Trading Permit Information for 3/14/2013 through 3/20/2013

Transcription

1 March 22, 2013 Volume 41, Number 12 The Bylaws and Rules of Chicago Board Options Exchange, Incorporated ( Exchange ), in certain specific instances, require the Exchange to provide notice to Exchange Trading Permit Holders. To satisfy this requirement, a copy of the Exchange Bulletin, including the Regulatory Bulletin, is delivered by or by hard copy free of charge to all effective Trading Permit Holders on a weekly basis. Trading Permit Holders are encouraged to receive the Exchange and Regulatory Bulletin and Information Circulars via . subscriptions may be obtained by Trading Permit Holders by submitting your name, firm if applicable, address, and phone number, to registration@cboe.com. If you do sign up for delivery, please remember to inform the Registration Services Department of address changes. Subscriptions by Trading Permit Holders for hard copy delivery may be obtained by submitting your name, firm if any, mailing address and telephone number to: Chicago Board Options Exchange, Registration Services Department, 400 South LaSalle, Chicago, Illinois 60605, Attention: Bulletin Subscriptions. Copyright 2013 Chicago Board Options Exchange, Incorporated Trading Permit Information for 3/14/2013 through 3/20/2013 TRADING PERMIT APPLICATIONS RECEIVED FOR WHICH BULLETIN PUBLICATION IS REQUIRED Individual Applicants EFFECTIVE TRADING PERMIT HOLDERS Individuals Khoa P. Le Credit Suisse Securities (USA) LLC 11 Madison Ave. New York, NY TPH Organization Applicants Sanford C. Bernstein & Co., LLC Matthew J Tym, Nominee 1345 Avenue of the Americas New York, NY Alliance Capital Management LLC - Sole LLC Member AllianceBerstein, LP - Sole Member David S. Barnard - SVP/Head of Bernstein Global Wealth Mgmt Laurence H. Bertan - Co-Chief Compliance Officer Edward J. Farrell - Director & Chief Financial Officer James D. Lamke - Co-Chief Compliance Officer Lawrence P. Patrizio - Sr. Vice President/Global Head of Broker Dealer Operations and Director Robert P. Van Brugge - Chairman, Chief Executive Officer and Director TERMINATIONS Individuals Nominee: Effective Date Adam J. Alpert 3/15/13 Synergy Capital Management, LLC Type of Business to be Conducted: Market Maker Jeffrey S Everson (EVR) 3/19/13 Group One Trading LP Type of Business to be Conducted: Market Maker Reed M Hogan (RMH) 3/19/13 Group One Trading LP Type of Business to be Conducted: Market Maker Jacob T. Shapiro (SHP) 3/20/13 Susquehanna Securities Type of Business to be Conducted: Market Maker Abraham P. Becker (PBR) 3/20/13 Susquehanna Securities Type of Business to be Conducted: Market Maker Ryan A. Burakowski (BSK) 3/20/13 Susquehanna Securities Type of Business to be Conducted: Market Maker Nominee: Termi nation Date James C Sieck 3/15/13 Synergy Capital Management, LLC James W Moore (JIM) 3/18/13 Wolverine Trading LLC March 22, 2013 Volume 41, Number 12 1

2 Research Circulars The following Research Circulars were distributed between March 19, 2013 and March 21, If you wish to read the entire document, please refer to the CBOE website at and click on the Trading Tools Tab. New listings and series information is also available in the Trading Tools section of the website. For questions regarding information discussed in a Research Circular, please call The Options Clearing Corporation at OPTIONS. Research Circular #RS March 19, 2013 Complete Genomics, Inc. ("GNOM"): Merger Completed -- Cash Settlement March 22, 2013 Volume 41, Number 12 2

