
[Federal Register Volume 78, Number 22 (Friday, February 1, 2013)]
[Notices]
[Pages 7467-7470]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-02187]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68743; File No. SR-CBOE-2013-009]


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

January 28, 2013.
    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 January 16, 2013, 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend its rules to codify the ``Minimum 
Volume Order.'' The text of the proposed rule change is provided below. 
(additions are italicized; deletions are [bracketed])
* * * * *

Chicago Board Options Exchange, Incorporated Rules

* * * * *

Rule 6.44. Bids and Offers in Relation to Units of Trading

* * * * *
     * * * Interpretations and Policies:
* * * * *
    .05 A minimum volume order bid or offer shall be deemed to have 
been made for the full size of the order or any lesser number of option 
contracts that is at least equal to the minimum volume specified. 
Minimum volume orders and bids and offers made on a minimum volume 
basis shall be deemed to be all-or-none for purposes of Interpretations 
and Polices .01 and .03 above. To the extent available pursuant to Rule 
6.53, minimum volume orders may only be made available by the Exchange 
for open outcry trading.
* * * * *

Rule 6.53. Certain Types of Orders Defined

    One or more of the following order types may be made available on a 
class-by-class basis. Certain order types may not be made available for 
all Exchange systems. The classes and/or systems for which the order 
types shall be available will be as provided in the Rules, as the 
context may indicate, or as otherwise specified via Regulatory 
Circular.
    (a)-(v) No changes.
    (w) Minimum Volume Order. A minimum volume order is an order 
represented in open outcry for which an execution must at least equal 
the minimum volume specified. To the extent there is any remaining 
balance of a minimum volume order after the minimum volume is executed, 
the remainder will no longer have a minimum fill contingency and will 
be represented, in open outcry or electronically, unless cancelled by 
the customer. A minimum volume order that has a minimum volume size 
equal to the full size of the original order will be considered an all-
or-none order as described in Rule 6.53(i).
* * * * *

[[Page 7468]]

    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.

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 add new paragraph (w) to Exchange Rule 
6.53, Certain Types of Orders Defined, to codify an open outcry order 
type, the ``Minimum Volume Order.'' Because of the complexity of 
programming to make this order available electronically, this order 
type is currently only supported for routing to, and utilized on, the 
Exchange's trading floor for open outcry trading,\3\ and, thus, the 
Exchange is proposing to harmonize its Rules with the current 
functionality and practice.
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    \3\ Please note the Exchange may decide to introduce this order 
type electronically but such action would be subject to a separate 
rule change filing. The Exchange notes that it currently supports 
various order types that by their nature or terms may only be 
available for open outcry trading (e.g., Not Held Orders) or may 
only be available for electronic trading (e.g., Reserve Orders). 
See, e.g., Exchange Rule 6.53(g) and (t).
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    The proposed definition of a Minimum Volume Order is similar to an 
existing definition in the Exchange's Screen-Based Trading rules.\4\ In 
the proposed language, a Minimum Volume Order is an order represented 
in open outcry for which an execution must at least equal the minimum 
volume specified. To the extent there is a remaining balance of the 
original order after the minimum volume amount has been executed, the 
remainder of the order will no longer have any minimum volume 
contingency and will be represented in open outcry or electronically 
unless cancelled by the customer. The proposed language also notes that 
a Minimum Volume Order that has a minimum volume size equivalent to the 
full size of the original order would be considered an All-or-None 
Order as described in Rule 6.53(i).\5\
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    \4\ See Exchange Rule 43.2(a)(9)(E), which defines a ``Minimum 
Volume Order'' as ``* * * an order where the fill should be at least 
equal to the minimum volume specified, which is an amount less than 
the total volume of the order.'' The Exchange does not currently 
trade options pursuant to its Screen-Based Trading Rules (Chapters 
XL-XLIX).
    \5\ Under Rule 6.53(i), an All-or-None Order is currently 
defined as ``* * * a market or limit order which is to be executed 
in its entirety or not at all.''
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    For example, assume a Trading Permit Holder (``TPH'') represents an 
order to buy 50 contracts at $10.00 that is a Minimum Volume Order with 
a minimum fill size of 30. This order can only execute if at least 30 
contracts of the order would trade against other trading interest. In 
this scenario, if a Floor Broker represents the Minimum Volume Order to 
buy in open outcry and another order or quote for 30 contracts were 
offered to sell against it, as the minimum value was met, 30 contracts 
of the Minimum Volume Order to buy would execute against the sell 
order/quote and the remaining 20 contracts of the Minimum Volume Order 
to buy would be represented on the Exchange's trading floor or 
electronically unless cancelled by the customer. In the same example, 
if orders and/or quotes for only 10 contracts were offered to sell 
against the Minimum Volume Order, there would be no trade because the 
minimum size of 30 contracts would not be satisfied.
    In the case where the minimum volume size specified is equivalent 
to the total volume of the order, then the order will be considered the 
same as an All-or-None Order as specified in Exchange Rule 6.53(i). In 
the above example, if the order entered to buy was a Minimum Value 
[sic] Order for 50 contracts with a minimum quantity of 50 contracts 
then the order would be considered an All-or-None Order as described in 
Rule 6.53(i), and, as such, the entered order would only execute if the 
50 contracts could be executed in its entirety.
    The Exchange is also proposing to amend Exchange Rule 6.44, Bids 
and Offers in Relation to Units of Trading, to address Minimum Volume 
Orders. Rule 6.44, in relevant part, provides that subject to certain 
provisions in the Exchange rules, bids and offers made on the floor are 
deemed to be for one option contract unless a specific number is 
expressed in the bid or offer. A bid or offer for more than one option 
contract which is not made on an All-or-None [sic] are deemed to be for 
that amount or any lesser number of option contracts. An All-or-None 
bid or offer is deemed to be made only for the amount stated. Proposed 
new Interpretation and Policy .05 to Rule 6.44 will provide that, to 
the extent that the Exchange determines to make the Minimum Volume 
Order type available,\6\ a Minimum Volume Order bid or offer would be 
deemed to have been made for the full size of the order or any lesser 
number of option contracts that is at least equal to the minimum volume 
specified.\7\
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    \6\ The introductory paragraph to Rule 6.53 currently provides 
that one or more of the identified order types may be made available 
on a class-by-class basis, and certain order types may not be made 
available for all Exchange Systems. The introductory paragraph to 
Rule 6.53 also provides that the classes and/or systems for which 
the order types shall be available will be as provided in the Rules, 
as the context may indicate, or as otherwise specified via 
Regulatory Circular.
    \7\ By comparison, for example, as noted above an all-or-none 
bid or offer is deemed to be made only for the amount stated. See 
Rule 6.44.
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    In addition, a Minimum Volume Order would be deemed to be an All-
or-None Order for purposes of certain other provisions of Rule 6.44. 
The particular provisions are Interpretations and Policies .01 and .03 
of Rule 6.44.\8\ Interpretation and Policy .01 of Rule 6.44 provides 
the following: (i) A bid or offer may be made and transacted on an All-
or-None basis if the All-or-None bid or offer represents the only bid 
or offer available at the best price in the market at the time the All-
or-None bid or offer is executed; \9\ (ii) an All-or-None order may not 
be crossed with another All-or-None order unless all bids or offers at 
the same price at which the cross is to be effected have been filled; 
and (iii) if two or more All-or-None bids or offers represent the only 
bids or offers at the best price in the market, priority shall be 
afforded to such All-or-None bids or offers in the sequence in which 
they are made. Interpretation and Policy .03 provides that the Exchange 
may restrict the entry of All-or-None Orders in one or more classes or 
series of options whenever, in its judgment, the interests of 
maintaining a fair and orderly market are best served. Proposed new 
Interpretation and Policy .05 to Rule 6.44 will reflect the 
applicability of

