[Federal Register Volume 78, Number 61 (Friday, March 29, 2013)]
[Notices]
[Pages 19348-19350]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-07299]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69227; File No. SR-CBOE-2013-035]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change Relating to 
Exchange Trading Days and Hours of Business and Trading Halts

March 25, 2013.
    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 March 11, 2013, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

    The Exchange proposes to amend Exchange rules to clarify Rules 6.1, 
``Days and Hours of Business,'' and 6.3, ``Trading Halts.'' The text of 
the proposed rule change is available on the Exchange's Web site 
(http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the 
Exchange's Office of the Secretary, and at the Commission'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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to change its rules to clarify when it 
will be open for trading along with when trading halts on underlying 
securities will inhibit trading on the Exchange. The Exchange is 
proposing to amend its rules to clarify that it will not be solely 
dependent upon the ``primary market'' when determining when to open 
and/or halt securities. Instead, the Exchange is proposing to clarify 
in its rules that it will be open if there is ample liquidity in the 
underlying market for the security. Generally, the national equity 
exchanges have the same core business hours.\3\ With this proposal, the 
Exchange is attempting to clarify in its rules that it can remain open 
to trade options during such business hours even if the ``primary 
market'' of the underlying securities is not open for business. The 
Exchange believes that the proposed changes will allow the markets to 
continue to function in an instance where all exchanges may not be 
open. In addition, the Exchange believes the proposed changes will 
bring greater clarity to its Trading Permit Holders (``TPHs'') 
regarding when the Exchange will be open for trading.
---------------------------------------------------------------------------

    \3\ See, e.g., New York Stock Exchange Rule 51(a) and Bats 
Exchange Rule 1.5(w) which describes regular trading hours as 9:30 
a.m. through 4:00 p.m. Eastern.
---------------------------------------------------------------------------

    Currently, Exchange Rule 6.1 provides that no TPH ``shall make any 
bid, offer, or transaction on the Exchange before or after'' business 
hours.\4\ As an administrative clean-up change, the Exchange is 
proposing to eliminate this language as it is no longer relevant. 
Executions may only happen during business hours, however, TPHs now 
have the ability to submit information in the electronic system outside 
of business hours. The Exchange believes deleting this language would 
bring greater clarity to Exchange rules while updating the rule text to 
the current trading environment.
---------------------------------------------------------------------------

    \4\ See Exchange Rule 6.1.
---------------------------------------------------------------------------

    Next, the Exchange is proposing to add language to Rule 6.1.01 to 
specify that the Exchange will not solely rely on the ``primary 
market'' of an underlying security to determine whether the Exchange 
may trade the option for such security. The Exchange believes that the 
proposed rule change will specify that if there is an ample market in 
the underlying security, the Exchange has the authority to trade the 
option even if

[[Page 19349]]

the primary market is not open. The Exchange believes that allowing 
such discretion will create a lesser market disruption if the primary 
exchange is unable to open for trading.
    Exchange Rule 6.3 specifies when the Exchange will halt trading.\5\ 
Specifically, Rule 6.3(a) lists factors that may be considered in 
making that determination. Currently, Rule 6.3(a)(i) lists, as a factor 
in the decision with respect to options, ``trading in the underlying 
security has been halted or suspended in the primary market.'' The 
Exchange is proposing to add language to state, instead of the 
``primary market,'' that the Exchange may factor in if ``trading in the 
underlying security has been halted or suspended in one or more of the 
markets trading the underlying security.'' The Exchange is proposing to 
make similar changes in 6.3(a)(iii) which lists factors in making the 
determination in securities other than options. The Exchange believes 
the proposed changes will grant discretion for the Exchange to be open 
for trading when there is a robust market in the underlying security 
rather than limit it to only when the ``primary'' exchange is open.
---------------------------------------------------------------------------

    \5\ See Exchange Rule 6.3.
---------------------------------------------------------------------------

    Next, the Exchange is proposing to add language to Rule 6.3.01 to 
expand the authority of a Post Director or Order Book Official to 
suspend trading in an option not only if the ``primary market'' of the 
security has halted or suspended trading but if the security has been 
halted in ``one or more of the markets trading the underlying 
security.'' The Exchange believes this change will give the authority 
to a Post Director or Order Book Official to halt trading in an option 
if the primary market for an underlying security is not open for 
business however that security is being traded elsewhere. For example, 
if the primary market is unable to open due to a natural disaster, or 
other circumstance, but other stock exchanges are trading the 
underlying security, the proposed change will allow the Exchange to 
continue trading the overlaying options.
    Finally, the Exchange is proposing to amend language in Rule 
6.3.05. Rule 6.3.05 currently allows the Exchange to turn off the 
Retail Automation Execution System (``RAES'') with respect to a stock-
option order if credible information has been communicated that trading 
in the underlying stock has been halted for that stock-option order.\6\ 
The Exchange is proposing to add language to specifically state that 
the information communicated may be that ``one or more of the markets 
trading the underlying security'' have suspended trading in the 
underlying security. Again, the Exchange believes this language would 
allow the Exchange to continue trading stock-option orders even if the 
primary market has not opened for business.
---------------------------------------------------------------------------

    \6\ See Exchange Rule 6.3.05.
---------------------------------------------------------------------------

    The Exchange believes the proposed changes will allow the Exchange 
to trade options for underlying stocks even if that underlying listing 
market shall be unable to trade due to an emergency or other 
circumstance unique to that stock exchange. Making these proposed 
changes will allow the Exchange to trade options when an underlying 
security is trading on any national securities exchange regardless of 
where that security is formally listed. The proposed discretion 
attempts to create a lessor market disruption if a listing or primary 
market is unable to trade due to some circumstance. Because of the 
connectivity of the national securities exchanges today, the Exchange 
believes limiting its ability to trade options to when the primary 
market of the underlying security is open might hurt investors if some 
circumstance should render the primary exchange inoperable. In 
addition, the Exchange believes that the reference to ``primary 
market'' is ambiguous and has the potential to cause confusion. Thus, 
the Exchange believes by further clarifying the language, it is clearer 
when the Exchange will be open for trading.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\7\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \8\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \9\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes the proposed rule change 
protects investors by allowing trading in options as long as the 
underlying security is trading on another exchange. Instead of only 
relying on the ``primary market,'' the proposed rule change attempts to 
clarify when options will trade on the Exchange to allow greater 
continuity in the marketplace. By allowing the Exchange to trade 
options whenever the underlying securities are trading, the proposed 
changes seek to create less of a disconnect if the ``primary'' market 
should be experiencing technical difficulties, an emergency, or other 
situation that may inhibit it to be connected to the marketplace.

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. The Exchange does not believe 
the proposed rule change imposes any burden on intramarket competition 
because it is applied to all TPHs. In addition, the Exchange does not 
believe the proposed rule change will impose any burden on intermarket 
competition as it will merely give the Exchange discretion to trade 
options when there is an ample market for the underlying security of 
those options. Thus, the Exchange believes the proposed rule change 
will promote competition by giving the Exchange the ability to trade 
options when the underlying security is trading anywhere, and, thus, 
helping the Exchange to better participate in the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

 III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which

[[Page 19350]]

the Exchange 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-2013-035 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-2013-035. 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 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-2013-035, and should be 
submitted on or before April 19, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Deputy Secretary.
[FR Doc. 2013-07299 Filed 3-28-13; 8:45 am]
BILLING CODE 8011-01-P