3 March 22, 2013 Volume RB24, Number 12 The Bylaws and Rules of Chicago Board Options Exchange, Incorporated ( Exchange ), in certain specific instances, require the Exchange to provide notice to Trading Permit Holders. The weekly Regulatory Bulletin is delivered to all effective Trading Permit Holders to satisfy this requirement. Copyright 2013 Chicago Board Options Exchange, Incorporated. Regulatory Circulars Regulatory Circular RG Date: March 14, 2013 To: Trading Permit Holders From: Finance and Administration RE: Transaction Fees and Marketing Fee for Mini-Options Contracts On March 18, 2013, Chicago Board Options Exchange, Inc. (the Exchange or CBOE ), will list for trading mini-options on the following five securities: Security Name Underlying Symbol Mini-Option Symbol APPLE INC COM STK AAPL AAPL7 AMAZON.COM INC AMZN AMZN7 SPDR GOLD SHARES GLD GLD7 GOOGLE INC CLASS A GOOG GOOG7 SPDR S&P 500 ETF TRUST SPY SPY7 Transaction Fees for Mini-Options Transaction Fees (per contract side) for mini-options will be as follows: AIM Manual Electronic QCC Primary Contra CFLEX Customer 1 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 CBOE Market-Maker/DPM 2 $0.02 $0.02 $0.02 $0.02 $0.02 $0.02 Clearing Trading Permit Holder 3 $0.03 $0.03 $0.02 $0.02 $0.01 $0.03 Broker Dealer $0.04 $0.04 $0.02 $0.02 $0.01 $0.04 Non-TPH Market-Maker $0.04 $0.04 $0.02 $0.02 $0.01 $0.04 Professional and Joint Back-Office $0.03 $0.03 $0.02 $0.02 $0.01 $ Customer contracts in mini-options will not be included as customer volume for aggregation in the Exchange s Volume Incentive Plan. 2 Mini-option contracts are excluded from the Liquidity Provider Sliding Scale. 3 Transaction Fees on non-facilitation business executed in the Automated Improvement Mechanism (AIM) or open outcry, or as QCC, in aggregate with all such Clearing Trading Permit Holder Proprietary transactions other than in OEX, XEO, SPX and volatility indexes, are capped at $75,000 per month. March 22, 2013 Volume RB24, Number 12 1

4 There are no transaction fees for facilitation orders and such orders are not counted toward the monthly fee cap. Mini-option contracts will not be included as volume in multiply-listed options for volume thresholds in the CBOE Proprietary Products Sliding Scale. Marketing Fee The marketing fee will be assessed only on transactions of Market-Makers and DPMs resulting from (i) customer orders from payment accepting firms, or (ii) customer orders that have designated a Preferred Market-Maker under CBOE Rule Penny Classes (AAPL7, AMZN7, GLD7 and SPY7). $0.02 Non-Penny Classes (GOOG7). $0.06 Linkage Fees Linkage Fees on mini-options are the same as standard options. See CBOE Fees Schedule for information. ******** CBOE Fees Schedule Additional Information Questions may be directed to Don Patton at (312) or patton@cboe.com, Colleen Laughlin at (312) or laughlin@cboe.com, or John Mavindidze at (312) or mavindidze@cboe.com. Regulatory Circular RG Date: March 15, 2013 To: Trading Permit Holders From: Market Operations Department RE: Restrictions on Transactions in Gold Reserve Inc. (GRZ) Effective March 15, 2013, Gold Reserve Inc. (GRZ) will be delisted from the NYSE MKT LLC. Trading in GRZ will commence on the Other-OTC market under the symbol GDRZ. Trading on CBOE in existing series of GDRZ options will be subject to the following restrictions. Only closing transactions may be affected in any series of GDRZ options except for (i) opening transactions by Market-Makers executed to accommodate closing transactions of other market participants and (ii) opening transactions by CBOE TPH organizations to facilitate the closing transactions of public customers executed as crosses pursuant to and in accordance with CBOE Rule 6.74(b) or (d). The execution of opening transactions in GDRZ options, except as permitted above, and/or the misrepresentation as to whether an order is opening or closing, will constitute a violation of CBOE rules, and may result in disciplinary action. TPH organizations should ensure that they have appropriate procedures in place to prevent their customers from entering opening orders in this restricted option class. In addition, transactions in contravention of this restriction may be subject to nullification pursuant to Exchange Rule There are no restrictions in place with respect to the exercise of GDRZ options. Any questions regarding this circular may be directed to Kerry Winters at helpdesk@cboe.com and (312) or the Regulatory Interpretations and Guidance team at RegInterps@cboe.com and by telephone at (312) March 22, 2013 Volume RB24, Number 12 2

