[Federal Register Volume 77, Number 232 (Monday, December 3, 2012)]
[Notices]
[Pages 71650-71652]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-29076]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68301; File No. SR-CBOE-2012-111]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Order Granting Accelerated Approval
of Proposed Rule Change To Amend CBOE Rule 6.18 Concerning the
Exchange's Disaster Recovery Facility
November 27, 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 November 13, 2012, 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 and II below, which Items have been substantially prepared
by the Exchange. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons and is
approving the proposal on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify the text of Rule 6.18, ``Disaster
Recovery Facility,'' to clarify how the Exchange intends to continue to
operate in the event the Exchange's trading floor or trading systems
are compromised. The text of the proposed rule change is available on
the Exchange's Web site (www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
CBOE Rule 6.18 (Disaster Recovery Facility) currently provides for
a disaster recovery site in the event that open outcry trading is not
available. In such an event, Trading Permit Holders (``TPHs'') are
required to utilize a floorless configuration of the trading system
similar to the electronic component of the Exchange's Hybrid System
platform, the primary difference being that this configuration is not
programmed to require open outcry. Because of a change in location of
the Exchange's back-up data center (the Exchange is moving its primary
data center to the East coast and will use its current Chicago data
center as the back-up data center), the Exchange is proposing to amend
Rule 6.18 in order to provide that (1) in the case the Exchange must
use the back-up data center, the Exchange's trading floor may still be
operable, and (2) TPHs will need to use the alternate trading system if
the Exchange's trading floor should become inoperable. Finally, the
Exchange is proposing to make conforming changes to the entire rule to
reflect this change in location by eliminating references to a
``Disaster Recovery Facility'' and eliminating portions of the rule
that are no longer relevant. This change in location of the Exchange's
primary and back-up data centers is anticipated to take effect on
December 3, 2012.
First, the Exchange is proposing to modify Rule 6.18 to clarify
that when an event or other circumstance renders the Exchange's primary
electronic platform inoperable, assuming the trading floor has not been
affected, TPHs may still be able to utilize the Exchange's trading
floor. The Exchange's current Rule 6.18 specifies that if the Disaster
Recovery Facility were used, no open outcry trading would be available.
Because of the change of location of the back-up data center, this will
no longer be the case. In the event the Exchange back-up data center
must be utilized, the Exchange's trading floor may still be operable
and all Exchange rules associated with the trading floor, including
those codifying the integration of the electronic trading platform with
the trading floor, will remain in effect. As such, trading on the
Exchange would not change.
Second, the Exchange is proposing to amend Rule 6.18 to clarify
that TPHs will need to use the floorless configuration in the event a
disaster or other unusual circumstance renders the Exchange trading
floor inoperable. In the current Exchange rules, TPHs must only utilize
a floorless configuration in the event the Disaster Recovery Facility
is utilized. In the proposed changes, TPHs will need to use this
configuration of the trading system if the trading floor is inoperable
which could be the case in an instance when the primary data center is
still operating. In this configuration, there will be no change in the
Exchange trading rules associated with electronic trading. TPHs will be
required to follow the same rules associated with electronic trading as
they would if the trading floor were operable. This proposed change is
also a result of the change in location of the Exchange's various data
centers.
Finally, other conforming changes have been made throughout the
rule to eliminate references to a Disaster Recovery ``Facility'' to
reflect that dual locations may now be used in the event the Exchange
experiences an event or other circumstance rendering either the trading
floor or the primary data center inoperable. In addition, references to
[[Page 71651]]
portions of the rule that are no longer relevant have been eliminated
from the rule text. More specifically, section (e) of the Rule has been
eliminated because the back-up data center in Chicago will have the
capacity to accommodate all TPHs.\3\
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\3\ The Commission notes that CBOE Rule 6.18(e) currently
authorizes the Exchange to restrict access to the Disaster Recovery
Facility if necessitated by system capacity limitations, and
priority access would have been afforded to TPHs subject to certain
conditions. See CBOE Rule 6.18(e).
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It should be noted, however, that no material changes are being
made to the Exchange Rule 6.18(b) which states that the Exchange will
announce, prior to the commencement of trading, all classes that will
continue to trade. Depending upon the specifics of the circumstances,
the Exchange's trading floor may or may not be operable. In this
announcement, the Exchange will clarify the current status of the
trading floor. In addition, pursuant to the current Exchange Rule
6.18(d), TPHs will still be required to maintain access to both the
primary electronic platform and the back-up data center in order to
continue trading in all circumstances.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\4\ Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \5\ requirements that the rules of
an exchange be designed to 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.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
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In particular, the modification to Exchange Rule 6.18 fully
clarifies how TPHs can trade in the event that unforeseen circumstances
arise. The proposed changes promote just and equitable principles of
trading by putting all TPHs, and other market centers, on notice about
how the Exchange intends to operate in the event either the primary
data center or the trading floor becomes inoperable which also provides
for a free and open market for all TPHs. The proposed changes also
prevent fraudulent and manipulative acts on the Exchange as the changes
more clearly explain different venues available to the TPHs and alert
TPHs of how the Exchange will operate if such circumstance should
arise. Finally, it protects investors by alerting all TPHs to the
different trading alternatives if one of these events should occur so
they are aware of their options.
