[Federal Register Volume 79, Number 103 (Thursday, May 29, 2014)]
[Notices]
[Pages 30911-30912]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-12426]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72230; File No. SR-CBOE-2014-029]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving a Proposed Rule Change To Enhance the 
Exchange's Audit Trail

May 22, 2014.

I. Introduction

    On March 27, 2014, the Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (the ``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to enhance the Exchange's audit 
trail. The proposed rule change was published for comment in the 
Federal Register on April 9, 2014.\3\ The Commission received no 
comment letters regarding the proposed rule change. This order approves 
the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 71859 (April 3, 
2014), 79 FR 19697 (``Notice'').
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II. Description of the Proposal

    The Exchange proposes to require Floor Brokers \4\ and PAR 
Officials \5\ to electronically capture, by pressing a ``Represent 
Button'' on their trading device, the time at which they initially 
verbally present orders in the Exchange's trading crowd.\6\ The 
Represent Button will be located on PAR workstations and other 
Exchange-approved devices used by Floor Brokers.\7\
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    \4\ See CBOE Rule 6.70 defining a Floor Broker.
    \5\ See CBOE Rule 7.12(a) defining a PAR Official.
    \6\ See Notice, supra note 3, at 19697.
    \7\ See id.
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    According to the Exchange, CBOE Trading Permit Holders may use 
Exchange-approved devices to systematize \8\ orders on the floor, but 
the Exchange does not currently require Floor Brokers and PAR Officials 
to electronically capture the time when orders are represented in the 
trading crowd on these devices.\9\ The Exchange states that the 
procedure Floor Brokers and PAR Officials currently follow to represent 
orders and consummate trades on the Exchange's trading floor will not 
change aside from the added step of capturing the time an order is 
initially represented in the trading crowd by pushing the Represent 
Button.\10\ The Exchange also represents that any new floor based order 
management device will be required to have the Represent Button 
functionality before CBOE will approve it to be used on the Exchange 
trading floor if it will be used to represent orders on an agency 
basis.\11\ The Exchange believes that capturing the time when orders 
are represented on the Exchange's trading floor will help the Exchange 
develop and implement surveillances concerning the Exchange's rules, 
including, but not limited to, due diligence requirements of Floor 
Brokers and Exchange priority rules.\12\
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    \8\ See id. at n. 4 (citing CBOE Rule 6.24).
    \9\ See id. at 19698.
    \10\ See id.
    \11\ See id. at n. 5.
    \12\ See id. at 19698.
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    The Exchange proposes to announce the implementation date of the 
proposed rule change within 30 days following approval by the 
Commission and has represented to the Commission that all devices 
currently used to represent orders in the trading crowd by Floor 
Brokers and PAR Officials will have the Represent Button functionality 
by the time of implementation.\13\
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    \13\ See id.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\14\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\15\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, 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.
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    \14\ 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).
    \15\ 15 U.S.C. 78f(b)(5).
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    As described above, the Exchange proposes to require that Floor 
Brokers and PAR Officials press the Represent Button to capture 
electronically the time at which they initially represent an order to 
the Exchange's trading crowd. The Commission notes that the Exchange 
has represented that, aside from this additional requirement, open out-
cry trading will generally continue to operate as it currently does 
once this proposed rule change is implemented.\16\ The Represent Button 
will be added to devices already used by Floor Brokers and PAR 
Officials on the Exchange floor and represents an additional discrete 
functionality to capture the time that an order is represented. The 
Exchange also represents that this new requirement will apply equally 
to all participants that handle agency orders in the trading crowd.\17\ 
The Commission believes that the proposed rule change represents an 
incremental enhancement to CBOE's audit trail and should help 
facilitate CBOE's ability to monitor activity on its trading floor and 
assess compliance with its rules.
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    \16\ See Notice, supra note 3, at 19698.
    \17\ See id.

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[[Page 30912]]

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\18\ that the proposed rule change (SR-CBOE-2014-029) is approved.
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    \18\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-12426 Filed 5-28-14; 8:45 am]
BILLING CODE 8011-01-P