5 CBOE restricted class memos can be accessed from CBOE.org at the following web address: Regulatory Circular RG Date: March 15, 2013 To: Trading Permit Holders From: Business Development Division RE: Operational Details for Mini-Options Trading on CBOE This memo supplements and should be read in conjunction with CBOE Regulatory Circular RG Beginning on March 18, 2013, Chicago Board Options Exchange, Incorporated (CBOE) and C2 Options Exchange, Incorporated (C2) will begin trading mini-options on the following five securities: Security Name Underlying Symbol Mini-Option Symbol Price Increments APPLE INC COM STK AAPL AAPL7 $.01<=$3, $.05>$3 AMAZON.COM INC AMZN AMZN7 $.01<=$3, $.05>$3 SPDR GOLD SHARES GLD GLD7 $.01<=$3, $.05>$3 GOOGLE INC CLASS A GOOG GOOG7 $.05<=$3, $.10>$3 SPDR S&P 500 ETF TRUST SPY SPY7 $.01 all levels Quote Risk Monitor (QRM) The QRM for mini-option classes will be separate from the QRM in the standard option class for the same underlying security. CFLEX CFLEX transaction will be available for mini-options. Automated Improvement Mechanism (AIM) The match order of an AIM paired order for a quantity of 499 or fewer mini contracts must be priced at least $0.01 inside the NBBO or at the market. Such orders of 500 and greater mini contracts may be priced at or inside the NBBO or at the market. Solicitation Auction Mechanism (SAM, also referred to as AON AIM ) Order quantity must be for a minimum of 5000 mini contracts to be eligible for SAM processing (see circular CBOE Regulatory Circular RG08-53 for SAM details). Qualified Contingent Cross (QCC) Order quantity must be for a minimum of 10,000 mini contracts to be eligible for QCC processing (see circular CBOE Regulatory Circular RG for QCC details). Complex Orders Complex orders (up to 4 legs) will be accepted and eligible for electronic processing via the Complex Order Auction (COA) and the Complex Order Book (COB), as long as all legs comprise mini-options and the ratio of the quantity on the largest to smallest leg does not exceed 3-to-1. Such orders that exceed this ratio will be accepted and routed for manual handling. Complex orders that include both mini and standard options on the same security will be accepted and routed for manual handling. March 22, 2013 Volume RB24, Number 12 3

6 Complex Orders with A Stoc k Leg Complex orders with stock (e.g., buy-writes, conversions, reversals, delta-neutrals, etc.) will be accepted and eligible for electronic processing via COA and COB, as long as the ratio of mini-options to shares does not exceed 80 mini-options-to-100 shares. Such orders that exceed this ratio will be accepted and routed for manual handling. Additional Information: For information regarding mini-options please contact the CBOE Help Desk at helpdesk@cboe.com or (866) for additional information. Regulatory Circular RG Date: March 15, 2013 To: Trading Permit Holders From: Business Development Division RE: Automation of Stock-Option Strategy Orders in Classes that Trade until 3:15 PM CST Effective March 19, 2013, complex orders containing a stock leg in option classes underlying Exchange Traded Products, including those listed below, will not be eligible for automated handling through the use of the Complex Order Auction (COA), the Complex Order Book (COB), the Automated Improvement Mechanism (AIM), and the AIM AON Solicitation Auction Mechanism (SAM). DIA IWN SVXY VIXY XLE XLU EEM MDY UNG VXX XLF XLV EFA OEF UVXY VXZ XLI XLY IWM QQQ VIIX XHB XLK XME SPY7 SPY VIXM XLB XLP XRT Trading Permit Holders will be notified via circular when automated handling for complex orders containing a stock leg in these classes is reactivated. Complex orders that do not contain a stock leg are not affected by this change. Additional Information: General questions regarding this matter may be directed to CBOE Help Desk at (866) or helpdesk@cboe.com. Charlie Hullihan (312) or hullian@cboe.com March 22, 2013 Volume RB24, Number 12 4

