
[Federal Register Volume 80, Number 58 (Thursday, March 26, 2015)]
[Notices]
[Pages 16046-16047]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-06886]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74551; File No. SR-CBOE-2015-010]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving a Proposed Rule Change To Amend Rules 
6.41 and 24.8

March 20, 2015.
    On January 22, 2015, the Chicago Board Options Exchange, 
Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities 
and Exchange Commission (the ``Commission''), pursuant to Section 
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 
19b-4 thereunder,\2\ proposed rules to describe the process of 
establishing final leg execution prices when a broker receives from a 
customer a complex order for open-outcry handling at a total cash price 
for the order. The proposal was published for comment in the Federal 
Register on February 10, 2015.\3\ The Commission received no comments 
regarding the proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 74200 (February 4, 
2015), 80 FR 7515 (``Notice'').
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    Currently Exchange Rules 6.41 (with respect to equities) and 24.8 
(with respect to indexes), provide that bids and offers must be 
expressed in terms of dollars per unit of the underlying security or 
index, as applicable. However, the Exchange explains that sometimes a 
customer will request an execution in a complex order at a total cash 
price for the order (rather than at a price per contract for each leg) 
and the total number of contracts of each leg.\4\ In this situation, a 
broker may represent the order to the trading crowd at the total order 
price, and Trading Permit Holders may respond to trade with the order 
at that total order price.\5\ The Exchange notes that in some 
instances, due to the complexity of the order and the price and number 
of contracts involved, the complex order may not break down into a per-
unit price for each leg based on the existing market for the leg that 
corresponds to the total order price.\6\
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    \4\ Id. at 7516.
    \5\ Id.
    \6\ Id.
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    Accordingly, the Exchange proposes to adopt Interpretation and 
Policy .01 to each of Exchange Rules 6.41 and 24.8. The Interpretations 
will impose requirements requiring how brokers must determine final leg 
execution prices when a broker receives from a customer a complex order 
for open-outcry handling at a total cash price, and the complex order 
does not break down into a per-unit price for each leg based on the 
existing market for the leg that corresponds to the total price.\7\ 
Specifically, the Interpretations will provide that when the complex 
order does not break down into a per-unit price for each leg, the 
broker must resolve any difference in a manner that provides price 
improvement to the customer (i.e. the broker must determine leg prices 
that correspond to a total purchase (sale) price that is less (greater) 
than the total order price).\8\
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    \7\ Id.
    \8\ See Notice, supra note 3, at 7516. In the notice, the 
Exchange provided examples of how this occurs. Id. at 7516-7.
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    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\9\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section

[[Page 16047]]

6(b)(5) of the Act,\10\ which requires, among other things, that the 
rules of a national securities exchange be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, 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 
Commission notes that the proposed rule change maintains the current 
allocation and priority rules for open outcry trading, including the 
complex order priority exception, and that any orders represented to 
the crowd at a customer's total order price will execute in accordance 
with the Exchange's current allocation and priority rules.\11\ Further, 
the Commission notes that orders represented to the crowd at a 
customer's order price will be executed at the applicable increment for 
the class (or the complex order minimum increment if eligible) and in 
accordance with all other pricing rules.\12\
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    \9\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ See Notice, supra note 3, at 7517.
    \12\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-06886 Filed 3-25-15; 8:45 am]
 BILLING CODE 8011-01-P


