[Federal Register Volume 81, Number 47 (Thursday, March 10, 2016)]
[Notices]
[Pages 12764-12769]
[FR Doc No: 2016-05326]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77297; File No. SR-CBOE-2016-014]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Related to Complex Orders

March 4, 2016.
    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 February 25, 2016, Chicago Board Options Exchange, Incorporated
(``CBOE'' or the ``Exchange'') 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 seeks to amend its rules related to complex orders.
The text of the proposed rule change is provided below.
    (additions are italicized; deletions are [bracketed])
* * * * *

Chicago Board Options Exchange, Incorporated Rules

* * * * *

Rule 6.53C. Complex Orders on the Hybrid System

    (a) Definition: No change.
    (b) Types of Complex Orders: No change.
    (c) Complex Order Book
    No change.
    (d) Process for Complex Order RFR Auction: Prior to routing to the
COB or once on PAR, eligible complex orders may be subject to an
automated request for responses (``RFR'') auction process.
    (i) For purposes of paragraph (d):
    (1) ``COA'' is the automated complex order RFR auction process.
    (2) A ``COA-eligible order'' means a complex order that, as
determined by the Exchange on a class-by-class basis, is eligible for a
COA considering the order's [marketability (defined as a number of
ticks away from the current market),] size, complex order type (as
defined in paragraphs (a) and (b) above) and complex order origin types
(as defined in subparagraph (c)(i) above). Complex orders processed
through a COA may be executed without consideration to prices of the
same complex orders that might be available on other exchanges.
    (ii) Initiation of a COA:
    (A) The System will send an RFR message to all Trading Permit
Holders who have elected to receive RFR messages on receipt of (1) a
COA-eligible order with two legs (including orders submitted for
electronic processing from PAR) that is better than the same side of
the derived net market or (2) a complex order with three or more legs
that (A) meets the class[, marketability], size, and complex order type
parameters of subparagraph (d)(i)(2) and is better than the same side
of the derived net market or (B) is marketable against the derived net
market, designated as immediate or cancel, and meets the class [,
marketability,] and size parameters of subparagraph (d)(i)(2).[, in
both cases] Complex orders as described in subparagraph (ii)(A)(2) will
initiate a COA regardless of the order's routing

parameters or handling instructions (except for orders routed for
manual handling). Immediate or cancel orders that are not marketable
against the derived net market in accordance with subparagraph
(ii)(A)(2)(B) will be cancelled. The RFR message will identify the
component series, the size and side of the market of the COA-eligible
order and any contingencies, if applicable.
    (B) No change.
    (iii)-(ix) No change.
* * * * *
    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'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 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 the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On October 2, 2015, the Exchange submitted immediately effective
filing SR-CBOE-2015-081, which amended Exchange rules related to the
initiation of a complex order auction (``COA'').\3\ The purpose of SR-
CBOE-2015-081 (as well as predecessor filing SR-CBOE-2014-017) \4\ was
to limit a potential source of unintended Market-Maker risk (fully
described below) related to how the Exchange's Hybrid Trading System
(the ``System'') \5\ calculates risk parameters under Rule 8.18 when
complex orders leg into the market.
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    \3\ See Securities Exchange Act Release No. 76106 (October 8,
2015), 80 FR 62125 (October 15, 2015) (SR-CBOE-2015-081)
(``Notice'').
    \4\ See Securities Exchange Act Release No. 72986 (September 4,
2014), 79 FR 53798 (September 10, 2014) (SR-CBOE-2014-017)
(``Approval Order'').
    \5\ The System is a trading platform that allows automatic
executions to occur electronically and open outcry trades to occur
on the floor of the Exchange. To operate in this ``hybrid''
environment, the Exchange has a dynamic order handling system that
has the capability to route orders to the trade engine for automatic
execution and book entry, to Trading Permit Holder and PAR Official
workstations located in the trading crowds for manual handling, and/
or to other order management terminals generally located in booths
on the trading floor for manual handling. Where an order is routed
for processing by the Exchange order handling system depends on
various parameters configured by the Exchange and the order entry
firm itself.
