes 
to simplify the definitions for complex orders, including stock-option 
orders, subject to electronic processing under Rule 6.53C.
---------------------------------------------------------------------------

    \3\ COA is a process for auctioning eligible complex orders, 
including stock-option orders, for price improvement. See Rule 
6.53C(d) and .06(d).
---------------------------------------------------------------------------

Designated Broker-Dealer(s)
    The first purpose of this proposed rule change is to revise the 
procedures for routing the stock leg of a stock-option order. 
Interpretation and Policy .06 to Rule 6.53C, Complex Orders on the 
Hybrid System, currently describes the procedure for processing 
electronic stock-option orders. The procedure provides that the stock 
portion of a stock-option order shall be electronically executed on the 
CBOE Stock Exchange, LLC (``CBSX,'' CBOE's stock execution facility) 
consistent with CBSX order execution rules. The Exchange proposes to 
revise the process to instead provide that the Exchange will 
electronically transmit orders related to a stock leg for execution by 
a broker-dealer designated by the Exchange (a ``designated broker-
dealer'') on behalf of the parties to the trade. The Exchange will 
transmit the underlying stock leg order to a designated broker-dealer 
for execution once the Exchange trading system determines that a stock-
option order trade is possible and at what net prices. The stock leg 
component will be transmitted to the designated broker-dealer as two 
paired orders with a designated limit price, subject to one limited 
exception pertaining to the stock leg of an unmatched market stock-
option order (which is described in more detail below). The designated 
broker-dealer will act as agent for the stock leg of the stock-option 
orders. The designated broker-dealer may determine to match the orders 
on an exchange or ``over-the-counter.''
    To participate in this automated process for stock-option orders, 
an Exchange Trading Permit Holder (``TPH'') must enter into a customer 
agreement with one or more designated broker-dealers that are not 
affiliated with the Exchange.\4\ In addition, TPHs may only submit 
complex orders with a stock component if such orders comply with the 
Qualified Contingent Trade Exemption (the ``QCT Exemption'') from Rule 
611(a) of Regulation NMS.\5\ TPHs submitting such complex orders 
represent that such orders comply with the QCT Exemption. The Exchange 
intends to address fees related to routing

[[Page 10027]]

the stock portion of stock-option trades in a separate rule change 
filing.
---------------------------------------------------------------------------

    \4\ This provision for a designated broker-dealer is similar to 
a provision in the International Securities Exchange Rule 722.02, 
except that CBOE's proposed provision makes it clear the broker-
dealer(s) that are designated by the Exchange to perform this 
function are not affiliated with CBOE.
    \5\ 17 CFR 242.611(a).
---------------------------------------------------------------------------

    The Exchange believes that the electronic communication of the 
orders by the Exchange to the designated broker-dealer is a more 
efficient means for processing stock-option orders than the system of 
routing orders to CBSX. The designated broker-dealer will be 
responsible for the proper execution, trade reporting and submission to 
clearing of the stock trade that is part of a stock option order. In 
this regard, once the orders are communicated to the broker-dealer for 
execution, the broker-dealer has complete responsibility for 
determining whether the orders may be executed in accordance with all 
the rules applicable to execution of equity orders, including 
compliance with the applicable short sale, trade-through and trade 
reporting rules. As with the current procedure, if the broker-dealer 
cannot execute the equity orders at the designated price, the stock-
option combination order will not be executed on the Exchange.\6\
---------------------------------------------------------------------------

    \6\ See existing Rule 6.53C.01(a) and proposed changes thereto.
---------------------------------------------------------------------------

    With respect to trade throughs in particular, the Exchange believes 
that the stock component of a stock-option order is eligible for the 
QCT Exemption from Rule 611(a) of Regulation NMS. A Qualified 
Contingent Trade (``QCT'') is a transaction consisting of two or more 
component orders, executed as agent or principal, that satisfy the six 
elements in the Commission's order exempting QCTs from the requirements 
of Rule 611(a), which requires trading centers to establish, maintain, 
and enforce written policies and procedures that are reasonably 
designed to prevent trade-throughs.\7\ The Exchange believes that the 
stock portion of a complex order under this proposal complies with all 
six requirements.\8\ Moreover, as explained below, CBOE's Hybrid System 
will validate compliance with each requirement such that any matched 
order received by a designated broker-dealer under this proposal has 
been checked for compliance with the exemption to the extent noted 
below:
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 57620 (April 4, 
2008), 73 FR 19271 (April 9, 2008) (``QCT Release''); see also 
Securities Exchange Act Release No. 54389 (August 31, 2006), 71 FR 
52829 (September 7, 2006).
    \8\ As discussed in more detail below, the stock component of 
all stock-option orders will be transmitted to a designated routing 
broker as paired stock orders with a specified limit price, with one 
limited exception. The exception pertains to the stock leg of an 
unmatched market stock-option order. In the limited circumstances 
when the Exchange transmits the stock component leg of an unmatched 
market stock-option order to the designed [sic] routing broker, such 
a stock component leg will be subject to NBBO pricing (and therefore 
not be processed subject to the QCT Exemption).
---------------------------------------------------------------------------

