
[Federal Register Volume 78, Number 24 (Tuesday, February 5, 2013)]
[Notices]
[Pages 8211-8213]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-02485]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68770; File No. SR-CBOE-2013-011]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating To Delay the Operative Date of a Rule 
Change To Exchange Rule 6.3B

January 30, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on January 28, 2013, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II 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 delay the operative date of a rule change 
to Exchange Rule 6.3B, which provides for methodology for determining 
when to halt trading in all stocks due to extraordinary market 
volatility, from the date of February 4, 2013, until April 8, 2013.
    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 [sic].

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 proposes to amend Rule 6.3B, which provides the 
methodology for determining when to halt trading in all stocks due to 
extraordinary market volatility,\3\ to delay the operative date of the 
pilot by which such Rule operates from the current scheduled date of 
February 4, 2013, until April 8, 2013, to coincide with the initial 
date of operations of the Regulation NMS Plan to Address Extraordinary 
Market Volatility (``LULD Plan'').\4\ As proposed, the pilot period

[[Page 8212]]

will begin and end at the same time [sic] the pilot period for the LULD 
Plan. The current Rule 6.3B would remain in effect until April 8, 2013. 
If the pilot is not either extended or approved permanently at the end 
of the pilot period, the current version of Rule 6.3B would be in 
effect.
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    \3\ Exchange Rule 6.3B does not currently contain any reference 
to the specific levels of decline in the DJIA that would trigger a 
market-wide trading halt. Instead, the rule was amended in 1997 to 
provide that a market-wide halt will be triggered on the Exchange 
whenever a market-wide halt is in effect on the New York Stock 
Exchange LLC (``NYSE''). See Securities Exchange Act Release No. 
38221 (January 31, 1997), 62 FR 5871 (February 7, 1997)(SR-CBOE-96-
78).
    \4\ The Exchange adopted the proposed changes to the market-wide 
circuit breakers on a pilot basis for a period that corresponds to 
the pilot period for the LULD Plan so that the impact of the two 
proposals can be reviewed together. See Securities Exchange Act 
Release No. 67090 (May 31, 2012), 77 FR 33531 (June 6, 2012) (SR-
CBOE-2011-087). The Exchange anticipates that the initial date of 
LULD Plan operations will be changed to April 8, 2013. The proposal 
would delay the operative date of the market-wide circuit breakers 
pilot to April 8, 2013 in order for the implementation date for the 
market-wide circuit breakers pilot would remain the same date as for 
the LULD Plan.
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Current Rule 6.3B
    In its current form,\5\ the rule provides for Level 1, 2, and 3 
declines and specified trading halts following such declines. The 
values of Levels 1, 2 and 3 [sic] are calculated at the beginning of 
each calendar quarter, using 10%, 20% and 30%, respectively, of the 
average closing value of the DJIA for the month prior to the beginning 
of the quarter. Each percentage calculation is rounded to the nearest 
fifty points to create the Levels' trigger points. The NYSE 
disseminates the new trigger levels quarterly to the media and via an 
Information Memo and [sic] is available on NYSE's Web site.\6\ The 
values then remain in effect until the next quarterly calculation, 
notwithstanding whether the DJIA has moved and a Level 1, 2, or 3 
decline is no longer equal to an actual 10%, 20%, or 30% decline in the 
most recent closing value of the DJIA.
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    \5\ The rule was last amended in 1998, when declines based on 
specified point drops in the DJIA were replaced with the current 
methodology of using a percentage decline that is recalculated 
quarterly. See Securities Exchange Act Release No. 39846 (April 9, 
1998), 63 FR 18477 (April 15, 1998) (SR-NYSE-98-06, SR-Amex-98-09, 
SR-BSE-98-06, SR-CHX-98-08, SR-NASD-98-27, and SR-Phlx-98-15).
    \6\ See e.g., NYSE Regulation Information Memos 11-19 (June 30, 
2011) and 11-10 (March 31, 2011).
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    Once a circuit breaker is in effect, trading in all stocks halt for 
the time periods specified below:
Level 1 Halt
    anytime before 2:00 p.m.--one hour;
    at or after 2:00 p.m. but before 2:30 p.m.--30 minutes;
    at or after 2:30 p.m.--trading shall continue, unless there is a 
Level 2 Halt.
Level 2 Halt
    anytime before 1:00 p.m.--two hours;
    at or after 1:00 p.m. but before 2:00 p.m.--one hour;
    at or after 2:00 p.m.--trading shall halt and not resume for the 
rest of the day.
Level 3 Halt
    at any time--trading shall halt and not resume for the rest of the 
day.
    Unless stocks are halted for the remainder of the trading day, 
price indications are disseminated during a trading halt for stocks 
that comprise the DJIA.
Amended Rule 6.3B
    The Exchange amended Rule 6.3B to revise the current methodology 
for determining when to halt trading in all stocks due to extraordinary 
market volatility (``market-wide circuit breakers''). \7\ The Exchange, 
other equities, options, and futures markets, and FINRA amended the 
market-wide circuit breakers to take into consideration the 
recommendations of the Joint CFTC-SEC Advisory Committee on Emerging 
Regulatory Issues, and to provide for more meaningful measures in 
today's markets of when to halt trading in all stocks. Accordingly, the 
Exchange amended Rule 6.3B as follows: (i) replaced the DJIA with the 
S&P 500; (ii) replaced the quarterly calendar recalculation of Rule 
6.3B triggers with daily recalculations; (iii) replaced the 10%, 20%, 
and 30% market decline percentages with 7%, 13%, and 20% market decline 
percentages; (iv) modified the length of the trading halts associated 
with each market decline level; and (v) modified the times when a 
trading halt may be triggered. The Exchange believes that these 
amendments update the rule to reflect today's high-speed, highly 
electronic trading market while still meeting the original purpose of 
Rule 6.3B: to ensure that market participants have an opportunity to 
become aware of and respond to significant price movements.
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    \7\ See Securities Exchange Act Release No. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-CBOE-2011-087).
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    The Exchange adopted the proposed changes to the market-wide 
circuit breakers on a pilot basis for a period that corresponds to the 
pilot period for the LULD Plan so that the impact of the two proposals 
can be reviewed together.\8\ In addition, in order for the markets and 
the single plan processors responsible for the consolidation of 
information pursuant to Rule 603(b) of Regulation NMS under the 
Securities Exchange Act of 1934 to make the necessary technological 
changes to implement both the changes to the market-wide circuit 
breakers and the proposed LULD Plan, the Exchange established that the 
implementation date for the proposed rule changes should be the same 
date that the LULD Plan is implemented. The Exchange anticipates that 
the initial date of LULD Plan operations will be changed to April 8, 
2013. For the same reasons as stated above, the Exchange proposes to 
delay the operative date of the market-wide circuit breakers pilot to 
April 8, 2013 in order for the implementation date for the market-wide 
circuit breakers pilot would remain the same date as for the LULD Plan.
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    \8\ See id.
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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.\9\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \10\ 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) \11\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Id.
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    In particular, this rule proposal supports the objectives of 
perfecting the mechanism of a free and open market and the national 
market system because it promotes uniformity across markets concerning 
when and how to halt trading in all stocks as a result of extraordinary 
market volatility. Additionally, delaying the operative date of the 
market-wide circuit breakers pilot until the initial date of operations 
of the LULD Plan would allow the pilot to begin and end at the same 
time of the LULD Plan so that the Exchange and the Commission could 
further assess the impact of the two pilots on the marketplace or 
whether other initiatives should be adopted in lieu of the pilots, 
which contributes to the protection of investors and the public 
interest.