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    Under Rule 8.18, CBOE offers Market-Makers that are obligated to
provide and maintain continuous electronic quotes in an option class
the Quote Risk Monitor Mechanism (``QRM''), which is functionality to
help Market-Makers manage their quotes and related risk. Market-Makers
with appointments in classes that trade on the System must, among other
things, provide and maintain continuous electronic quotes in a
specified percentage of series in each class for a specified percentage
of time.\6\ To comply with this requirement, each Market-Maker may use
its own proprietary quotation and risk management system to determine
the prices and sizes at which it quotes. In addition, each Market-Maker
may use QRM.
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    \6\ See Rules 8.7(d)(ii)(iv) (Market-Makers), 8.13(d) (Preferred
Market-Makers), 8.15A(b)(i) (Lead Market-Makers) and 8.85(a)(i)
(Designated Primary Market-Makers).
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    A Market-Maker's risk in a class is not limited to the risk in a
single series of that class. Rather, a Market-Maker is generally
actively quoting in multiple classes, and each class may comprise
hundreds or thousands of individual series. The System automatically
executes orders against a Market-Maker's quotes in accordance with the
Exchange's priority and allocation rules.\7\ As a result, a Market-
Maker has exposure and risk in all series in which it is quoting in
each of its appointed classes. QRM is an optional functionality that
helps Market-Makers, and TPH organizations with which a Market-Maker is
associated, limit this overall exposure and risk.
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    \7\ See Rules 6.45A, 6.45B and 6.53C.
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    Specifically, if a Market-Maker elects to use QRM, the System will
cancel a Market-Maker's quotes in all series in an appointed class if
certain parameters the Market-Maker establishes are triggered. Market-
Makers may set the following QRM parameters (Market-Makers may set
none, some or all of these parameters):
     A maximum number of contracts for that class (the
``contract limit'') and a specified rolling time period in seconds
within which such contract limit is to be measured (the ``measurement
interval'');
     a maximum cumulative percentage (which is the sum of the
percentages of the original quoted size of each side of each series
that trade) (the ``cumulative percentage limit'') that the Market-Maker
is willing to trade within a specified measurement interval; or
     a maximum number of series for which either side of the
quote is fully traded (the ``number of series fully traded'') within a
specified measurement interval.
    If the Exchange determines the Market-Maker has traded more than
the contract limit or cumulative percentage limit, or has traded at
least the number of series fully traded, of a class during the
specified measurement interval, the System will cancel all of the
Market-Maker's electronic quotes in that class (and any other cases
with the same underlying security) until the Market-Maker refreshes
those quotes (a ``QRM Incident''). A Market-Maker, or TPH organization
with which the Market-Maker is associated, may also specify a maximum
number of QRM Incidents that may occur on an Exchange-wide basis during
a specified measurement interval. If the Exchange determines that a
Market-Maker or TPH Organization, as applicable, has reached its QRM
Incident limit during the specified measurement interval, the System
will cancel all of the Market-Maker's or TPH Organization's quotes, as
applicable, and the Market-Maker's orders resting in the book in all
classes and prevent the Market-Maker and TPH organization from sending
additional quotes or orders to the Exchange until the earlier to occur
of (1) the Market-Maker or TPH organization reactivates this ability or
(2) the next trading day.
    The purpose of the QRM functionality is to allow Market-Makers to
provide liquidity across most series in their appointed classes without
being at risk of executing the full cumulative size of all their quotes
before being given adequate opportunity to adjust their quotes. For
example, if a Market-Maker can enter quotes with a size of 25 contracts
in 100 series of class ABC, its potential exposure is 2,500 contracts
in ABC. To mitigate the risk of having all 2,500 contracts in ABC
execute without the opportunity to evaluate its positions, the Market-
Maker may elect to use QRM. If the Market-Maker elects to use the
contract limit functionality and sets the contract limit at 100 and the
measurement interval at five seconds for ABC, the System will
automatically cancel the Market-Maker's quotes in all series of ABC if
100 or more contracts in series of ABC execute during any five-second
period.