    (1) At least one component order is in an NMS stock: The stock 
component must be an NMS stock, which is validated by the Hybrid 
System;
    (2) All components are effected with a product or price contingency 
that either has been agreed to by the respective counterparties or 
arranged for by a broker-dealer as principal or agent: A complex order, 
by definition, is executed at a single net credit/debit price and this 
price contingency applies to all the components of the order, such that 
the stock price computed and sent to the designated broker-dealer 
allows the stock order to be executed at the proper net debit/credit 
price based on the execution price of each of the option legs, which is 
determined by the Hybrid System;
    (3) The execution of one component is contingent upon the execution 
of all other components at or near the same time: Once a stock-option 
is accepted and validated by the Hybrid System, the entire package is 
processed as a single transaction and each of the option leg(s) and 
stock components are simultaneously processed;
    (4) The specific relationship between the component orders (e.g., 
the spread between the prices of the component orders) is determined at 
the time the contingent order is placed: Stock-option orders, upon 
entry, must have a size for each component and a net debit/credit price 
(or market price), which the Hybrid System validates and processes to 
determine the ratio between the components; an order is rejected if the 
net debit/credit price (or market price) and size are not provided on 
the order;
    (5) The component orders bear a derivative relationship to one 
another, represent different classes of shares of the same issuer, or 
involve the securities of participants in mergers or with intentions to 
merge that have been announced or since cancelled: Under this proposal, 
the stock component must be the underlying security respecting the 
option leg(s), which is validated by the Hybrid System; and
    (6) The transaction is fully hedged (without regard to any prior 
existing position) as a result of the other components of the 
contingent trade: Under this proposal and as discussed in more detail 
below, the ratio between the options and stock must be a conforming 
ratio (e.g., largest option leg to stock cannot exceed a ratio of 
eight-to-one and multiple options legs cannot exceed a ratio of three-
to-one), which the Hybrid System validates, and which under reasonable 
risk valuation methodologies, means that the stock position is fully 
hedged. In addition, if all option and stock component legs are on the 
same side of the market, which the Hybrid System also validates, then 
the order will not be eligible for electronic processing pursuant to 
Rule 6.53C.
    Furthermore, as noted above, proposed Rule 6.53C.06(a) provides 
that TPHs may only submit complex orders with a stock component if such 
orders comply with the QCT Exemption. TPHs submitting such complex 
orders with a stock component represent that such orders comply with 
the QCT Exemption. Thus, the Exchange believes that complex orders 
consisting of a stock component will comply with the exemption and that 
the Hybrid System will validate such compliance as noted above to 
assist its designated routing broker(s) in carrying out its 
responsibilities as agent for these orders.
    The Exchange believes the new process offers effective and 
efficient automatic execution for both the options and stock components 
of a stock-option order and it should promote just and equitable 
principles of trade and remove impediments to and perfect the mechanism 
of a free and open market and a national market system by enhancing the 
electronic processing of the stock-option orders. However, this process 
is not exclusive. The Exchange notes that TPHs will be able to continue 
using open outcry procedures for executing stock-option orders if they 
choose to do so.\9\ TPHs can also utilize other exchanges' systems 
(several of which offer stock-option processing) or avoid using stock-
option orders.
---------------------------------------------------------------------------

    \9\ Stock-option orders may be represented in open outcry by 
floor brokers or Exchange PAR Officials. See, e.g., Rules 6.45A(b) 
and 6.45B(b).
---------------------------------------------------------------------------

Legging

    In conjunction with this change, the second purpose of this 
proposed rule change is to revise the stock-option procedure to provide 
that ``legging'' against the individual orders and quotes in the CBOE 
and CBSX electronic books (``EBooks'') will no longer occur for stock-
option orders,\10\ except that that legging may occur in the limited 
instance provided in Rule 6.53C.06(d) for eligible market orders that 
have been subject to a COA (which market order

[[Page 10028]]

process is proposed to be revised as described below).\11\ The Exchange 
believes that limiting the electronic trading of stock-option orders 
pursuant to Rule 6.53C to executions against other stock-option orders 
in the manner proposed will provide for more efficient execution and 
processing of stock-option orders and will assist with the maintenance 
of fair and orderly markets by helping to mitigate the potential risks 
associated with legging stock-option orders, including the risk of one 
leg of the stock-option order going unexecuted (and thereby not 
achieving a complete stock-option order execution and having a partial 
position that is unhedged).\12\
---------------------------------------------------------------------------

    \10\ Currently under Rule 6.53C complex orders, including stock-
option orders, are eligible to trade with other complex orders or by 
``legging'' with the individual orders and quotes residing in the 
EBook for the individual component legs provided the complex order 
can be executed in full (or in a permissible ratio) by the orders 
and quotes in the EBook in those individual component legs. In the 
case of stock-option orders that are ``legged,'' the stock leg would 
trade with CBSX's EBook and the option series leg(s) with the CBOE 
EBook.
    \11\ The Exchange notes that at least one other options exchange 
that offers electronic complex order processing does not ``leg'' 
stock-option orders. See, e.g., NASDAQ OMX PHLX LLC (``Phlx'') Rule 
1080.08(f)(iii)(A)(1).
    \12\ That is not to say that the Exchange would not determine to 
permit additional ``legging'' of stock-option orders under Rule 
6.53C in the future. Any such change to the electronic processing of 
stock-option orders under Rule 6.53C would be subject to a separate 
rule change filing.
---------------------------------------------------------------------------

    A limited exception will continue to apply for certain market 
stock-option orders, with certain modifications. Currently, under Rule 
6.53C.06(d), if at the conclusion of a COA a stock-option order that is 
an eligible market order \13\ cannot be filled in whole or in a 
permissible ratio, then any remaining balance of the option leg(s) 
routes to the CBOE Hybrid Trading System for processing as a simple 
market order(s) consistent with CBOE's order execution rules and any 
remaining balance of the stock leg routes to CBSX for processing as a 
simple market order consistent with CBSX's order execution rules.\14\ 
This alternate legging functionality is intended to assist in the 
automatic execution and processing of stock-option orders that are 
market orders. The Exchange notes that when a stock-option order is 
legged in this manner, it is possible for CBOE to route the option 
leg(s) to another options exchange and/or for CBSX to route the stock 
leg to another stock exchange, consistent with their respective 
rules.\15\ As proposed to be revised, the Exchange may determine to 
continue to make this ``legging'' functionality available for stock-
option orders that are eligible market orders. The legging 
functionality will continue to operate in the same manner, with the 
exception that the stock leg will no longer route to CBSX and an order 
eligibility provision will be eliminated from the rule.\16\ Instead, 
the Exchange will electronically transmit the stock leg to a designated 
broker-dealer, who will represent the order on behalf of the party that 
submitted the stock-option order.
---------------------------------------------------------------------------

