[Federal Register Volume 80, Number 192 (Monday, October 5, 2015)]
[Notices]
[Pages 60195-60197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-25186]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76024; File No. SR-CBOE-2015-080]


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

September 29, 2015.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on September 25, 2015, 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 self-regulatory organization. The Exchange has designated this 
proposal as a ``non-controversial'' proposed rule change pursuant to 
section 19(b)(3)(A) of the Act \4\ and Rule 19b-4(f)(6)(iii) 
thereunder,\5\ which renders it effective upon filing with the 
Commission. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to provide that certain quote cancel messages 
are subject to bandwidth limitations. 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 self-regulatory organization 
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 those 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,

[[Page 60196]]

of the most significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
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 quote messages are subject to bandwidth limitations 
and count towards the maximum number of quotes allowed per second(s). 
Specifically, quote cancel messages, a message type that is used by an 
originator of quotes to cancel quotes, will be subject to existing 
bandwidth limitations and counted towards the maximum number of quotes 
allowed per second(s) as described below.
    By way of background, 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). Currently, for example, a 
Trading Permit Holder (``TPH'') is limited to x quote messages 
(``blocks'') per 1 second. Each block is limited to a maximum number of 
quotes. Additionally, there is a set maximum number of total quotes per 
3 seconds. For example, if the Exchange limited each Trading Permit to 
100 quotes per 1 block, 10 blocks per 1 second and a maximum of 200 
quotes per 3 seconds, then a user cannot, for example, enter 11 blocks 
per 1 second. The Exchange will reject the entire block of quotes that 
puts the user over the threshold. If a user in the above example were 
to enter, 10 blocks comprised of 10 quotes (i.e., total of 100 quotes) 
in the first second and 5 blocks comprised of 20 quotes (i.e., total of 
100 quotes) in the following second, then the user would not be able to 
enter any more blocks (and therefore quotes) in the third second, as 
the user would exceed the 200 quotes per 3 second threshold. To date, 
quote cancel messages have not been counted towards the maximum number 
of messages per second(s). The Exchange believes however, that the 
volume of quote cancel requests by series messages in addition to 
quotes, can potentially threaten the Exchange's systems capacity. As 
such, the Exchange proposes to include these messages as part of the 
maximum number of quotes allowed per second(s), so as not to overburden 
the Exchange's system. Accordingly, a ``block'' may be comprised of 
either a maximum number of quotes or quote cancels messages (for 
requests by series \6\) and the maximum number of blocks per second 
allowed may be comprised of quote blocks, quote cancel message blocks 
or both quote and quote cancel message blocks. Also, the maximum number 
of total quotes per 3 seconds may now be comprised of quotes, quote 
cancel messages, or a combination of both. The Exchange will reject any 
block of messages that put a user over the bandwidth thresholds.
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    \6\ For example, under the proposed rule change, if a TPH were 
to send a quote cancel message for a quote in the XYZ 75 Dec 2015 
Call and the XYZ 85 Dec 2015 Call (i.e. each a different series of 
XYZ class), a TPH could send a block identifying each series and 
would count towards the bandwidth limitations as two quote messages 
and one block message.
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    The Exchange established bandwidth allowances for the purpose of 
protecting its systems and ensuring its systems were capable of 
handling all its message traffic. The Exchange believes that subjecting 
quote cancel messages (by series) to bandwidth allowance will help 
achieve this objective. The Exchange notes however, that requests to 
cancel by class or by session will not count towards the bandwidth 
limitation. Because the ability to cancel all quotes in a class is an 
important risk control for TPHs, the Exchange does not wish to count 
requests to cancel quotes for an entire class towards the maximum 
bandwidth allowance.
    The Exchange will announce the implementation date of the proposed 
rule change in an Information Circular to be published no later than 90 
days following the effective date of this rule filing. The 
implementation date will be no later than 180 days following the 
effective date of this rule filing.
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.\7\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
section 6(b)(5) \8\ 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) \9\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
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    In particular, the Exchange believes that imposing a bandwidth 
limitation on quote cancel messages protects its systems and ensures 
its systems are capable of handling its message traffic, thus removing 
impediments to and perfecting the mechanism of a free and open market 
and a national market system, as well protecting investors and the 
public interest. As noted above, quote cancel request messages in 
addition to quotes, can result in message traffic that can be 
burdensome to the Exchange's systems. In addition, the proposed rule 
change does not discriminate unfairly between market participants 
because this will be applied equally to all TPHs that may quote (i.e., 
Market-Makers).

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

    CBOE does not believe that imposing a bandwidth limitation on quote 
cancel messages for a series or group of series 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 imposing a bandwidth limitation on quote cancel messages will 
place any burden on intramarket competition because this will be 
applied to equally to all relevant TPHs (i.e., Market-Makers), in that 
all Market-Makers will be limited (in terms of bandwidth capacity) in 
the number of quote cancel and quote messages that they can send to the 
Exchange. Additionally, as noted above, the proposed rule change allows 
the Exchange to better protect its systems and ensures its systems are 
capable of handling all its message traffic. The Exchange does not 
believe that imposing a bandwidth limitation on quote cancel messages 
will place any burden on intermarket competition because this only 
applies to the sending of quote cancel messages to CBOE. To the extent 
the proposed rule change makes CBOE a more attractive trading venue to 
market participants on other exchanges, such market participants may 
elect to become CBOE market participants.

[[Page 60197]]

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 designated this rule filing as non-controversial 
under section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) 
thereunder.\10\ The proposed rule change effects a change that 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; provided that the 
self-regulatory organization has given the Commission written notice of 
its 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 times as designated by the Commission.\11\
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    \10\ 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.
    \11\ The Exchange has fulfilled this requirement.
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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: (1) 
Necessary or appropriate in the public interest; (2) for the protection 
of investors, or (3) otherwise in furtherance of the purposes of the 
Act. If the Commission takes such action, the Commission shall 
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-2015-080 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-2015-080. 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 20549-1090, on official business days between the hours 
of 10:00 a.m. and 3:00 p.m. Copies of the filing will also be available 
for inspection and copying at the NYSE's principal office and on its 
Internet Web site at www.nyse.com. 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-2015-080 and should be submitted on or before 
October 26, 2015.
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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\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-25186 Filed 10-2-15; 8:45 am]
 BILLING CODE 8011-01-P