[Federal Register Volume 79, Number 70 (Friday, April 11, 2014)]
[Notices]
[Pages 20288-20290]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-08119]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71883; File No. SR-CBOE-2014-034]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Market-Maker Appointment Adjustments

April 7, 2014.
    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 April 1, 2014 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 add language to Rule 8.3 (Appointment of 
Market-Makers) to add clarity to when a Market-Maker must notify the 
Exchange of an appointment adjustment in advance of an upcoming tier 
rebalance. 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, at the Commission's Public Reference Room, and on the 
Commission's Web site (http://www.sec.gov).

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

[[Page 20289]]

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 proposes to amend Exchange Rule 8.3 regarding Market-
Maker appointment cost rebalances and the resulting assignment of 
additional Trading Permits when necessary. Currently, Rule 8.3 provides 
that appointments to act as a Market-Maker ``cost'' different amounts 
for different classes (with no classes costing more than 1.0). Each 
Trading Permit held by a Market-Maker has an appointment credit of 1.0. 
The Exchange, on a quarterly basis, can rebalance the tiers into which 
different classes fall, which means that the Exchange can elect to move 
a class from one tier to another. As a result, the appointment costs 
for the corresponding classes could change.
    The Exchange recently added to Rule 8.3(c)(iv) language stating 
that ``If a Market-Maker with a VTC appointment holds a combination of 
appointments whose aggregate revised appointment cost is greater than 
the number of Trading Permits that Market-Maker holds, the Market-Maker 
will be assigned as many Trading Permits as necessary to ensure that 
the Market-Maker no longer holds a combination of appointments whose 
aggregate revised appointment cost is greater than the number of 
Trading Permits that Market-Maker holds.'' \3\ However, this proposed 
change can be read to give Market-Makers until 11:59 p.m. on the day 
before a rebalance takes effect to change their appointments in order 
to no longer hold a combination of appointments whose aggregate revised 
appointment cost is greater than the number of Trading Permits that 
Market-Maker holds. Under this reading, the Exchange's Registration 
Department may not be provided enough time to review and manage such 
changes. As such, the Exchange proposes to set a cutoff time of 3:30 
p.m. Central Time to make such changes in order to provide the Exchange 
with the requisite time.\4\
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    \3\ See Securities Exchange Act No. 71223 (January 2, 2014), 79 
FR 1412 (January 8, 2014) (SR-CBOE-2013-109), which also stated that 
the Exchange shall announce rebalances via Regulatory Circular at 
least ten (10) business days before the rebalance takes effect.
    \4\ Following the proposed change, the last sentence of Rule 
8.3(c)(iv) would read:
     ``If, after 3:30 p.m. (Central Time) on the business day before 
a rebalance is to take effect, a Market-Maker with a VTC appointment 
holds a combination of appointments whose aggregate revised 
appointment cost is greater than the number of Trading Permits that 
Market-Maker holds, the Market-Maker will be assigned as many 
Trading Permits as necessary to ensure that the Market-Maker no 
longer holds a combination of appointments whose aggregate revised 
appointment cost is greater than the number of Trading Permits that 
Market-Maker holds.''
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Act and the rules and regulations thereunder applicable to the Exchange 
and, in particular, the requirements of Section 6(b) of the Act.\5\ 
Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \6\ 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) \7\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ Id.
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    The proposed rule change will ensure that the Exchange's 
Registration Department will be provided enough time to review and 
manage appointment changes without imposing an unnecessary burden on 
Market-Makers (since they will still be provided with at least ten 
business days of notice prior to a rebalance taking effect), thereby 
removing impediments to and perfecting the mechanism of a free and open 
market and a national market system. The proposed change will apply to 
all Market-Makers (who are the only market participants who have class 
appointments).

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. CBOE does not believe that the 
proposed rule change will impose any burden on intramarket competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act because it will apply to all Market-Makers (who are the only 
market participants who have class appointments). CBOE does not believe 
that the proposed rule change will impose any burden on intermarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because the proposed rule change only applies to 
the Market-Maker appointment process on CBOE and is not intended for 
competitive purposes, but to streamline an Exchange process.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\ 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, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) 
thereunder.\10\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and 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. The 
Exchange has satisfied this requirement.
    \10\ 17 CFR 240.19b-4(f)(6).
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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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings

[[Page 20290]]

under Section 19(b)(2)(B) \11\ of the Act to determine whether the 
proposed rule should be approved or disapproved.
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    \11\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal 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-2014-034 on the subject line.

Paper Comments:

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2014-034. 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-2014-034 and should be 
submitted on or before May 2, 2014.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-08119 Filed 4-10-14; 8:45 am]
BILLING CODE 8011-01-P