    \13\ For purposes of this legging functionality, an ``eligible 
market order'' means a stock-option order that is within the 
designated size and order type parameters, determined by the 
Exchange on a class-by-class basis, and for which the national best 
bid or offer (``NBBO'') is within designated size and price 
parameters, as determined by the Exchange for the individual leg. 
The rule currently provides that the designated NBBO price 
parameters will be determined based on a minimum bid price for sell 
orders and a maximum offer price for buy orders. The Exchange may 
also determine to limit the trading times within regular trading 
hours that the legging functionality will be available. See Rule 
6.53C.06(d). Pursuant to Rule 6.53C.01, any determination by the 
Exchange on these parameters will be announced to TPHs via 
Regulatory Circular.
    \14\ Pursuant to Rule 6.53C.01, any determination by the 
Exchange to route stock-option market orders in this manner will be 
announced to TPHs via Regulatory Circular.
    \15\ See, e.g., CBOE's Rules 6.14A, Hybrid Agency Liaison 2 
(HAL2), and 6.14B, Order Routing to Other Exchanges, and CBSX's Rule 
52.6, Processing of Round-lot Orders.
    \16\ See note 13, supra, for a description of ``eligible market 
orders.'' The Exchange is proposing to eliminate an eligible market 
order provision that permits the Exchange to specify a designated 
NBBO price parameter based on a maximum offer price for buy orders. 
The Exchange has no intention of utilizing this parameter feature 
and is therefore proposing to delete it from the rules at this time. 
(By contrast, the Exchange will maintain a provision that permits 
the Exchange to specify a designated NBBO price parameter based on a 
minimum bid price for sell orders.) See proposed changes to Rule 
6.53C.06(d).
---------------------------------------------------------------------------

    This legging functionality is intended to assist in the automatic 
execution and processing of stock-option orders that are market orders. 
The Exchange believes the order eligibility parameters provide the 
Exchange with the flexibility to assist with the maintenance of orderly 
markets by helping to mitigate the potential risks associated with 
legging stock option orders, e.g., the risk of a [sic] order drilling 
through multiple price points on another exchange (thereby resulting in 
execution at prices that are away from the NBBO and potentially 
erroneous), and/or the risk of one leg of the stock-option order going 
unexecuted (thereby not achieving a complete stock-option order 
execution and having a partial position that is unhedged).

Allocation Algorithms

    The third purpose of this proposed rule change is to modify the 
default electronic allocation algorithm applicable for stock-option 
orders in COB and COA. With respect to COB, Interpretation and Policy 
.06(b), (c) and (f), taken together, currently provide that stock-
option orders submitted to COB will trade in the following sequence: 
(i) Public customer orders resting in the EBook in each of the 
individual options leg(s) of a stock-option order have first priority; 
(ii) stock-option orders resting in COB have second priority, with 
public customer priority and then time priority; and (iii) individual 
orders and quotes resting in the EBook in each of the individual 
options leg(s) have third priority provided the order can be executed 
in full or in a permissible ratio. Because the Exchange is proposing to 
no longer permit ``legging'' of orders in COB against the individual 
orders and quotes in the component legs, the Exchange is proposing to 
the [sic] amend the algorithm with respect to COB to provide that 
stock-option orders that are marketable against each other will 
automatically execute. In the event there are multiple stock-option 
orders at the same price, they will be allocated pursuant to the rules 
of trading priority otherwise applicable to incoming electronic orders 
in the individual series legs (or such other allocation algorithm as 
the Exchange may designate pursuant to Rule 6.53C.09).\17\
---------------------------------------------------------------------------

    \17\ The allocation algorithms for the individual series legs 
include price-time, pro-rata, and the ultimate matching algorithm 
(``UMA'') base priorities and a combination of various optional 
priority overlays pertaining to public customer priority, Market-
Maker participation entitlements, small order preference, and market 
turner. See Rules 6.45A, Priority and Allocation of Equity Option 
Trades on the CBOE Hybrid System, and 6.45B, Priority and Allocation 
of Trades in Index Options and Options on ETFs on the CBOE Hybrid 
System.
---------------------------------------------------------------------------

    As a condition for a stock-option order to execute against another 
stock-option order in COB, the execution must be at a net price where 
the individual options series leg(s) of the stock-option order has 
priority over the individual orders and quotes residing in the CBOE 
EBook (the ``EBook Priority Condition''). To satisfy the EBook Priority 
Condition, the individual option series leg(s) of a stock-option order 
(i) must not trade inferior to CBOE's best bid (offer) in the 
individual component series, and (ii) must not trade at CBOE's best bid 
(offer) in the individual component series if one or more public 
customer orders are resting at the best bid (offer) in each of the 
component series and the stock-option order could otherwise be executed 
in full (or in a permissible ratio).
    Again, because there will be no legging, the Exchange is also 
proposing to amend the algorithm with respect to COA. Interpretation 
and Policy .06(b), (d) and (f), taken together, currently provide that 
stock-option orders submitted to COA will trade in the following 
sequence: (i) Public customer orders resting in the EBook in each of 
the individual options leg(s) of a stock-option order have first 
priority; (ii) public customer stock-option orders resting in COB 
before, or that are received during, the COA Response

[[Page 10029]]