7 Regulatory Circular RG Date: March 15, 2013 To: Trading Permit Holders, Clearing Trading Permit Holders From: Division of Regulatory Services RE: Margin Requirements for Mini Options Chicago Board Options Exchange, Incorporated (CBOE) and C2 Options Exchange, Incorporated (C2) recently adopted rules that permit the listing and trading of options overlying ten shares of SPDR S&P 500 (SPY), Apple, Inc. (AAPL), SPDR Gold Trust (GLD), Google Inc. (GOOG) and Amazon.com Inc. (AMZN) (mini options). Trading is set to begin March 18, All existing CBOE/C2 rules applicable to regular sized options on equities/etfs that overlie 100 shares (standard options) will apply to minioptions, except with respect to position and exercise limits. This Regulatory Circular primarily discusses spread margining considerations for spreads involving standard options and mini options. Spreads. The same spread margin treatment that is applied to spreads involving only standard options is permitted for spreads involving only mini options. Spreads between standard and mini options are permitted under CBOE rules. However, Trading Permit Holders (TPH) and clearing TPHs are advised that spreads involving long standard options and short mini options require additional position management if less than 10 short mini contracts are assigned, and that a margin requirement may result in certain circumstances. The examples given below highlight potential outcomes. If a TPH is able to apply a portion of a standard option as a spread with mini options on an equal underlying aggregate contract value basis (e.g., 2 mini options vs. four-fifths of a standard option), and properly margin the remaining portion separately, spread margin treatment is permitted. A TPH must have processes and procedures in place to properly compute margin, and document on its books and records that it is properly computing margin, when allowing a portion of a standard option to receive spread margin treatment vs. mini options, both on the spread and un-spread portions of the standard option. As an example, for a short standard option that is spread with 2 long mini options, but is otherwise uncovered, the uncovered margin requirement for the un-spread portion of the standard option is eight-tenths of the uncovered margin requirement for that standard option, if treated as a stand-alone uncovered option. TPHs and clearing TPHs must implement policies and procedures to provide for the supervision of accounts of market participants that mix standard and mini options in spreads. Example 1 Bullish (or debit) call spread Long 1 XYZ MAR call Short 10 mini XYZ MAR calls If the price of XYZ is above 50 and all of the short mini calls are assigned, the long call could be exercised, and the outcome is comparable to a spread involving only standard options in a 1 to 1 ratio. However, if less than 10 mini calls are assigned, and the long call is exercised, a covered call position results. (While it may seem likely that all of the short mini calls would be assigned when the price of XYZ stock is above 50, the possibility exists that they would not.) Margin must be available in the account or deposited to meet the requirement for the stock purchased upon exercise. For example, if only two 2 of the short mini calls are assigned, the resulting position would be long 1 XYZ MAR call, short 8 mini XYZ MAR calls and short 20 shares of XYZ. If the long call is March 22, 2013 Volume RB24, Number 12 5

8 exercised upon notice of the assignment, the resulting position would be long 80 shares of XYZ and short 8 mini XYZ MAR calls (covered). Margin must be available in the account or deposited to meet the requirement for the net 80 share purchase of XYZ. There would now be the risk of a long stock position. In the case of a spread that involves only standard options, exercise of the long call upon assignment of the short call would result in no stock position and its attendant risk, and no additional margin requirement. Alternatively, if only two of the short mini calls are assigned, the long XYZ MAR call could continue to be held. There would be no margin requirement under Regulation T for the short stock position provided the long call is held (although Reg. T still requires the short sale proceeds). The limited risk / limited reward profile of a spread would be maintained. One fifth of the long call offsets (hedges) the short stock position and four-fifths would be spread with the remaining short mini calls. As a second alternative, if less than 10 of the short mini calls are assigned, the long call could be sold, the remaining short calls could be closed (bought) and the resulting short stock position could be closed (bought). Example 2 Bearish or (credit) call spread Long 1 XYZ MAR call Short 10 mini XYZ MAR calls If the price of XYZ stock is above 45 (but at or below 50) an assignment of short mini calls could be managed in the same manner as a spread involving only standard options in a 1 to 1 ratio, even if less than ten of the short mini calls are assigned. For example, if only 2 of the short mini calls are assigned, the resulting position would be long 1 XYZ MAR call, short 8 mini XYZ MAR calls and short 20 shares of XYZ. The short stock position could either be held or immediately liquidated. If held, margin must be available in the account or deposited to meet the requirement for the short sale of XYZ. The risk would not change. The long call sets a floor on a loss from the short stock. Except for the number of short shares that would result, this is no different than being assigned on 1 standard option in the case of a spread involving only standard contracts when the price of XYZ is above 45 (but at or below 50). If the price of XYZ stock is above 50 and all of the short mini calls are assigned, the long call could be exercised, and the outcome is comparable to a spread involving only standard contracts in a 1 to 1 ratio. However, if less than 10 mini calls are assigned, and the long call is exercised, a covered call position results. (While it may seem likely that all of the short mini calls would be assigned when the price of XYZ stock is above 50, the possibility exists that they would not.) Margin must be available in the account or deposited to meet the requirement for the stock purchased upon exercise. For example, if only two 2 of the short mini calls are assigned, the resulting position would be long 1 XYZ MAR call, short 8 mini XYZ MAR calls and short 20 shares of XYZ. If the long call is exercised upon notice of the assignment, the resulting position would be long 80 shares of XYZ and short 8 mini XYZ MAR calls (covered). Margin must be available in the account or deposited to meet the requirement for the net 80 share purchase of XYZ. There would now be the risk of a long stock position. In the case of a spread that involves only standard options, exercise of the long call upon assignment of the short call would result in no stock position and its attendant risk, and no additional margin requirement. March 22, 2013 Volume RB24, Number 12 6