    To assure that all quotations are firm for their full size, the
System performs the parameter calculations after an execution against a
Market-Maker's quote occurs. For example, using the same parameters in
class ABC as above, if a Market-Maker has executed a total of 95
contracts in ABC within the previous three seconds, a quote in a series
of ABC with a size of 25 contracts continues to be firm for all 25
contracts. An incoming order in that series could execute all 25
contracts of that quote, and, following the execution, the total size
parameter would add 25 contracts to the previous total of 95 for a
total of 120 contracts executed in ABC. Because the total size executed
within the previous five seconds now exceeds the 100 contract limit for
ABC, the System would, following the execution, immediately cancel all
of the Market-Maker's quotes in series of ABC. The Market-Maker would
then enter new quotes for series in ABC. Thus, QRM limits the amount by
which a Market-Maker's executions in a class may exceed its contract
limit to the largest size of its quote in a single series of the class
(or 25 in this example).
    The Exchange proposes to amend Rule 6.53C regarding complex orders
to limit a potential source of unintended Market-Maker risk related to
how the System calculates risk parameters under Rule 8.18 when complex
orders leg into the market.\8\ As discussed above, by checking the risk
parameters following each execution in a series, the risk parameters
allow a Market-Maker to provide liquidity across multiple series of a
class without being at risk of executing the full cumulative size of
all its quotes. This is not the case, however, when a complex order
legs into the regular market (i.e. the market for individual, or
simple, orders). Because the execution of each leg of a complex order
is contingent on the execution of the other legs, the execution of all
the legs in the regular market is processed as a single transaction,
not as a series of individual transactions.
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    \8\ Rule 6.53C(c)(ii)(1) provides that complex orders in the
complex order book (``COB'') may execute against individual orders
or quotes in the book provided the complex order can be executed in
full (or a permissible ratio) by the orders and quotes in the book.
Rule 6.53C(d)(v)(1) provides that orders that are eligible for the
complex order auction (``COA'') may trade with individual orders and
quotes in the book provided the COA-eligible order can be executed
in full (or a permissible ratio) by the orders and quotes in the
book. COA is an automated request for responses (``RFR'') auction
process. Upon initiation of a COA, the Exchange sends an RFR message
to all Trading Permit Holders who have elected to receive RFR
messages, which RFR message identifies the series, size and side of
the market of the COA-eligible order and any contingencies. Eligible
market participants may submit responses during a response time
interval. At the conclusion of the response time interval, COA-
eligible orders are allocated in accordance with Rule 6.53C(d)(v),
including against individual orders and quotes in the book.
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    For example, if market participants enter into the System
individual orders to buy 25 contracts for the Jan 30 call, Jan 35 call,
Jan 40 call and Jan 45 call in class ABC, the System processes each
order as it is received and calculates the Market-Makers parameters in
class ABC following the execution of each 25-contract call. However, if
a market participant enters into the System a complex order to buy all
four of these strikes in class ABC 25 times, which complex order
executes against bids and offers for the individual series (i.e. legs
into the market), the System will calculate the Market-Maker's
parameters in class ABC following the execution of all 100 contracts.
If the Market-Maker had set the same parameters in class ABC as
discussed above (100-contract limit with five-second measurement
interval) and had executed 95 contracts in class ABC within the
previous three seconds, the amount by which the next transaction might
exceed 100 is limited to the largest size of its quote in a single
series of the class. In that example, since the largest size of the
Market-Maker's quotes in any series was 25 contracts, the Market-Maker
could not have exceeded the 100-contract limit by more than 20
contracts (95 + 25 = 120). However, with respect to the complex order
with four legs 25 times, the next transaction against the Market-
Maker's quotes potentially could be as large as 100 contracts
(depending upon whether there are other market participants at the same
price), creating the potential in this example for the Market-Maker to
exceed the 100-contract limit by 95 contracts (95 + 100 = 195) instead
of 20 contracts.
    As this example demonstrates, legging of complex orders into the
regular market presents higher risk to Market-Makers than executing
their quotes against individual orders entered in multiple series of a
class in the regular market, because it may result in Market-Makers
exceeding their risk parameters by a greater number of contracts. This
risk is directly proportional to the number of legs associated with a
complex order. Market-Makers have expressed concerns to the Exchange
regarding this risk.