Time Interval \18\ and public customer responses collectively have 
second priority, with multiple orders ranked by time priority; (iii) 
non-public customer stock-option orders resting in the COB before the 
COA Response Time Interval have third priority, with multiple orders 
subject to the UMA allocation algorithm described in Rule 6.45A or 
6.45B, as applicable; (iv) non-public customer stock-option orders 
resting in COB that are received during the Response Time Interval and 
non-public customer responses collectively have fourth priority, with 
multiple orders subject to the Capped UMA (``CUMA'') allocation 
described in Rule 6.45A or 6.45B, as applicable; and (iv) all other 
individual orders and quotes residing in the EBook have fifth priority, 
with multiple interest subject to the UMA allocation algorithm 
described in Rule 6.45A or 6.45B, as applicable. Because the Exchange 
is proposing to no longer permit ``legging'' of orders in COA against 
the individual orders and quotes in the component legs (except in the 
limited instance involving market orders described above), items (i) 
and (vi) above will no longer be applicable. Instead, the Exchange is 
proposing to amend the algorithm with respect to COA to provide that, 
in the event there are multiple stock-option orders at the same price, 
they will trade in the following sequence: (i) Public customer stock-
option orders resting in COB before, or that are received during, the 
COA Response Time Interval and public customer responses collectively 
have first priority, with multiple orders ranked by time priority; (ii) 
non-public customer stock-option orders resting in the COB before the 
COA Response Time Interval have second priority, with multiple orders 
subject to the UMA allocation algorithm described in Rule 6.45A or 
6.45B, as applicable; and (iii) non-public customer stock-option orders 
resting in COB that are received during the Response Time Interval and 
non-public customer responses collectively have third priority, with 
multiple orders subject to the CUMA allocation described in Rule 6.45A 
or 6.45B, as applicable.
---------------------------------------------------------------------------

    \18\ The COA ``Responses [sic] Time Interval'' means the period 
of time during which responses to the RFR may be entered. The 
Exchange determines the length of the Response Time Interval on a 
class-by-class basis, however, the duration shall not exceed three 
(3) seconds. See Rule 6.53C(d)(iii)(2).
---------------------------------------------------------------------------

    As with COB, as a condition for a stock-option order to execute 
against another stock-option order through COA, the execution must 
satisfy the EBook Priority Condition described above.
    The system also has some features that would apply to the extent 
that a stock-option order is or becomes marketable. First, to the 
extent that a marketable stock-option order cannot automatically 
execute in full (or in a permissible ratio) when it is routed to COB or 
after being subject to COA because there are individual orders and 
quotes residing in the EBook that have priority (but the order resting 
in COB would not trade against them because there will be no 
``legging''), any part of the order that may be executed would be 
executed automatically and the part that cannot automatically execute 
would be routed on a class-by-class basis to PAR or, at the order entry 
firm's discretion, to the order entry firm's booth. If an order is not 
eligible to route to PAR, then the remaining balance would be 
cancelled. Second, to the extent that a stock-option order resting in 
COB becomes marketable against the derived net market (and cannot 
automatically execute because there is no ``legging''), the full order 
would be subject to COA (and the processing described above). For 
purposes of this feature, the ``derived net market'' for a given stock-
option strategy would be calculated using the Exchange's best bid or 
offer in the individual option series leg(s) and the NBBO in the stock 
leg. The Exchange notes this feature would only be applicable to 
resting stock-option orders that become marketable against the derived 
net market. This feature would not be applicable to resting stock-
option [sic] that would become marketable with other stock-option 
orders. Having the system automatically initiate a COA once such a 
stock-option order resting in COB becomes marketable against the 
derived net market provides an opportunity for other market 
participants to match or improve the net price and allows for an 
opportunity for an automatic execution before a marketable stock-option 
order is routed for manual handling to PAR or a booth.\19\ As noted 
above, after being subject to COA, any part of the order that may be 
executed would be executed automatically and the part of the order that 
cannot automatically execute would be routed on a class-by-class basis 
to PAR or, at the order entry firm's discretion, to the order entry 
firm's booth. If an order is not eligible to route to PAR, then the 
remaining balance would be cancelled.
---------------------------------------------------------------------------

    \19\ The Exchange notes that, in these circumstances when a 
resting stock-option order becomes marketable, COA will 
automatically initiate regardless of whether a TPH has requested 
that the stock-option order be COA'd pursuant to Rule 6.53C.04. In 
this regard, the Exchange notes that, currently, all of its TPHs 
have elected to have their COA-eligible orders COA'd. In addition, 
the Exchange notes that other markets have programs in place that 
provide for the automatic auctioning of complex orders. See, e.g., 
Phlx Rule 1080(e)(i)(A) which, among other things, provides that a 
complex order live auction (``COLA'') will initiate if the Phlx 
system receives a complex order that improves the Phlx complex order 
best debit or credit price respecting the specific complex order 
strategy that is the subject of the complex order. During a COLA, 
Phlx market participants may bid and offer against the COLA-eligible 
order pursuant to the Phlx Rule.
---------------------------------------------------------------------------

    The following examples illustrate the operation of the proposed 
system functionality:

    Example 1: Assume an incoming market stock-option order for 75 
units is submitted to COA, where the strategy involves the sale of 
75 call contracts and purchase of 7,500 stock shares. At the 
conclusion of COA, assume the best net price response is $9.13 for 
50 units and the best derived net market price is 9.15 for 100 
units. The incoming market order to purchase 75 units of the stock-
option strategy would receive a partial execution of 50 units at a 
net price of $9.13. Because the remaining 25 units are marketable 
against individual orders and quotes in the EBook, the 25 units 
would be routed to PAR or, at the order entry firm's discretion, to 
the order entry firm's booth, for manual handling. If the order 
would otherwise route to PAR but is not eligible to route to PAR, 
then the remaining 25 units will be cancelled.\20\
---------------------------------------------------------------------------

    \20\ However, if the Exchange has activated the market stock-
option order ``legging'' functionality and the and the [sic] order 
is eligible, in lieu of routing to PAR or a booth, any remaining 
balance of the option leg will route to the CBOE Hybrid Trading 
System for processing as a simple market order and any remaining 
balance of the stock leg will be electronically transmitted by the 
Exchange to a designated broker-dealer, who will represent the order 
on behalf of the party that submitted the stock-option order. See 
note 13, supra, and surrounding discussion on Legging.
---------------------------------------------------------------------------

