[Federal Register Volume 79, Number 145 (Tuesday, July 29, 2014)]
[Notices]
[Pages 44080-44081]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-17773]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72660; File No. SR-CBOE-2014-058]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Bandwidth Allowance

July 23, 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 July 10, 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, 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.
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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 amend its rule governing bandwidth 
allowance. 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 make an amendment to Rule 6.23B to 
state that certain order messages are not subject to bandwidth 
limitations and do not count towards the maximum number of orders 
allowed per second(s). Specifically, paired order messages, meaning 
orders that come into the Exchange already matched with a contra side 
order (i.e., Qualified Contingent Cross (``QCC'') orders \3\ and orders 
submitted to initiate the Solicitation Auction Mechanism \4\ or 
Automated Improvement Mechanism (``AIM'') \5\ (i.e., AIM Sweep orders 
and Sweep and AIM orders)), will not be subject to any bandwidth 
limitations and are not counted towards the maximum number of orders 
allowed per second(s). Currently, Rule 6.23B does not specify that 
paired order messages do not count towards total bandwidth allocation.
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    \3\ See CBOE Rule 6.53(u) for a description of QCC orders.
    \4\ See CBOE Rule 6.74B for a description of the Solicitation 
Auction Mechanism.
    \5\ See CBOE Rule 6.74A for a description of AIM.
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    The Exchange does not have unlimited system bandwidth to support an 
unlimited number of order and quote entries per second. For this 
reason, the Exchange limits each Trading Permit to a maximum number of 
messages per second(s). Paired order messages however, are not counted 
towards the maximum number of messages per second(s). The Exchange 
represents that not including paired order messages as part of the 
maximum number of orders allowed per second(s), as compared to non-
paired orders, will not jeopardize Exchange systems capacity. 
Specifically, the Exchange notes that paired order messages are not 
submitted at the same velocity or frequency as non-paired orders or 
quotes and thus do not result in message traffic that is overly 
burdensome to the Exchange's systems. Accordingly, the Exchange systems 
have the necessary capability to handle paired order message traffic, 
even if such orders are not subjected to bandwidth limitations. The 
Exchange established bandwidth allowances for the purpose of protecting 
its systems and ensuring its systems were capable of handling all its 
message traffic. As the Exchange's systems do not need to be 
``protected'' from paired order message traffic, the Exchange believes 
that, unlike non-paired orders, it is not necessary to subject paired 
orders to bandwidth allowance. If, in the future, the Exchange 
determines that the lack of a bandwidth limitation on paired order 
messages challenges the Exchange's systems capacity or capabilities, 
the Exchange would submit a proposed rule change to establish such a 
limitation and modify its systems accordingly. The Exchange lastly 
notes that the exclusion of paired order messages from the bandwidth 
limitation applies to all Trading Permit Holders (``TPHs'').
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.\6\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \7\ 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) \8\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ Id.
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    In particular, the Exchange believes that not imposing a bandwidth 
limitation regarding paired order messages perfects the mechanism of a 
free and open market by permitting investors to send in as many paired 
messages as they like (without threatening the Exchange's systems 
capacity). As noted above, paired order messages are not submitted at 
the same velocity or frequency as non-paired orders or quotes and thus 
do not result in message traffic that is overly burdensome to the 
Exchange's systems. Accordingly, the Exchange systems have the 
necessary capability to handle paired order message traffic, even if 
such orders are not subjected to bandwidth limitations. In addition, 
the proposed rule change does not

[[Page 44081]]

discriminate unfairly between market participants because this will be 
applied equally to all TPHs, in that all TPHs will not be limited (in 
terms of bandwidth capacity) in the number of paired order messages 
that they can send to the Exchange.

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

    CBOE does not believe that not imposing a bandwidth limitation 
regarding paired order messages will impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. In particular, the Exchange does not believe that not imposing 
a bandwidth limitation regarding paired order messages will place any 
burden on intramarket competition because this will be applied to 
equally to all TPHs, in that all TPHs will not be limited (in terms of 
bandwidth capacity) in the number of paired order messages that they 
can send to the Exchange. The Exchange notes that any TPH can submit 
paired orders. The Exchange does not believe that not imposing a 
bandwidth limitation regarding paired order messages will place any 
burden on intermarket competition because this only applies to the 
sending of paired order messages to CBOE. To the extent that not 
imposing a bandwidth limitation regarding paired order messages makes 
CBOE a more attractive trading venue to market participants on other 
exchanges, such market participants may elect to become CBOE market 
participants.

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) of the Act \9\ 
and Rule 19b-4(f)(6) \10\ thereunder. 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 change should be approved or disapproved.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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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 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-2014-058 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-2014-058. 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-2014-058 and should be 
submitted on or before August 19, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-17773 Filed 7-28-14; 8:45 am]
BILLING CODE 8011-01-P