Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 (“Act”),
CFE proposes to revise the notification and reporting provisions contained in CFE Rules 414 (Exchange of Contract for Related Position) (“ECRP”) and 415 (Block Trading).
The scope of this filing is limited solely to the application of the rule changes to security futures traded on CFE. The only security futures currently traded on CFE are traded under Chapter 16 of CFE's Rulebook which is applicable to Individual Stock Based and Exchange-Traded Fund Based Volatility Index (“Volatility Index”) security futures.
The text of the proposed rule change is attached as Exhibit 4 to the filing
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.
CFE Rule 414 sets forth requirements relating to ECRP transactions, and CFE Rule 415 sets forth requirements relating to Block Trades. Each of these types of transactions occurs off-exchange, and CFE Rules 414(i) and 415(g) each set forth notification and reporting requirements, which are substantially the same. The current proposal seeks to amend these provisions. The impetus for these proposed changes is the planned expansion of extended trading hours for CBOE Volatility Index (VIX) futures, which is planned to occur in two phases with the first phase to begin in late September and the second phase to begin in the weeks that follow.
Because CFE's Help Desk will be staffed during longer periods of time than previously, the Exchange is proposing to amend the notification and reporting provisions contained in CFE Rules 414 (Exchange of Contract for Related Position) and 415 (Block Trades), which apply to all products traded on the Exchange.
For purposes of efficiency, the Exchange will describe below the current notification and reporting provisions and the proposed changes to those provisions, which would apply equally to both CFE Rule 414 and CFE Rule 415.
The current notification and reporting provisions require that each party to the transaction have an Authorized Reporter call or email the CFE Help Desk after the transaction is agreed upon to notify CFE of the terms of the transaction.
• If the transaction is agreed upon between the time that Trading Hours commence in the relevant Contract and 3:15 p.m., the notification to the CFE Help Desk must be made without delay and by no later than ten minutes after the transaction is agreed upon (in which event the CFE Help Desk will report the transaction to CFE's trading system and provide a written transaction summary on that day);
• if the transaction is agreed upon between 3:15 p.m. and 3:25 p.m., the notification to the CFE Help Desk must be made either
• on the day the transaction is agreed upon by no later than 3:25 p.m. (in which event the CFE Help Desk will report the transaction to CFE's trading system and provide a written transaction summary to the Authorized Reporters on that day) or
• on the following business day by no later than ten minutes from the time that Trading Hours commence in the relevant Contract (in which event the CFE Help Desk will report the transaction to CFE's trading system and provide and provide a written transaction summary to the Authorized Reporters on that business day); and
• if the transaction is agreed upon after 3:25 p.m. and prior to the time that Trading Hours commence in the relevant Contract on the following business day, the notification to the CFE Help Desk must be made on that following business day by no later than ten minutes from the time that Trading Hours commence in the relevant Contract (in which event the CFE Help Desk will report the transaction to CFE's trading system and provide a written transaction summary to the Authorized Reporters on that business day).
The current proposal would extend the time frames during which ECRP transactions and Block Trades may be reported. Also, the notification provisions would be described in terms of the time of notification to the Exchange (instead of when there is agreement to the transaction).
Specifically, based upon the time of notification to the CFE Help Desk of an ECRP or Block Trade, these Rules would be amended to include charts that specify the manner in which the notification of an ECRP or Block Trade must be provided to the CFE Help Desk, the Business Day for which the ECRP Contract leg or Block Trade will be submitted for clearing, and when the Help Desk will report the ECRP Contract leg or Block Trade to CFE's trading system. The CFE Help Desk will provide a written transaction summary to each Authorized Reporter on the Business Day for which the ECRP Contract leg or Block Trade is submitted for clearing. The Exchange notes that between 7:00 a.m. and 4:00 p.m. on each business day, notification may be made by phone or email. The Exchange proposes to limit the method of notification to email only during all other times. The proposed rule charts
CFE
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed rule change would benefit investors and market participants because it would enhance CFE's ECRP and Block Trade reporting provisions by extending the time frames during which ECRP transactions and Block Trades may be reported. The Exchange also believes that the proposed rule change is equitable and not unfairly discriminatory because amended CFE Rules 414 and 415 would apply to all TPHs and Authorized Reporters and do not discriminate between market participants.
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, in that the rule change makes enhancements to CFE's Block Trade and ECRP reporting process. In addition, the Exchange believes that the expansion of the ability to report Block Trades and ECRP transactions in security futures in conjunction with the expansion of trading hours in VIX futures will promote competition because it will provide for the reporting and dissemination of security futures Block Trades and ECRPs during additional time frames which will serve to promote additional transparency and thus potential further price competition.
No written comments were solicited or received with respect to the proposed rule change.
The proposed rule change will become operative on or after October 7, 2013.
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.
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.