    In order to alleviate this potential risk to Market-Makers, the
Exchange, in SR-CBOE-2015-081, amended Rule 6.53C(d) to, among other
things, provide that a COA will be initiated when a complex order with
three or more legs is designated as IOC and meets the class,
marketability, and size parameters of subparagraph (d)(i)(2).\9\ The
Exchange observed IOC orders causing the risk to Market-Makers
described above and believed the previous amendment proposed in SR-
CBOE-2015-081 would reduce that risk by initiating a COA in those
circumstances. The Exchange is now proposing to fine tune this
requirement by amending Rule 6.53C(d)(ii)(A)(2)(B) to provide that a
COA will be initiated when a complex order with three or more legs that
is marketable against the derived net market is designated as immediate
or cancel and the order meets the class and size parameters of
subparagraph (d)(i)(2).\10\
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    \9\ See Rule 6.53C(d)(ii)(A)(2)(B). The Exchange has not yet
implemented the changes described in SR-CBOE-2015-081 in
anticipation of this proposal.
    \10\ This proposed change applies to Hybrid classes only, and
not Hybrid 3.0 classes. The Exchange does not believe the risk
discussed in this rule filing is present in Hybrid 3.0 classes
because in Hybrid 3.0 classes complex orders are not legged into the
regular market. See Rule 6.53C.10 (providing flexibility for the
Exchange to determine to not allow marketable complex orders entered
into COB and/or COA to automatically execute against individual
quotes residing in the EBook).
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    As noted above, it is the legging of complex orders into the
regular market that presents the potential risk to Market-Makers.
Generally, a complex order has the potential to leg into the market
when the complex order is marketable against leg quotes. For example,
if the derived net market of a complex order strategy is 1.00-1.20 and
a complex order to buy or sell at $1.10 is entered, the complex order
would not execute against the legs of the regular market because the
leg markets (which make-up the derived net market) cannot satisfy the
order. A complex order to buy at $1.20 or higher or to sell at $1.00 or
lower (i.e., an order that is marketable against the derived net
market) would potentially be executable against the leg quotes.
However, the current rule requires the Exchange to initiate a COA for a
complex order with three or more legs that is designated IOC and meets
the class, marketability, and size parameters of subparagraph
(d)(i)(2), even if the complex order is not marketable against the
derived net market. Complex orders that are not marketable against the
derived net market do not pose the same risk to Market-Makers as
complex orders that are marketable against the derived net market
because, as noted above, it is marketable complex orders that can leg
into the market and execute against individual quotes causing the risk
to Market-Makers. Thus, the Exchange is proposing to amend Rule
6.53C(d)(ii)(A)(2)(B) as described above. Additionally, IOC orders that
are not

marketable against the derived net market in accordance with
subparagraph (ii)(A)(2)(B) will be cancelled, which allows order entry
firms to use their own sophisticated technology to manage their orders
helping to remove impediments to and perfect the mechanism of a free
and open market.
    Currently, the marketability parameter in Rule 6.53C(d)(i)(2),
defined as a number of ticks away from the current market, sets the
price at which a complex order will initiate a COA. To avoid confusion,
the Exchange proposes to remove the marketability parameter from the
definition of ``COA-eligible order,'' which will remove the Exchange's
flexibility to set the price at which a complex order will initiate a
COA. The Exchange does not foresee any issues with removing the
flexibility to determine the price at which a COA will be initiated
because the Exchange does not foresee a future need to modify the price
at which auctions are initiated. If unforeseen circumstances arise
where the Exchange believes it is necessary to modify the price at
which auctions are initiated then the Exchange will submit a subsequent
rule filing. Additionally, removing such flexibility may provide
increased certainty to market participants about the price at which a
complex order will initiate a COA, helping to remove impediments to and
perfect the mechanism of a free and open market.