9 Alternatively, if only two of the short mini calls are assigned, the long XYZ MAR call could continue to be held. There would be no margin requirement under Regulation T for the short stock position provided the long call is held (although Reg. T still requires the short sale proceeds). The limited risk / limited reward profile of a spread would be maintained. One fifth of the long call offsets (hedges) the short stock position and four-fifths would be spread with the remaining short mini calls. As a second alternative, if less than 10 of the short mini calls are assigned, the long call could be sold, the remaining short calls could be closed (bought) and the resulting short stock position could be closed (bought). Example 3 Bullish (credit) put spread Long 1 XYZ MAR put Short 10 mini XYZ MAR puts If the price of XYZ stock is below 50 (but at or above 45) an assignment of short mini puts could be managed in the same manner as a spread involving only standard options in a 1 to 1 ratio, even if less than ten of the short mini puts assigned. For example, if only 2 of the short mini puts are assigned, the resulting position would be long 1 XYZ MAR put, short 8 mini XYZ MAR puts and long 20 shares of XYZ. The long shares would either be held or immediately liquidated. If held, margin must be available in the account or deposited to meet the requirement for the purchase of XYZ. The risk would not change. The long put sets a floor on a loss from the long stock. Except for the number of long shares that would result, this is no different than being assigned on 1 standard option in the case of a spread involving only standard contracts when the price of XYZ is below 50 (but at or above 45). If the price of XYZ is below 45, and all of the short mini puts are assigned, the long put could be exercised, and the outcome is comparable to a spread involving only standard options in a 1 to 1 ratio. However, if less than 10 mini puts are assigned, and the long put is exercised, a covered put position results. (While it may seem likely that all of the short mini puts would be assigned when the price of XYZ stock is below 45, the possibility exists that they would not.) Margin must be available in the account or deposited to meet the requirement for the stock sold short upon exercise. For example, if only two 2 of the short mini puts are assigned, the resulting position would be long 1 XYZ MAR put, short 8 mini XYZ MAR puts and long 20 shares of XYZ. If the long put is exercised upon notice of the assignment, the resulting position would be short 80 shares of XYZ and short 8 mini XYZ MAR puts (covered). Margin must be available in the account or deposited to meet the requirement for the net 80 share short sale of XYZ. There would now be the risk of a short stock position. In the case of a spread that involves only standard options, exercise of the long put upon assignment of the short put would result in no stock position and its attendant risks, and no additional margin requirement. Alternatively, if only two of the short mini puts are assigned, the long XYZ MAR put could continue to be held. The limited risk / limited reward profile of a spread would be maintained, but margin must be available in the account or deposited to meet the requirement for the 20 share purchase of XYZ stock. One fifth of the long put offsets (hedges) the long stock position and four-fifths would be spread with the remaining short mini puts. March 22, 2013 Volume RB24, Number 12 7