    Example 2:  Assume a stock-option order for 75 units is resting 
in COB, where the strategy involves the sale of 75 call contracts 
and purchase of 7,500 stock shares at a net debit price of $9.13. By 
virtue of the fact that it is resting [sic] the COB, the stock-
option order is not marketable--meaning there are no orders or 
quotes within the derived net market price or other stock-option 
orders within COB against which the resting stock-option order may 
trade. Assume there are no other stock-option orders representing 
[sic] in the COB for the strategy and also assume the best derived 
net market price for the strategy is a net price of $9.15 per unit 
for 100 units. If the price of the component option series leg or 
the stock is thereafter updated such that the derived net market 
price becomes $9.13 per unit for 100 units, then the full size of 
the resting stock-option order will become marketable but cannot 
automatically execute. As a result, the full size (75 units) of the 
resting stock-option order would be subject to COA. At the 
conclusion of COA, any part of the stock-option order that may be 
executed against other stock-option orders or auction responses will 
be automatically executed. Any part of the order that is marketable 
and cannot automatically execute

[[Page 10030]]

(because the stock-option order cannot ``leg'' against the derived 
net market) will be routed on a class-by-class basis to PAR or, at 
the order entry firm's discretion, to the order entry firm's booth. 
If an order is not eligible to route to PAR, then the remaining 
balance will be cancelled. To the extent any part of the stock-
option order is not marketable, it will continue resting in COB.
Price Protection and Re-COA Features
    The fourth purpose of this proposed rule change is to adopt a new 
price check parameter applicable to the electronic processing of stock-
option orders and to make some modification to an existing price check 
parameter to address stock-option orders. In particular, the Exchange 
is proposing to provide that, on a class-by-class basis, the Exchange 
may determine (and announce to TPHs via Regulatory Circular) to not 
automatically execute a stock-option order that is marketable if, 
following COA, the execution would not be within the acceptable derived 
net market for the strategy that existed at the start of COA. As 
indicated above, a ``derived net market'' for a strategy will be 
calculated using the Exchange's best bid or offer in the individual 
option series leg(s) and the NBBO in the stock leg. An ``acceptable 
derived net market'' for a strategy will be calculated using the 
Exchange's best bid or offer in the individual option series leg(s) and 
the NBBO in the stock leg plus/minus an acceptable tick distance. The 
``acceptable tick distance'' will be determined by the Exchange on a 
class-by-class and premium basis.\21\ Such a stock-option order will 
route on a class-by-class basis to PAR or, at the order entry firm's 
discretion, to the order entry firm's booth. If an order is not 
eligible to route to PAR, then the remaining balance will be cancelled. 
The Exchange believes that users are more concerned about obtaining a 
net price execution of their stock-option strategy orders than about 
achieving an execution of the stock leg at the NBBO. The price check 
parameter, however, would serve to prevent automatic executions at 
extreme prices beyond the NBBO.
---------------------------------------------------------------------------

    \21\ It should be noted that this is simply a parameter for 
determining whether a stock-option order will be subject to 
automatic execution, or routed to PAR, a booth or cancelled. A 
stock-option order that is subject to automatic execution remains 
subject to the applicable priority requirements prescribed in Rule 
6.53C.
    It should also be noted that the Exchange has not proposed to 
prescribe a minimum acceptable tick distance for this parameter 
(e.g., the acceptable tick distance may be established at 0). This 
will provide the Exchange with the flexibility to set the price 
check feature so that automatic executions of stock-option orders 
must be within the derived net market, which considers the 
Exchange's best bid or offer for the options component leg(s) and 
the NBBO for the stock component leg. The Exchange believes it is 
reasonable and appropriate to utilize the Exchange best bid and 
offer in the calculation as the option component leg(s) are not 
permitted to trade at a price inferior to the Exchange's best bid 
and offer. The Exchange also believes it is reasonable and 
appropriate to consider the NBBO for the stock component leg in the 
calculation as the NBBO should serve as a reasonable proxy for what 
may be considered a reasonable price for the automatic execution of 
the stock component leg. However, the Exchange also recognizes that 
some range outside the NBBO may also be appropriate for determining 
whether an automatic execution should occur as the QCT Exemption 
does not require the stock component leg of a qualifying stock-
option order to be executed at the NBBO. The proposed parameter 
therefore provides the Exchange with the flexibility to determine to 
utilize the NBBO (which equates to an acceptable tick distance of 0) 
or some range outside the NBBO (which equates to the derived net 
part plus/minus an acceptable tick distance of 1, 2, 3 or some other 
number of ticks) for determining whether to automatically execute a 
stock-option order.
---------------------------------------------------------------------------

    The following example illustrates the operation of the proposed 
system functionality:

    Example 3: Assume that at the start of COA the CBOE best bid and 
offer for the option leg of a stock-option strategy is $1.00-$1.20 
(100 x 100) and the NBBO for the stock leg of the strategy is 
$10.05-$10.15 (10,000 x 10,000). Thus, the derived net market for 
the strategy is $8.85-$9.15 (calculated as $1.20-$10.05 and -$1.00 + 
$10.15, respectively). In addition, assume that the acceptable tick 
distance for the stock leg is two ticks ($0.02). Under this 
parameter, an order to sell stock could not execute at a price below 
$10.03 and an order to buy stock could not execute at a price above 
$10.17. Thus, the acceptable derived net market for the strategy 
would be calculated as $8.83-$9.17 (calculated as $1.20-$10.03 and -
$1.00 + $10.17, respectively). Under this scenario, following COA, a 
marketable stock-option order to sell the option series and buy the 
stock that would trade with another stock-option order at [sic] net 
debit price of $9.17 (within the acceptable derived net market for 
the strategy) will be executed. However, a marketable stock-option 
[sic] to sell the option series and buy the stock that would trade 
with another stock-option order at a net debit price of $9.18 ($0.01 
outside the acceptable derived net market for the strategy) will be 
routed to PAR or, at the order entry firm's discretion, to the order 
entry firm's booth. If an order is not eligible to route to PAR, 
then the remaining balance will be cancelled.

