[Federal Register Volume 78, Number 191 (Wednesday, October 2, 2013)]
[Notices]
[Pages 60971-60973]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24000]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70509; File No. SR-CBOE-2013-091]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to the CBSX Clearly Erroneous Policy 
Pilot Program

September 26, 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 September 23, 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 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.
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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 extend a pilot program related to Rule 
52.4 (Clearly Erroneous Executions) and remove certain references to 
individual stock trading pauses contained in Rule 52.4(c)(4). 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to extend the effectiveness of the 
Exchange's current rule applicable to Clearly Erroneous Executions and 
to remove references to individual stock trading pauses described in 
CBOE Stock Exchange, LLC (``CBSX'') Rule 52.4(c)(4). Portions of CBSX 
Rule 52.4, explained in further detail below, are currently operating 
as a pilot program set to expire on September 30, 2013. The Exchange 
proposes to extend the pilot program to April 8, 2014.
    On September 10, 2010, the Commission approved, on a pilot basis, 
changes to CBSX Rule 52.4 to provide for uniform treatment: (1) Of 
clearly erroneous execution reviews in multi-stock events involving 
twenty or more securities; and (2) in the event transactions occur that 
result in the issuance of an individual stock trading pause by the 
primary listing market and subsequent transactions that occur before 
the trading pause is in effect on the Exchange. The Exchange also 
adopted additional changes to CBSX Rule 52.4 that reduced the ability 
of the Exchange to deviate from the objective standards set forth in 
CBSX Rule 52.4, and in 2013, adopted a provision designed to address 
the operation of the Plan to Address Extraordinary Market Volatility 
Pursuant to Rule 608 of Regulation NMS under the Act (the ``Limit Up-
Limit Down Plan'' or the ``Plan''). The Exchange believes the benefits 
to market participants from the more objective clearly erroneous 
executions rule should continue on a pilot basis through April 8, 2014, 
which is one year following the commencement of operations of the Plan. 
The Exchange believes that continuing the pilot during this time will 
protect against any unanticipated consequences. Thus, the Exchange 
believes that the protections of the Clearly Erroneous Rule should 
continue while the industry gains further experience operating the 
Plan.
    The Exchange also proposes to eliminate all references in CBSX Rule 
52.4 to individual stock trading pauses issued by a primary listing 
market. Specifically, CBSX Rule 52.4(c)(4)

[[Page 60972]]

provides specific rules to follow with respect to review of an 
execution as potentially clearly erroneous when there was an individual 
stock trading pause issued pursuant to Rule 6.3C.03(a). The stock 
trading pauses described in CBSX Rule 52.4(c)(4) are being phased out 
as securities become subject to the Plan pursuant to a phased 
implementation schedule. The Plan is already operational with respect 
to all securities included in Rule 6.3C.03(a), and thus, the Exchange 
believes that all references to individual stock trading pauses should 
be removed, including all cross-references to CBSX Rule 52.4(c)(4) 
contained in other portions of CBSX Rule 52.4.\3\
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    \3\ The Exchange notes that certain Exchange Traded Products 
(``ETPs'') are not yet subject to the Plan. Because such ETPs are 
not on the pilot list of securities, such ETPs are not subject to 
Rule 52.4(c)(4). See Securities Exchange Act Release No. 65103 
(August 11, 2011), 76 FR 51094 (August 17, 2011) (SR-CBOE-2011-078) 
(notice of filing and immediate effectiveness Proposed Rule Change 
Related to the CBSX Clearly Erroneous Policy Pilot Program). 
Accordingly, the proposed rule change does not change the status quo 
with respect to such ETPs. As amended, all securities, including 
ETPs not subject to the Plan, will continue to be subject to Rule 
52.4(c)(1) through (3).
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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.\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 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) \6\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Id.
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    In particular, the Exchange believes that the extension of the 
pilot would help assure that the determination of whether a clearly 
erroneous trade has occurred will be based on clear and objective 
criteria, and that the resolution of the incident will occur promptly 
through a transparent process. The proposed rule change would also help 
assure consistent results in handling erroneous trades across the U.S. 
markets, thus furthering fair and orderly markets, the protection of 
investors and the public interest. Although the Plan will become fully 
operational during the same time period as the proposed extended pilot, 
the Exchange believes that maintaining the pilot will help to protect 
against unanticipated consequences. To that end, the extension will 
allow the Exchange to determine whether CBSX Rule 52.4 is necessary 
once the Plan is fully operational and, if so, whether improvements can 
be made. Finally, the elimination of references to individual stock 
trading pauses will help to avoid confusion amongst market 
participants, which is consistent with the protection of investors and 
the public interest and therefore consistent with the Act. As described 
above, individual stock trading pauses have been replaced by the Plan.

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. To the contrary, the Exchange 
believes that the Financial Industry Regulatory Authority (``FINRA'') 
and other national securities exchanges are also filing similar 
proposals, and thus, that the proposal will help to ensure consistency 
across market centers.

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

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

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

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-
4(f)(6)(iii) thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest, 
as it will allow the pilot program to continue uninterrupted, thereby 
avoiding investor confusion that could result from a temporary 
interruption in the pilot program. For this reason, the Commission 
designates the proposed rule change to be operative upon filing.\9\
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    \9\ For purposes only of waiving the 30-day operative delay, the 
Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CBOE-2013-091 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-2013-091. 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

[[Page 60973]]

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 offices 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-2013-091, and should be 
submitted on or before October 23, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24000 Filed 10-1-13; 8:45 am]
BILLING CODE 8011-01-P