10 As a second alternative, if less than 10 of the short mini puts are assigned, the long put could be sold, the remaining short puts could be closed (bought) and the resulting long stock position could be closed (sold). Example 4 Bearish or (debit) put spread Long 1 XYZ MAR put Short 10 mini XYZ MAR puts If the price of XYZ stock is below 45 and all of the short mini puts are assigned, the long put could be exercised, and the outcome is comparable to a spread involving only standard options in a 1 to 1 ratio. However, if less than 10 mini puts are assigned, and the long put is exercised, a covered put position results. (While it may seem likely that all of the short mini puts would be assigned when the price of XYZ stock is below 45, the possibility exists that they would not.) Margin must be available in the account or deposited to meet the requirement for the stock sold short upon exercise. For example, if only two 2 of the short mini puts are assigned, the resulting position would be long 1 XYZ MAR put, short 8 mini XYZ MAR puts and long 20 shares of XYZ. If the long put is exercised upon notice of the assignment, the resulting position would be short 80 shares of XYZ and short 8 mini XYZ MAR puts (covered). Margin must be available in the account or deposited to meet the requirement for the net 80 share short sale of XYZ. There would now be the risk of a short stock position. In the case of a spread that involves only standard options, exercise of the long put upon assignment of the short put would result in no stock position and its attendant risks, and no additional margin requirement. Alternatively, if only two of the short mini puts are assigned, the long XYZ MAR put could continue to be held. The limited risk / limited reward profile of a spread would be maintained, but margin must be available in the account or deposited to meet the requirement for the 20 share purchase of XYZ stock. One fifth of the long put offsets (hedges) the long stock position and four-fifths would be spread with the remaining short mini puts. As a second alternative, if less than 10 of the short mini puts are assigned, the long put could be sold, the remaining short puts could be closed (bought) and the resulting long stock position could be closed (sold). Covered writing. The same covered writing margin treatment that is applied to short standard options is permitted for mini options written against an equivalent or greater position in the underlying security. Straddles. Short straddle (and strangle and combination) margin treatment is permitted for short put and short call positions that combine standard and mini options, provided that the put(s) and call(s) have equal underlying aggregate contract values. Either the put or the call position (or both) can be composed of mini contracts. Only the portion of a standard option that corresponds equally to mini options may be treated as a straddle. Any portion for which there is not a standard or mini option counterpart must be margined separately. Additional Information: Please contact the Regulatory Interpretations and Guidance team at reginterps@cboe.com and (312) for additional information. March 22, 2013 Volume RB24, Number 12 8

11 Rule Changes EFFECTIVE-ON-FILING RULE CHANGE(S) The following rule filings were submitted to the Securities and Exchange Commission ( SEC ) effective on filing, and may have taken effect pursuant to Section 19(b)(3) of the Securities Exchange Act of 1934 (the Act ). They will remain in effect barring further action by the SEC within 60 days after publication in the Federal Register. Below, any additions to rule text are underlined, and any deletions are [bracketed]. Copies are available on the CBOE public website at SR-CBOE Mini-Option On March 19, 2013, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to amend the qualified contingent cross (QCC) rule and various auction rules (which are predicated on an option contract delivering 100 shares) so that minimum order sizes apply proportionally to mini-options. Any questions regarding the rule change may be directed to Jenny Golding, Legal Division, at The rule text is shown below and the rule filing is available at Rule 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) (t) No changes. (u) Qualified Contingent Cross Order: A qualified contingent cross order is an order to buy (sell) at least 1,000 standard option contracts or 10,000 mini-option contracts that is identified as being part of a qualified contingent trade coupled with a contra-side order to sell (buy) an equal number of contracts. Such orders may only be entered in the standard increments applicable to simple orders in the options class under Rule For purposes of this order type: (i) (ii) No changes. (v) No change. * * * * * Rule Crossing Orders Generally. The rules of priority and order allocation procedures set forth in this Rule shall apply only to crossing orders in open outcry. The term in-crowd market participant ( ICMP ) as used throughout this Rule only includes an in-crowd Market-Maker, in-crowd DPM or LMM, and Floor Broker or PAR Official representing orders in the trading crowd. For purposes of establishing priority for bids and offers, at the same price: (A) bids and offers of ICMPs have first priority, except as is otherwise provided in the Rule below with respect to public customer orders resting in the electronic book; and (B) all other bids and offers (including bids and offers of broker-dealer orders in the electronic book and electronic quotes of Market-Makers) have second priority. In addition, in order to transact proprietary orders on the floor of the Exchange pursuant to this Rule, Trading Permit Holders must ensure that they qualify for an exemption from Section 11(a)(1) of the Exchange Act. Notwithstanding the priority provisions otherwise applicable under this Rule, Trading Permit Holders relying on Section 11(a)(1)(G) of the Exchange Act and Rule 11a1-1(T) thereunder (the G exemption) as an exemption must yield priority to any bid or offer at the same price of public customer orders and broker-dealer orders resting in the electronic book, as well as any other bids and offers that have priority over such broker-dealer orders under this Rule. In the event a Floor Broker that is asserting a crossing participation entitlement for its proprietary order pursuant to paragraph (d) below must yield priority in reliance on the G exemption and a DPM or LMM, as applicable, is asserting a participation entitlement, the Floor Broker's crossing percentage entitlement to the remaining balance of the original order, when March 22, 2013 Volume RB24, Number 12 9