    In addition to the foregoing, additional parameters would apply. In 
classes where these price check parameters are available, they will 
also be available for COA stock-option responses under Rule 6.53C(d), 
stock-option orders and responses under Rules 6.74, Automated 
Improvement Mechanism (``AIM''), and 6.74B, Solicitation Auction 
Mechanism (``SAM''), or AIM customer-to-customer immediate cross of 
stock-option orders under Rule 6.74A.08 (``CTC'').\22\ Under these 
provisions, such paired stock-option orders and responses would not be 
accepted. In this regard, if any paired stock-option order submitted by 
an order entry firm for AIM, SAM or CTC processing exceeds the 
parameters, then both the order that exceeds the parameters and the 
paired contra-side order would not be accepted regardless of whether 
the contra-side order exceeds the parameters. However, to the extent 
that only the paired contra-side order submitted by an order entry firm 
for AIM or SAM processing would exceed the price check parameter, the 
paired contra-side order would not be accepted while the original 
Agency Order would not be accepted or, at the order entry firm's 
discretion, continue processing as an unpaired stock-option order 
(e.g., the original Agency Order would route to COB or COA for 
processing). The proposal also provides that, to the extent a contra-
side order or response is marketable, its price will be capped at the 
price inside the acceptable derived net market.
---------------------------------------------------------------------------

    \22\ AIM, SAM and CTC are mechanisms that may be used to cross 
two paired orders. COA is a mechanism that may be used to expose an 
unpaired complex order for price improvement. Orders submitted for 
COA, AIM or SAM processing are exposed for price improvement through 
an auction (and thus other market participants may submit 
responses), whereas orders submitted for CTC processing are executed 
immediately without exposure.

    Example 4: Assume the acceptable derived net market is $1.00-
$1.20. Also assume two paired stock-option orders are submitted to 
an AIM auction. If the original Agency Order to sell the option leg 
and buy the stock is a market order, but the contra-side order to 
buy the option leg and sell the stock has a net credit price of 
$1.25, the AIM auction will not initiate because the contra-side 
order does not satisfy the price check parameter. Such a contra-side 
order would not be accepted because it is outside the acceptable net 
market price range. The paired original Agency Order would either 
not be accepted along with the contra-side order or, at the order 
entry firm's discretion, would continue processing as an unpaired 
complex order. By comparison, if the contra-side order has a net 
---------------------------------------------------------------------------
credit price of $0.95, the price will be capped at $1.01.

    The Exchange is also proposing to modify its existing ``market 
width'' parameters under Rule 6.53C.08(a) to extend the application of 
the individual series leg width parameters to stock-option orders. 
Under this price check parameter, eligible market complex orders will 
not be automatically executed if the width between the Exchange's best 
bid and best offer in any individual series leg is not within an

[[Page 10031]]

acceptable price range.\23\ As proposed, the Exchange may also 
determine on a class-by-class basis to make this price check parameter 
available for market and marketable limit stock-option orders.
---------------------------------------------------------------------------

    \23\ The ``acceptable price range'' is determined by the 
Exchange on a class-by-class basis (and announced to TPHs via 
Regulatory Circular) on a series by series basis for each series 
comprising a complex order and is currently defined to be no less 
than 1.5 times the corresponding bid/ask differentials for 
individual series legs determined by the Exchange pursuant to Rule 
8.7(b)(iv). See also SR-CBOE-2012-004 (wherein the Exchange is 
proposing, among other things, to expand the application of this 
price check parameter to include marketable limit orders (currently 
the rule text only addresses market complex orders) and to specify 
particular minimum acceptable price ranges within the rule that are 
equal to 1.5 times the bid/ask differential requirements that the 
Exchange had in its rules at the time the price check parameters 
were adopted and are the same as the acceptable price range 
parameters set forth in Rule 6.13(b)(v)-(vi)).
---------------------------------------------------------------------------

    The Exchange believes that the application of these price 
protection features will assist with the maintenance of fair and 
orderly markets by helping to mitigate the potential risks associated 
with stock-option orders drilling through multiple price points 
(thereby resulting in executions at prices that are extreme and 
potentially erroneous). Rather than automatically executing or booking 
orders at extreme and potentially erroneous prices, the Exchange would 
route orders that are not within the price check parameters to PAR or 
the order entry firm's booth so that the orders can be further 
evaluated.
    In addition, the Exchange is proposing to extend the application of 
its ``re-COA'' feature to stock option orders. Under this feature, to 
the extent any non-marketable order resting at the top of the COB is 
priced within the acceptable tick distances of the derived net market, 
the full order would be subject to COA (referred to herein as a ``re-
COA'').\24\ The Exchange notes that this re-COA feature for resting 
orders would only be applicable to resting non-marketable stock-option 
orders that move close to the derived net market. This feature is not 
applicable to resting stock-option orders that become marketable with 
other stock-option orders. The Exchange may also determine on a class-
by-class and strategy basis to limit the frequency of re-COA auctions 
initiated for stock-option orders resting in COB. For example, the 
Exchange might determine to limit the frequency of re-COA auctions to 
once every ``X'' seconds (the ``interval timer'') for a total of ``Y'' 
intervals. Once this cycle is complete, the Exchange may determine to 
wait for a period of time ``Z'' (the ``sleep timer'') and then 
reactivate the re-COA feature.\25\ All timers would be reset if a new 
stock-option order improves the top of the COB (i.e., improves the best 
net price bid or offer of the stock-option orders resting in COB). 
These limitations on the frequency of COA auctions due to the re-COA 
feature are intended to address system efficiency and effectiveness 
considerations, such as limiting repeated initiations of COA auctions 
(and related messaging) when there are flickering quotes. Once the re-
COA feature is initiated for a resting order, all other aspects of the 
COA process described in Rule 6.53C would apply unchanged. The Exchange 
believes this re-COA feature facilitates the orderly execution of 
stock-option orders by providing an automated opportunity for price 
improvement to (and execution of) resting orders priced near the 
current market, similar to what a TPH might seek to do if the TPH were 
representing a stock-option order in open outcry (or just entering an 
order initially into COB).
---------------------------------------------------------------------------