The Exchange also believes the proposed rule change is consistent
with Section 6(b)(1) of the Act,\6\ which provides that the Exchange be
organized and have the capacity to be able to carry out the purposes of
the Act and to enforce compliance by the Exchange's TPHs and persons
associated with its TPHs with the Act, the rules and regulations
thereunder, and the rules of the Exchange. By clearly stating what will
happen in the event that normal trading venues are not available, the
Exchange is explicitly stating its capacity to operate in any unusual
or unpredictable circumstance that may arise. Thus, the Exchange is
preparing to exercise its obligations as a Self-Regulatory Organization
(``SRO'') under the Act in the event of unusual circumstances.
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\6\ 15 U.S.C. 78f(b)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
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. 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-2012-111 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-2012-111. 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-2012-111 and should be
submitted on or before December 24, 2012.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act, including
Section 6(b) of the Act,\7\ and the rules and regulations thereunder
applicable to a national securities exchange.\8\
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\7\ 15 U.S.C. 78f(b).
\8\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
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In its filing, the Exchange requested that the Commission approve
the proposal on an accelerated basis pursuant to Section 19(b)(2) of
the Act, so that the proposal may become operative in time to
accommodate the Exchange's planned transfer of its primary data center
to the East coast of the United States.\9\ The Commission finds good
cause, pursuant to Section 19(b)(2) of the Act,\10\ for approving the
[[Page 71652]]
proposed rule change prior to the thirtieth day after the date of
publication of the notice of filing in the Federal Register. Currently,
CBOE's electronic systems and its floor are housed in close proximity
to one another and, as a result, in the event that one is rendered
inoperable or inaccessible, it is possible that the other could be
compromised as well. As CBOE notes above, CBOE's current Rule 6.18
acknowledges this by presuming that if the Disaster Recovery Facility
is used, no open outcry trading would be available. However, CBOE now
plans to relocate its primary electronic systems to a different
location on the East coast of the United States, and thus the primary
electronic systems and the physical floor will be in separate
locations. Accordingly, CBOE is proposing to clarify Rule 6.18 to
reflect that it may, to the extent possible, continue to operate its
physical trading floor in Chicago in the event that it needs to operate
in disaster recovery mode on account of its primary data systems on the
East coast being unavailable.
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\9\ 15 U.S.C. 78s(b)(2).
\10\ Id.
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CBOE also has proposed to eliminate paragraph (e) of Rule 6.18, as
its new back-up systems will no longer necessitate that it retain the
ability to restrict access to its back-up data facility. Other than the
elimination of paragraph (e), CBOE has not proposed any material
changes to Rule 6.18, or how it would operate in recovery mode.
Finally, CBOE's Rule 6.18 will continue to require TPHs to take
action to be able to accommodate CBOE's ability to trade options
through the back-up data center in the event that CBOE operates in
disaster recovery mode.
Accordingly, the Commission believes that accelerated approval of
the proposed rule change to clarify the operation of CBOE Rule 6.18 in
light of CBOE's planned relocation of its primary data facility to the
East coast will allow CBOE to effectively revise its disaster recovery
rule without delay and thereby avoid any potential interruption to
CBOE's exchange operations. CBOE's proposed changes to Rule 6.18 are
not material and consist of technical updates to its rule to allow for
CBOE to resume operations on its physical floor in Chicago (along with
its back-up data center in Chicago) in the event of a disruption to its
primary data center on the East coast. Thus, accelerated approval of
this proposed rule change will grant CBOE the ability to continue its
operations to the fullest extent possible under its rules if a disaster
recovery situation were to occur between the time of transfer of its
primary data center to the East coast on December 3, 2012 and the time
that CBOE would have otherwise been able to obtain Commission action on
its proposed rule change under Section 19(b)(2) of the Act \11\ had the
Commission not granted accelerated approval to its proposal.
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\11\ 15 U.S.C. 78s(b)(2). As provided by Section 19(b)(2) of the
Act, the Commission must, within 45 days of the date of publication
of notice of a proposed rule change in the Federal Register (unless
such period is extended by the Exchange or the Commission) either:
(1) By order approve or disapprove such proposed rule change, or (2)
institute proceedings to determine whether the proposed rule change
should be disapproved. See id. Section 19(b)(2) also provides that
the Commission may not approve a proposed rule change earlier than
30 days after the date of publication unless it finds good cause for
doing so and publishes the reason for the finding. See id.
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-CBOE-2012-111) be, and
hereby is, approved on an accelerated basis.
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\12\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-29076 Filed 11-30-12; 8:45 am]
BILLING CODE 8011-01-P