    The Exchange proposes to hardcode the price at which a complex
order may initiate a COA in Rule 6.53C(d)(ii)(A). For example, assuming
all of the non-price specific requirements are met, a complex order
with two legs under subparagraph (d)(ii)(A)(1) and a complex order with
three legs under subparagraph (d)(ii)(A)(2)(A) will initiate a COA if
the derived net market is 1-1.20 and the complex order is to buy at
$1.01 or higher or to sell at 1.19 or lower.\11\ As described above,
assuming the non-price specific requirements are met, a complex order
with three legs under subparagraph (d)(ii)(A)(2)(B) will initiate a COA
if the derived net market is 1-1.20 and the complex order is to buy at
$1.20 or higher or to sell at $1.00 or lower. Initiating a COA in these
situations will relieve the risk to Market-Makers noted above, which
helps promote just and equitable principles of trade by relieving risk
to Market-Makers allowing them to more efficiently and effectively
provide important liquidity.
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    \11\ The Exchange notes that the prices at which a complex order
will initiate a COA under subparagraphs (d)(ii)(A)(1) or
(d)(ii)(A)(2)(A) are consistent with the current settings for the
marketability parameter. This portion of the proposal simply
hardcodes existing settings.
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    In short, SR-CBOE-2015-081, among other things, identified certain
orders that potentially cause the risk to Market-Makers described above
(i.e., complex orders with three or more legs that are designated as
IOC and meet the class, marketability, and size parameters of
subparagraph (d)(i)(2)). This proposal goes a step further and focuses
on the above orders that are marketable against the derived net market.
This is consistent with the purpose of SR-CBOE-2015-081, which was to
alleviate the potential risk to Market-Makers. Additionally, this
proposal helps to further balance the protection of Market-Makers with
the desire of market participants entering IOC orders to have those
orders cancel if not immediately executed. The Exchange also notes that
the Exchange is removing its flexibility with regards to the
marketability parameter.
    The Exchange will announce the implementation date of the proposed
rule change in a Regulatory Circular to be published no later than 90
days following the effective date of this filing. The implementation
date will be no later than 180 days following the effective date of
this 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.\12\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \13\ 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) \14\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ Id.
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    In particular, the Exchange believes the proposed rule change is
consistent with the purpose of SR-CBOE-2015-081, which was to alleviate
a potential risk to Market-Makers that arises through the use of QRM.
Complex orders with three or more legs that are designated as IOC and
meet the class and size parameters of subparagraph (d)(i)(2) and that
are marketable against the derived net market (which the Exchange has
identified as potentially causing risk to Market-Makers) will COA,
which helps promote just and equitable principles of trade by relieving
risk to Market-Makers allowing them to more efficiently and effectively
provide important liquidity. Orders that are designated as IOC and meet
the class and size parameters of subparagraph (d)(i)(2), but that are
not marketable against the derived net market, will be cancelled, which
allows order entry firms to use their own sophisticated technology to
manage their orders helping to remove impediments to and perfect the
mechanism of a free and open market. The Exchange is also removing
flexibility with regards to the marketability parameter. Although the
Exchange prefers flexibility, the Exchange does not foresee the need to
retain flexibility with regards to the marketability parameter and
hardcoding the parameter may help avoid confusion with regards to the
price at which a complex order will initiate a COA, which also helps to
remove impediments to and perfect the mechanism of a free and open
market.
    The Exchange also believes the proposed rule change to initiate a
COA upon receipt of complex orders with three or more legs that are
designated as IOC and meet the class and size parameters of
subparagraph (d)(i)(2) and that are marketable against the derived net
market is consistent with the requirement that Market-Makers' quotes be
firm under Rule 602 of Regulation NMS.\15\ The proposed rule change
does

not relieve Market-Makers of their obligation to provide ``firm''
quotes. If a complex order in a Hybrid class with three or more legs
goes through COA and then legs into the market for execution upon
completion of the COA, at which point the complex order would execute
against a Market-Maker's quotes based on priority rules, the Market-
Maker must execute its quotes against the order at its then-published
bid or offer up to its published quote size, even if such execution
would cause the Market-Maker to significantly exceed its risk
parameters. However, prior to the end of COA (and thus prior to a
complex order legging into the market), a Market-Maker may adjust its
published quotes to manage its risk in a class as it deems necessary,
including to prevent executions that would exceed its risk parameters.
