[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