[[Page 8213]]

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. The proposed changes are being 
made to delay the operation of the market-wide circuit breakers pilot 
until April 8, 2013 to allow the pilot period to begin and end at the 
same time as the LULD Plan, which contributes to the protection of 
investors and the public interest. Other competing equity exchanges are 
subject to the same methodology for determining when to halt trading in 
all stocks due to extraordinary market volatility and the same 
requirements specified in the LULD Plan. Thus, the proposed changes 
will not impose any burden on competition while providing that the 
market-wide circuit breakers pilot period corresponds to the pilot 
period for the LULD Plan so that the impact of the two proposals can be 
reviewed together.

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 significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not 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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). 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 
Commission has waived this requirement.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Doing so will delay the operative date of the market-
wide circuit breakers pilot until the initial date of operations of the 
LULD Plan, thereby allowing the pilot to run simultaneously with the 
LULD Plan, providing an opportunity to properly assess the impact of 
the two pilots on the marketplace and evaluate the pilots' 
effectiveness. Therefore, the Commission designates the proposal 
operative upon filing.\14\
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    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 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 shall institute proceedings under 
Section 19(b)(2)(B) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 15 U.S.C. 78s(b)(2)(B).
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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-2013-011 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-2013-011. 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-2013-011 and should be 
submitted on or before February 26, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02485 Filed 2-4-13; 8:45 am]
BILLING CODE 8011-01-P