    \24\ This feature will apply regardless of whether the stock-
option order was subject to COA before it was booked in COB. See 
note 19, supra.
    \25\ Determinations by the Exchange regarding the classes where 
the re-COA feature is activated and related tick distance and 
frequency parameters will be announced to TPHs via Regulatory 
Circular.
---------------------------------------------------------------------------

    The following example illustrates the operation of this proposed 
system functionality:

    Example 5: Assume that the acceptable tick distance to re-COA is 
2 ticks ($0.02). Also assume the frequency for the re-COA feature is 
limited to once every 15 seconds (the interval timer) for 1 
interval. Under this setting, only 1 re-COA auctions [sic] could be 
triggered--the original re-COA auction.\26\ No further auctions 
would be triggered until the sleep timer expires, and only then if a 
quote update which is received AFTER the sleep timer expires would 
result in the order being within 2 ticks of the derived net market. 
Assume the sleep timer is set at 60 minutes. Assume the current 
derived net market is $8.85-$9.15. If a stock-option order resting 
in the COB is priced at a net credit price of $8.88, the stock-
option order is not marketable and is priced inside the derived net 
market by 3 ticks. If subsequently the individual leg prices are 
updated such that the current derived net market for the strategy 
moves to a net price of $8.86-$9.14 the resting order priced at a 
net credit price of $8.88 would trigger the re-COA feature and 
initiate the re-COA auction process (as the order is now priced 
within 2 ticks of the derived net market). If there are no 
responses, the order would be placed back in COB. The resting order 
would not initiate the re-COA feature again until the 60-minute 
sleep timer has expired, and only then if a quote update received 
AFTER the 60-minute sleep timer expires would result in the order 
being within 2 ticks of the derived net market.
---------------------------------------------------------------------------

    \26\ In a prior rule change filing, the Exchange provided an 
example indicating that if the setting for the interval timer was 
once every 15 seconds for 1 interval, then a total of 2 re-COA 
auctions would occur during the interval--the original re-COA 
auction and a second re-COA auction after the expiration of the 15-
second interval timer. See Securities Exchange Act Release No. 65939 
(December 12, 2011), 76 FR 78708 (December 19, 2011)(SR-CBOE-2011-
119). However, the Exchange notes that only one re-COA auction will 
occur under these settings. Therefore, Example 5 above is intended 
to update the previous example and provide a more detailed 
illustration of the interval timer.
---------------------------------------------------------------------------

    If the number of attempts was set to a value greater than 1 
(assume 2 for the below discussion), when the 15-second interval 
timer expires, the order would be eligible to initiate the re-COA 
feature again if the current market moves after the expiration of 
the timer and the order meets the tick distance parameter (the order 
would not automatically initiate the re-COA feature after the 
expiration of the interval timer; instead there must be an update to 
the current market after the expiration of the interval timer and 
the order must meet the tick distance parameter for the system to 
re-COA again). For example, if after the end of the 15-second 
interval timer the derived net market moves to $8.87-$9.13 (or, for 
example, if the derived market moves back to $8.85-$9.15 and then, 
after the end of the 15-second interval timer moves back again to 
$8.86-$9.14), then the resting complex order would again initiate 
the re-COA feature. If there are no responses, the order would be 
placed back in COB. The cycle is complete. Now that the resting 
order has been subject to COA 2 times since it was booked in COB, 
the 60-minute sleep timer will begin and the resting order will not 
be eligible for the re-COA feature again until the sleep timer 
expires and there is a quote update after that timer expires that is 
within the tick distance parameter. All timers would be reset 
anytime there is a price change at the top of the COB. For example, 
if five minutes into the sleep interval a second stock-option order 
is entered to rest in COB at a price of $8.87 ($0.01 better than the 
original resting order priced at $8.88), the original resting order 
would no longer be at the top of the COB and subject to the re-COA 
feature. The timers would reset and the second complex order (which 
now represents the top of the COB) would be subject to the re-COA 
process. If, for example, the second order subsequently trades 
(constituting a price change at the top of the COB), the original 
order would be at the top of the COB again and could become subject 
to the re-COA feature again.
Other Changes Related to Stock-Option Orders
    The fifth purpose of this proposed rule change is to make certain 
other changes to generally reorganize and simplify the rule text 
pertaining to stock-option orders. As noted above, the current priority 
rules for stock-option orders for COB are contained in four locations--
paragraphs (b), (c) and (f) of Interpretation and Policy .06 to Rule 
6.53C. Similarly, the current priority rules for stock-option orders 
processed through COA are contained in three locations--paragraphs (b), 
(d) and (f) of

[[Page 10032]]

Interpretation and Policy .06 of Rule 6.53C. The Exchange is proposing 
to eliminate paragraph (e)(which provides that the N-second group timer 
\27\ for executions by market participants against orders in the COB 
shall not be in effect for stock-option orders) and to combine it with 
paragraph (c)(which also addresses executions against the COB). The 
Exchange is proposing to eliminate paragraph (f) (which relates to 
stock-option orders with more than one option leg) and to simplify and 
combine it with paragraph (b) (which relates to stock-option orders 
with one option leg). The Exchange is also proposing various other 
miscellaneous changes, such as revising the text to consistently use 
the term ``stock-option order(s)'' with no capitalization and to use 
the phrase ``not be accepted'' to replace various references to 
``rejected.''
---------------------------------------------------------------------------