12 combined with the DPM/LMM guaranteed participation, shall not exceed 40% of the order. However, provided the G exemption requirements are satisfied, nothing prohibits a Floor Broker or DPM/LMM from trading more than their applicable percentage entitlement if other ICMPs do not chose to trade the remaining portion of the order. For purposes of this Rule, the term proprietary order means an order for a Trading Permit Holder s own account, the account of an associated person, or an account with respect to which it or an associated person thereof exercises investment discretion. (a) A Floor Broker who holds orders to buy and sell the same option series may cross such orders, provided that he proceeds in the following manner: (i) In accordance with his responsibilities for due diligence, a Floor Broker shall request bids and offers for such option series and make all ICMPs, including the Order Book Official (if applicable), aware of his request. (ii) After providing an opportunity for such bids and offers to be made, he must (A) bid above the highest bid in the market and give a corresponding offer at the same price or at prices differing by the minimum increment or (B) offer below the lowest offer in the market and give a corresponding bid at the same price or at prices differing by the minimum increment. (iii) If such higher bid or lower offer is not taken, he may cross the orders at such higher bid or lower offer by announcing by public outcry that he is crossing and giving the quantity and price. (b) A Floor Broker who holds an order for a public customer of a TPH organization and a facilitation order may cross such orders provided that he proceeds in the following manner: (i) The TPH organization must disclose on its order ticket for the public customer order which is subject to facilitation, all of the terms of such order, including any contingency involving, and all related transactions in, either options or underlying or related securities. (ii) In accordance with his responsibilities for due diligence, the Floor Broker shall disclose all securities which are components of the public customer order which is subject to facilitation and then shall request bids and offers for the execution of all components of the order. (iii) After providing an opportunity for such bids and offers to be made, the Floor Broker must, on behalf of the public customer whose order is subject to facilitation, either bid above the highest bid in the market or offer below the lowest offer in the market, identify the order as being subject to facilitation, and disclose all terms and conditions of such order. After all other ICMPs are given an opportunity to accept the bid or offer made on behalf of the public customer whose order is subject to facilitation, the Floor Broker may cross all or any remaining part of such order and the facilitation order at such customer's bid or offer by announcing in open outcry that he is crossing and by stating the quantity and price(s). Once such bid or offer has been made, the public customer order which is subject to facilitation has precedence over any other bid or offer in the crowd to trade immediately with the facilitation order. (c) No changes. (d) Notwithstanding the provisions of paragraphs (a) and (b) of this Rule, when a Floor Broker holds an option order for the eligible order size or greater ( original order ), the Floor Broker is entitled to cross a certain percentage of the order with other orders that he is holding or in the case of a public customer order with a facilitation order of the originating firm (i.e., the firm from which the original customer order originated). The Exchange may determine on a class-by-class basis to include solicited orders within the provisions of paragraph (d) of this Rule. In addition, the Exchange may determine on a class-by-class basis the eligible size for an order that may be transacted pursuant to paragraph (d) of this Rule, however, the eligible order size may not be less than 50 standard option contracts or 500 mini-option contracts. In accordance with his responsibilities for due diligence, a Floor Broker representing an order of the eligible order size or greater that he wishes to cross shall request bids and offers for such option series and make all persons in the trading crowd, including the Order Book Official or the PAR Official, aware of his request. (i) (viii) (e) Reserved (f) Open Outcry SizeQuote Mechanism March 22, 2013 Volume RB24, Number 12 10

