[Federal Register Volume 81, Number 125 (Wednesday, June 29, 2016)]
[Notices]
[Pages 42386-42388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15322]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78143; File No. SR-CFE-2016-002]


Self-Regulatory Organizations; CBOE Futures Exchange, LLC; Notice 
of Proposed Rule Change To Make Clarifying Updates to Prohibited 
Disruptive Trading Practices

June 23, 2016.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934

[[Page 42387]]

(``Act''),\1\ notice is hereby given that on May 31, 2016 CBOE Futures 
Exchange, LLC (``CFE'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``SEC'' or ``Commission'') the proposed rule 
change described in Items I, II, and III below, which Items have been 
prepared by CFE. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons. CFE also 
has filed this proposed rule change with the Commodity Futures Trading 
Commission (``CFTC''). CFE filed a written certification with the CFTC 
under Section 5c(c) of the Commodity Exchange Act (``CEA'') \2\ on May 
27, 2016.
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 7 U.S.C. 7a-2(c).
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I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    The Exchange proposes to amend its rule provisions related to 
disruptive trading practices. The scope of this filing is limited 
solely to the application of the rule amendments to security futures 
traded on CFE. The only security futures that have been offered for 
trading on CFE were traded under Chapter 16 of CFE's Rulebook, which is 
applicable to Individual Stock Based and Exchange-Traded Fund Based 
Volatility Index security futures. CFE does not currently list any 
security futures for trading. The text of the proposed rule change is 
attached as Exhibit 4 to the filing but is not attached to the 
publication of this notice.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, CFE 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. CFE 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
    CFE Rule 620 (Disruptive Trading Practices) prohibits various 
disruptive trading practices and CFE Policy and Procedure XVIII of the 
Policies and Procedures section of the CFE Rulebook lists various 
factors that CFE may consider in assessing whether conduct violates 
Rule 620. The proposed rule change proposes clarifying updates in 
relation to these provisions with respect to security futures. These 
rule amendments will also apply to all other products traded on CFE.
List of Rules Applicable to Market Participants Subject to CFE 
Jurisdiction
    CFE Rule 308(d) sets forth the list of rules which are applicable 
to market participants that are not CFE Trading Privilege Holders 
(``TPHs'') or related parties of TPHs and are subject to CFE 
jurisdiction under CFE Rule 308 (Consent to Exchange Jurisdiction). The 
proposed rule change adds Policy and Procedure XVIII to the list of 
rules that already apply to these market participants. This is a 
clarifying change since Rule 620 is one of the rules listed in Rule 
308(d) and Policy and Procedure XVIII simply describes how CFE applies 
Rule 620.
Submission of Trade at Settlement Orders
    Policy and Procedure XVIII currently provides guidance on 
prohibited disruptive trading practices. The proposed rule change adds 
reference to an existing prohibition under CFE Rule 404A(c) as an 
example of conduct that could also violate Rule 620. Rule 404A(c) 
provides that during the time period between business days for a CFE 
contract, entry into CFE's trading system of a Trade at Settlement 
order in that contract prior to the time at which CFE's trading system 
disseminates the pre-opening notice for that contract is prohibited.
Bona Fide Orders That Also Serve a Risk Management Purpose
    Additionally, the amendment clarifies that a market participant is 
not precluded from entering a bona fide order that is intended to be 
executed where that execution may also serve some other risk management 
purpose, such as verifying the flow of the executed trades through the 
market participant's back-office systems.
    The proposed rule change is consistent with similar updated 
guidance provided by other designated contract markets (``DCMs'') 
regarding disruptive practices.\3\
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    \3\ These DCMs are Chicago Mercantile Exchange, Inc. (``CME''), 
The Board of Trade of the City of Chicago, Inc., New York Mercantile 
Exchange, Inc., and Commodity Exchange, Inc. Each submitted self-
certification rule filings to the CFTC pursuant to CFTC Regulation 
Sec.  40.6(a) to effectuate their respective updated guidance. See, 
e.g., CME Submission No. 15-436 (October 8, 2015), which is 
available on the CFTC's Web site.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\4\ in general, and furthers the 
objectives of Sections 6(b)(5) \5\ and 6(b)(7) \6\ in particular in 
that it is designed:
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 15 U.S.C. 78f(b)(7).
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     To prevent fraudulent and manipulative acts and practices;
     to promote just and equitable principles of trade; and
     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.
    The Exchange believes that the proposed rule change will benefit 
market participants because it will provide greater clarity regarding 
the Exchange's current prohibited disruptive trading practices and the 
various factors that CFE may consider in assessing whether conduct 
violates Rule 620. Additionally, the Exchange believes that the 
proposed rule change will strengthen its ability to carry out its 
responsibilities as a self-regulatory organization by providing further 
guidance regarding the type of activity that is prohibited under CFE 
Rule 620. In addition, the proposed rule change benefits market 
participants by contributing to the protection of CFE's market and 
market participants from abusive practices and to the promotion of a 
fair and orderly market.

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

    CFE does not believe that the proposed rule change will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act. Specifically, the Exchange believes that the 
proposed rule change will not burden competition because the new 
clarifying updates to the prohibited disruptive trading practices will 
apply equally to all market participants and will help to foster a fair 
and orderly market. Additionally, the proposed rule change is designed 
to make CFE's disruptive trading practice rules consistent with the 
existing rules and guidance published by other DCMs.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

[[Page 42388]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change will become effective on June 13, 2016.
    At any time within 60 days of the date of effectiveness of the 
proposed rule change, the Commission, after consultation with the CFTC, 
may summarily abrogate the proposed rule change and require that the 
proposed rule change be refiled in accordance with the provisions of 
Section 19(b)(1) of the Act.\7\
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    \7\ 15 U.S.C. 78s(b)(1).
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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-CFE-2016-002 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-CFE-2016-002. 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 such 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-CFE-2016-002, and should be 
submitted on or before July 20, 2016.
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    \8\ 17 CFR 200.30-3(a)(73).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Brent J. Fields,
Secretary.
[FR Doc. 2016-15322 Filed 6-28-16; 8:45 am]
 BILLING CODE 8011-01-P