[Federal Register Volume 79, Number 101 (Tuesday, May 27, 2014)]
[Notices]
[Pages 30210-30213]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-12076]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72197; File No. SR-CBOE-2014-042]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Trading Space Allocation Procedures

May 20, 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 May 12, 2014, Chicago Board Options Exchange, Incorporated (the 
``Exchange'' or ``CBOE'') filed with the Securities and

[[Page 30211]]

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.
---------------------------------------------------------------------------

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

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

    The Exchange proposes to adopt Rule 24.22 (Allocation of Trading 
Spaces) related to the allocation of newly-created trading spaces on 
the Exchange floor to Trading Permit Holders (``TPHs''). The text of 
the proposed rule change is provided below.

(additions are italicized; deletions are [bracketed])
* * * * *

Chicago Board Options Exchange, Incorporated Rules

* * * * *

Rule 24.21. Index Crowd Space Dispute Resolution Procedures

    (a)--(m) No Change.
    [ . . . Interpretations and Policies:
    .01 In connection with an expansion of the back area of the SPX 
trading crowd, CBOE may allocate the available trading spaces using a 
random lottery process or an order in time process. Under either of the 
processes that it chooses to utilize, CBOE would announce a deadline by 
which an approved individual CBOE Trading Permit Holder who would like 
to use the trading space can submit an indication of interest for one 
of the available trading spaces in the back area of the SPX trading 
crowd. Only those individuals who are approved Trading Permit Holders 
of CBOE would be eligible to submit an indication of interest, and the 
individual who would be using the trading space must be an effective 
Trading Permit Holder under CBOE Rule 3.10 (i.e., must have a Trading 
Permit) at the time of the random lottery process or the order in time 
process. After the deadline for indications of interest has passed, the 
available trading spaces in the back area of the SPX trading crowd 
would be allocated through a random lottery process or an order in time 
process.]
* * * * *

Rule 24.22. Allocation of Trading Spaces

    (a) In connection with an expansion or other physical modification 
of an area of a trading crowd or creation of a new trading crowd, CBOE 
may allocate the available trading spaces using a random lottery 
process or an order in time process. Under either of the processes that 
it chooses to utilize, CBOE would announce a deadline by which an 
approved individual CBOE Trading Permit Holder who would like to use 
the trading space can submit an indication of interest for one of the 
available trading spaces. Only those individuals who are approved 
Trading Permit Holders of CBOE would be eligible to submit an 
indication of interest, and the individual who would be using the 
trading space must be an effective Trading Permit Holder under CBOE 
Rule 3.10 (i.e., must have a Trading Permit) at the time of the random 
lottery process or the order in time process. After the deadline for 
indications of interest has passed, the available trading spaces would 
be allocated through a random lottery process or an order in time 
process.
    (b) CBOE may, in its discretion, determine the specific dimensions 
and parameters of each trading space in a trading crowd, provided that 
each Trading Permit Holder performing a specific trading function 
(i.e., Designated Primary Market-Maker (``DPM''), Lead Market-Maker 
(``LMM''), Market-Maker, or Floor Broker) in a trading crowd be 
allocated the same amount of space as each other Trading Permit Holder 
performing the same respective trading function in that trading crowd. 
Any determinations made by the Exchange pursuant to this Rule as to the 
specific dimensions and parameters of the trading spaces within a 
particular trading crowd shall be communicated in a Regulatory 
Circular.
* * * * *
    The text of the proposed rule change is also 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 purpose of the proposed rule change is to allow the Exchange to 
utilize its current process and procedures for allocating new trading 
spaces in the back area of the SPX trading crowd to allocate new 
trading spaces that may be created in other areas of the SPX trading 
crowd and other trading crowds on the floor of the Exchange. In 
addition, the Exchange proposes to adopt a rule, which will allow the 
Exchange to determine the dimensions and parameters of each trading 
space in a particular trading crowd.

Newly-Created Trading Spaces

    Historically, an order in time process has generally been applied 
to determine which individuals can use new trading spaces in a crowd 
located on the CBOE trading floor. In 2008, however, in connection with 
an expansion of the back area of the SPX trading crowd, the Exchange 
adopted Interpretation and Policy .01 to Rule 24.21, which provided 
that the Exchange may allocate newly-created trading spaces in the back 
area of the SPX trading crowd by either a random lottery process or an 
order in time process.\3\ Thus, Interpretation and Policy .01 to Rule 
24.21 was adopted in response to many new trading spaces in the back 
area of the SPX trading crowd becoming available due to expansion of 
the SPX trading crowd area. At the time, the Exchange believed that 
Interpretation and Policy .01 to Rule 24.21 would provide for the 
issuance of new trading spaces in an objective manner and consequently 
would provide for fair access to the Exchange.
---------------------------------------------------------------------------

    \3\ See Release No. 34-58978; File No. SR-CBOE-2008-116; 73 FR 
229, 72089-91 (Nov. 26, 2008).
---------------------------------------------------------------------------