In this case, the firm quote rule does not obligate the Market-Maker to
execute its quotes against the complex order at the quote price and
size that was published when the order entered the System and initiated
the COA. Rather, the Market-Maker's firm quote obligation applies only
to its disseminated quote at the time an order is presented to the
Market-Maker for execution, which presentation does not occur until the
System processes the order against the leg markets after completion of
the COA.\16\ Thus, the proposed rule change is consistent with the firm
quote rule.
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    \15\ Rule 602(b)(2) obligates a Market-Maker to execute any
order to buy or sell a subject security presented to it by another
broker or dealer or any other person belonging to a category of
persons with whom the Market-Maker customarily deals, at a price at
least as favorable to the buyer or sell as the Market-Maker's
published bid or offer in any amount up to its published quotation
size. Rule 602(b)(3) provides that no Market-Maker is obligated to
execute a transaction for any subject security to purchase or sell
that subject security in an amount greater than its revised
quotation size if, prior to the presentation of an order for the
purchase or sale of a subject security, the Market-Maker
communicated to the Exchange a revised quotation size. Similarly, no
Market-Maker is obligated to execute a transaction for any subject
security if, before the order sought to be executed is presented,
the Market-Maker has communicated to the Exchange a revised bid or
offer. CBOE Rule 8.51 imposes a similar obligation (Market-Maker
must sell (buy) at least the established number of contracts at the
offer (bid) which is displayed when the Market-Maker receives a buy
(sell) order at the trading station where the reported security is
located for trading; however, no Market-Maker is obligated to
execute a transaction for a listed option when, prior to the
presentation of an order to sell (buy) to the Market-Maker, the
Market-Maker has communicated to the Exchange a revised quote).
    \16\ See Staff Legal Bulletin No. 16, Transaction in Listed
Options Under Exchange Act Rule 11Ac1-1, U.S. Securities and
Exchange Commission, Division of Market Regulation, January 20, 2004
(``Scenario 3: When an Order is ``Presented'' . . . If an individual
market maker generates its own quotations . . . and exchange systems
route incoming orders to the responsible broker-dealer with
priority, when is an order presented to a responsible broker-dealer?
Response: . . . . When each market maker is the responsible broker-
dealer with respect to its own quote, an order is presented to it
when received by the market maker from the exchange system.''). When
a complex order is processing through COA, the order is still in the
System and has not yet been presented to a broker or dealer
(including a Market-Maker) for execution. Only after completion of
the COA, when the System allocates the complex order for execution
in accordance with priority rules, will that order be ``presented''
to the Market-Maker for firm quote purposes.
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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 intramarket or intermarket competition that is not necessary
or appropriate in furtherance of the purposes of the Act. The Exchange
does not believe the proposed rule change will impose any burden on
intramarket competition because all IOC orders will be treated equally
by the Exchange. The proposed rule change is intended to reduce risk to
Market-Makers that are quoting in the regular market. CBOE believes
that the proposed rule change will promote competition by encouraging
Market-Makers to increase the size of and to more aggressively price
their quotes, which will increase liquidity on the Exchange. To the
extent that the rule change makes CBOE a more attractive marketplace,
market participants are free to become Trading Permit Holders on CBOE
and other exchanges are free to amend their rules in a similar manner.
Furthermore, the Exchange does not believe the proposed rule change
will impose any burden on intermarket competition because the rule
change does not materially affect the outcome or purpose of SR-CBOE-
2015-081, which was to alleviate potential risk to Market-Makers using
QRM. The Exchange also does not believe hardcoding the price at which a
complex order may initiate a COA will impose a burden on competition.

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. If the Commission takes such action, the
Commission will institute proceedings to determine whether the proposed
rule change should be approved or disapproved.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give 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 time as designated by the Commission.
The Exchange has satisfied this requirement.
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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_ADDRESS>Please include
File Number SR-CBOE-2016-014 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2016-014. 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-CBOE-2016-014, and should be submitted
on or before March 31, 2016.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Brent J. Fields,
Secretary.
[FR Doc. 2016-05326 Filed 3-9-16; 8:45 am]
 BILLING CODE 8011-01-P