    \27\ The ``N-second group timer'' refers to a timer that the 
Exchange may establish when market participants (as defined in Rule 
6.45A or 6.45B, as applicable) quotes and/or orders interact with 
orders in the EBook. See Rules 6.45A(c), 6.45B(c), 6.53C.03 and 
proposed changes to Rule 6.53C.06 for additional information on the 
N-second timer group.
---------------------------------------------------------------------------

Complex Order Definitions
    Finally, the sixth purpose of this proposed rule change is to 
simplify some of the definitions contained within Rule 6.53C. By way of 
background, for many years, the options exchanges have recognized that 
strategies involving more than one option series or more than one 
instrument associated with an underlying security are different from 
regular buy and sell orders for a single series, and an order to 
achieve such strategies should be defined separately. As the 
sophistication of the industry as [sic] grown, so have the strategies, 
and the options exchanges have regularly added new strategies to the 
list of defined complex order types. The investing industry, however, 
creates new, legitimate investment strategies that do not necessarily 
fit into one of the narrow definitions for complex order types that the 
exchanges presently use. These order types are often developed for a 
particular strategy, specific to a particular issue. To attempt to 
define every individual strategy, and file additional rules to 
memorialize them, would be a time consuming and extremely onerous 
process, and would serve only to confuse the investing public. As a 
result, bona fide transactions to limit risk are not afforded the 
facility of execution afforded more common complex orders.
    Rule 6.53C currently defines at least ten specific complex 
strategies (including stock-option order strategies). These are the 
most comprehensive list of complex strategies defined in a rule set, 
yet they do not cover all of the possibilities of complex orders. To 
provide for greater flexibility in the design and use of complex 
strategies, the Exchange proposes to eliminate specific complex order 
types described in Rule 6.53C, and to adopt generic definitions. 
Specifically, under the proposed new definitions, first, a complex 
order will be defined as any order involving the execution of two or 
more different options series in the same underlying security, for the 
same account, occurring at or near the same time in a ratio that is 
equal to or greater than one-to-three (.333) and less than or equal to 
three-to-one (3.00) (or such lower ratio as may be determined by the 
Exchange on a class-by-class basis) and for the purpose of executing a 
particular investment strategy. In addition, only those complex orders 
with no more than the applicable number of legs, as determined by the 
Exchange on a class-by-class basis, will be eligible for electronic 
processing.\28\ Second, a stock-option order will be defined is as an 
order to buy or sell a stated number of units of an underlying stock or 
a security convertible into the underlying stock (``convertible 
security'') coupled with the purchase or sale of options contract(s) on 
the opposite side of the market representing either (i) the same number 
of units of the underlying stock or convertible security, or (ii) the 
number of units of the underlying stock necessary to create a delta 
neutral position, but in no case in a ratio greater than eight (8) 
options contracts per unit of trading of the underlying stock or 
convertible security established for that series by The Options 
Clearing Corporation (referred to in the text as the ``Clearing 
Corporation'') (or such lower ratio as may be determined by the 
Exchange on a class-by-class basis). Only those stock-option orders 
with no more than the applicable number of legs, as determined by the 
Exchange on a class-by-class basis, will be eligible for processing.
---------------------------------------------------------------------------

    \28\ Currently the rule limits the number of legs to four. See 
existing Rule 6.53C(b)(iii). This limitation is proposed to be 
removed. In addition, a duplicative reference to the one-to-three 
ratio for complex orders in Rule 6.53C(b)(iii) is proposed to be 
removed as the applicable ratio will now be included within the 
proposed definitions contained in proposed Rule 6.53C(a)(1).
---------------------------------------------------------------------------

    The Exchange believes adopting these generic definitions will give 
investors more flexibility in creating strategies with greater 
accuracy. Further, these definitions would conform with definitions 
used in other exchanges' rules \29\ and is modeled after the generic 
definitions approved for use for exemptions from Trade Through 
Liability by the Options Linkage Authority as described in the ``Plan 
For The Purpose of Creating And Operation An Intermarket Options 
Linkage'' (the ``Linkage Plan'') and as provided in Exchange Rules 
6.80(4) and 6.81(b)(7).
---------------------------------------------------------------------------

    \29\ See, e.g., International Securities Exchange Rule 722(a).
---------------------------------------------------------------------------

2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
\30\ in general and furthers the objectives of Section 6(b)(5) of the 
Act \31\ in particular in that it should promote just and equitable 
principles of trade, serve to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and 
protect investors and the public interest. The Exchange believes the 
proposed rule change will assist in the electronic processing of stock-
option orders by providing a more efficient mechanism for carrying out 
these strategies. The Exchange also believes the proposed additional 
stock-option order related price check parameters will enhance the 
functionality and assist with the maintenance of fair and orderly 
markets by helping to mitigate the potential risks associated with an 
order drilling through multiple price points (thereby resulting in 
execution at prices that are extreme and potentially erroneous). The 
Exchange believes the additional changes to reorganize and simplify the 
rule text will make it easier for users to read and understand the 
electronic processing procedures for stock-option orders. Finally, the 
Exchange believes adopting generic definitions for complex orders, 
including stock-option orders, as proposed, is appropriate in that 
complex orders and stock-option orders are widely recognized and 
utilized by market participants and are invaluable, both as an 
investment strategy and a risk management strategy. The proposed change 
will provide the opportunity for a more efficient mechanism for 
carrying out these strategies.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78f(b).
    \31\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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.

[[Page 10033]]

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 
proposal.

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 (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization 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 [email protected]. Please include 
File Number SR-CBOE-2012-005 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-CBOE-2012-005. 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 a.m. and 3 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-2012-005, and should be submitted on or before March 13, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
---------------------------------------------------------------------------

    \32\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-3902 Filed 2-17-12; 8:45 am]
BILLING CODE 8011-01-P