[[Page 7469]]

these two provisions to Minimum Volume Orders.\10\
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    \8\ The Exchange notes that Interpretation and Policy .02 
relates to All-or-None orders in the Exchange's electronic book, and 
because Minimum Volume Orders are only available in open outcry 
trading, this provision is not applicable to Minimum Volume Orders.
    \9\ In other words, a Minimum Volume Order would, like an All-
or-None Order, yield priority to all other interest at the same 
price on the trading floor.
    \10\ Specifically, proposed new Interpretation and Policy .05 
would also provide that Minimum Volume Orders and bids and offers 
made on a Minimum Volume basis shall be deemed to be All-or-None for 
purposes of Interpretations and Policies .01 and .03 of Rule 6.44. 
This proposed Interpretation and Policy .05 is similar to existing 
Interpretation and Policy .04 to Rule 6.44, which provides that 
Fill-or-Kill orders and bids or offers made on a Fill-or-Kill basis 
shall be deemed to be All-or-None for purposes of Rule 6.44.
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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.\11\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \12\ 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 facilitation 
[sic] 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) \13\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
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    In particular, the Exchange believes the addition of Rules 6.44.05 
and 6.53(w) promotes just and equitable principles of trading by 
aligning the text of the rules with the actual functionality, which is 
currently available in open outcry. By updating the text of the 
Exchange's rules to describe the orders already supported by the 
Exchange, the proposed rule change is attempting to harmonize the 
functionality with the text of the Exchange Rules and is thereby 
promoting clarity and eliminating confusion. In addition, the proposed 
language alerts TPHs of the functionality of the order, and, thus, 
allows investors to use the order type, to the extent made available by 
the Exchange, with full knowledge of how the order type will function.
    The Exchange notes that the proposed Minimum Volume Order type 
definition is similar to an existing order type in the Exchange's 
Screen-Based Trading Rules.\14\ Additionally, the Exchange notes that 
the proposed order type is similar to order types available on other 
markets, including on the NASDAQ OMX PHLX LLC (``PHLX'') \15\ and on 
the International Securities Exchange (``ISE'').\16\
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    \14\ See Exchange Rule 43.2(a)(9)(E).
    \15\ See PHLX Rule 3301(f)(5), which provides that ``Minimum 
Quantity Orders'' are orders that require ``a specified minimum 
quantity of shares be obtained, or the order is cancelled. Minimum 
Quantity Orders may only be entered with a time-in-force designation 
of System Hours Immediate or Cancel.''
    \16\ See ISE Rule 715(l) which defines a ``Minimum Quantity 
Order'' as one that ``is available for partial execution, but each 
partial execution must be for a specified number of contracts or 
greater.''
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE 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. Specifically, the Exchange 
believes the proposed rule change will not impose any burden because 
the Exchange is merely harmonizing its Rules with current functionality 
and practice. Further, CBOE believes that the proposed rule change will 
relieve any burden on, or otherwise promote, competition because this 
order type is currently offered by other Exchanges. Thus, clarifying 
the Exchange rules would give further authority to compete with other 
exchanges currently offering the order type.

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 \17\ and 
Rule 19b-4(f)(6) \18\ 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.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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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 rule-comments@sec.gov. Please include 
File Number SR-CBOE-2013-009 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2013-009. 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

[[Page 7470]]

offices 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-2013-009, and should be submitted on or before February 22, 
2013.

    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. 2013-02187 Filed 1-31-13; 8:45 am]
BILLING CODE 8011-01-P