    The Exchange would like the ability to utilize the process and 
procedures set forth in Interpretation and Policy .01 to Rule 24.21 to 
allocate other trading spaces that may be created on the Exchange floor 
due to expansion or other physical modifications to areas on the 
trading floor besides the ``back area of the SPX trading crowd.'' From 
time to time, the Exchange may expand, renovate, or make physical 
changes to trading crowd areas on the Exchange floor besides the area 
in the back of the SPX trading crowd. Although the Exchange's current 
rules provide a process and procedures for allocating newly-created 
trading spaces on the floor of the Exchange, they apply only

[[Page 30212]]

to trading spaces located in the ``back area of the SPX trading 
crowd.'' The Exchange would like the ability to allocate such other 
newly-created trading spaces in other areas of the Exchange floor using 
the process set forth in Interpretation and Policy .01 to Rule 24.21 
when the Exchange deems that process would be an effective and orderly 
way of allocating the available trading spaces.
    Given the Exchange's desire to extend the procedures set forth in 
Interpretation and Policy .01 to Rule 24.21 beyond its current scope to 
apply to trading crowd areas across the floor of the Exchange, the 
Exchange believes that the process and procedures should be moved to 
another rule as opposed to an interpretation and policy under Rule 
24.21. The Exchange adopted Interpretation and Policy .01 to Rule 24.21 
in connection with expansion of the back area of the SPX trading area. 
Thus, the Exchange placed the trading space allocation procedure under 
Rule 24.21 (Index Crowd Space Dispute Resolution Procedures). The 
Exchange believes that the broader policy should be placed under a 
separate rule and thus, proposes to adopt new Rule 24.22 (Allocation of 
Trading Spaces) for this procedure.

Trading Space Dimensions

    The Exchange also proposes to adopt Rule 24.22(b), which will allow 
the Exchange to determine the specific dimensions and parameters of 
each ``trading space'' in a particular trading crowd when the Exchange 
deems necessary. Certain trading crowds on the floor of the Exchange 
continue to be densely populated by many TPHs. The proposed rule 
codifies the Exchange's policies with respect to TPHs' use of the 
Exchange's facilities. Specifically, the rule sets forth the process 
that the Exchange may use to allocate trading spaces to TPHs in a fair, 
equal and non-discriminatory manner. The Exchange believes that Rule 
24.22(b) will contribute to the continued maintenance of fair and 
orderly markets.
    The proposed rule provides that the Exchange may, in its 
discretion, determine the dimensions and parameters of each trading 
space in a trading crowd, provided that each TPH performing a specific 
trading function (i.e., Designated Primary Market-Maker (``DPM''), Lead 
Market-Maker (``LMM''), Market-Maker, or Floor Broker) in a trading 
crowd be allocated the same amount of space as each other Trading 
Permit Holder performing the same respective trading function in that 
trading crowd. The proposed rule allows the Exchange to apportion 
different amounts of space to TPHs in a trading crowd based on their 
differing functions because TPHs within a trading crowd may have 
different technological necessities that may require more or less 
space. For example, a Floor Broker may have a need for a PAR 
workstation or order handling device. The proposed rule allows the 
Exchange the flexibility to apportion trading space based on the 
functions of the various TPHs in a trading crowd provided that all TPHs 
performing the same trading function in the crowd are allocated an 
equal amount of space in the particular trading crowd. Because not all 
trading crowds are densely populated, such rules are not necessary in 
all trading crowds. Accordingly, the Exchange proposes flexibility in 
the rule so that the Exchange can employ these rules when and where it 
determines they are needed.
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).\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.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Id.
---------------------------------------------------------------------------

    The Exchange believes that these procedures will contribute to the 
maintenance of fair and orderly markets by codifying a fair, objective, 
and nondiscriminatory procedure for allocating trading spaces that may 
be created in densely populated trading crowds on the floor of the 
Exchange. The Exchange believes that the proposed rule change is 
nondiscriminatory because any newly-created trading spaces on the floor 
of the Exchange that would be allocated under this process would be 
made equally available to all TPHs who wish to participate in the 
allocation process. In addition, the Exchange believes that adopting 
rules to ensure that all TPHs within densely populated trading crowds 
are afforded specific, defined, and equal trading spaces in terms of 
dimensions and parameters will protect TPHs against unfair 
discrimination on the trading floor of the Exchange.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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. Rather, the proposed rule 
will contribute to more robust and competitive markets by providing 
TPHs with trading spaces that maximize sightlines between potential 
counterparties and allow the Exchange to utilize its resources in an 
efficient manner to promote trading. The rule will also encourage 
greater participation and competition in the markets by allowing the 
Exchange to allocate newly-created trading spaces on the Exchange floor 
in an orderly fashion to TPHs who want to occupy those spaces. 
Furthermore, the proposed rule will remove burdens on competition by 
ensuring that all TPHs performing the same trading functions in densely 
populated trading crowds are afforded trading spaces of equal size and 
dimensions.

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 foregoing proposed rule change does not:
    A. Significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A)(ii) of the Act \7\ and 
Rule 19b-4(f)(6) \8\ thereunder.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \8\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
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.

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

[[Page 30213]]

    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. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule should be approved or 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-2014-042 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-2014-042. 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-2014-042 
and should be submitted on or before June 17, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-12076 Filed 5-23-14; 8:45 am]
BILLING CODE 8011-01-P