13 (i) SizeQuotes Generally: The SizeQuote Mechanism is a process by which a floor broker ( FB ) may execute and facilitate large-sized orders in open outcry. Floor brokers must be willing to facilitate the entire size of the order for which they request SizeQuotes (the SizeQuote Order ) or to execute it against one or more solicited orders, or against a combination of solicited and facilitation orders. The Exchange shall determine the classes in which the SizeQuote Mechanism shall apply. [The SizeQuote Mechanism will operate as a pilot program which expires February 15, 2008.] (A) Eligible Order Size: The Exchange shall establish the eligible order size however such size shall not be less than 250 standard option contracts or 2,500 minioption contracts. (B) (D) No changes. (ii) (iv) No changes.... Interpretations and Policies: Rule 6.9(e) does not prohibit a Trading Permit Holder or TPH organization from buying or selling a stock, security futures or futures position following receipt of an option order, including a complex order, but prior to announcing such order to the trading crowd, provided that: (a) the option order is in a class designated as eligible for tied hedge transactions (as described below) as determined by the Exchange and is within the designated tied hedge eligibility size parameters, which parameters shall be determined by the Exchange and may not be smaller than 500 standard option contracts or 5,000 mini-option contracts per order (there shall be no aggregation of multiple orders to satisfy the size parameter); (b) (g) No changes. Rule 6.74A. Automated Improvement Mechanism ( AIM ) Notwithstanding the provisions of Rule 6.74, a Trading Permit Holder that represents agency orders may electronically execute an order it represents as agent ( Agency Order ) against principal interest or against a solicited order provided it submits the Agency Order for electronic execution into the AIM auction ( Auction ) pursuant to this Rule. (a) Auction Eligibility Requirements. A Trading Permit Holder (the Initiating Trading Permit Holder ) may initiate an Auction provided all of the following are met: (1) the Agency Order is in a class designated as eligible for AIM Auctions as determined by the Exchange and within the designated Auction order eligibility size parameters as such size parameters are determined by the Exchange; (2) if the Agency Order is for 50 standard option contracts or 500 mini-option contracts or more, the Initiating Trading Permit Holder must stop the entire Agency Order as principal or with a solicited order at the better of the NBBO or the Agency Order's limit price (if the order is a limit order); (3) if the Agency Order is for less than 50 standard option contracts or 500 mini-option contracts, the Initiating Trading Permit Holder must stop the entire Agency Order as principal or with a solicited order at the better of (A) the NBBO price improved by one minimum price improvement increment, which increment shall be determined by the Exchange but may not be smaller than one cent; or (B) the Agency Order's limit price (if the order is a limit order); and (4) at least three (3) Market-Makers are quoting in the relevant series. (b) Auction Process. Only one Auction may be ongoing at any given time in a series and Auctions in the same series may not queue or overlap in any manner. The Auction may not be cancelled and shall proceed as follows: (1) Auction Period and Request for Responses (RFRs). (A) To initiate the Auction, the Initiating Trading Permit Holder must mark the Agency Order for Auction processing, and specify (i) a single price at which it seeks to cross the Agency Order (with principal interest or a solicited order) (a single-price submission ), including whether the Initiating Trading Permit Holder elects to have last priority in allocation, or (ii) that it is willing to automatically match as principal the price and size of all Auction responses ( auto-match ) in which case the Agency Order will be stopped at the NBBO (if 50 standard option contracts or 500 mini-option contracts or March 22, 2013 Volume RB24, Number 12 11

14 greater) or one cent/one minimum increment better than the NBBO (if less than 50 standard option contracts or 500 mini-option contracts). Once the Initiating Trading Permit Holder has submitted an Agency Order for processing pursuant to this subparagraph, such submission may not be modified or cancelled. (B) (I) No changes. (2) (3) No changes. (A) (J) No changes.... Interpretations and Policies: No changes. Rule 6.74B. Solicitation Auction Mechanism A Trading Permit Holder that represents agency orders may electronically execute orders it represents as agent ( Agency Order ) against solicited orders provided it submits the Agency Order for electronic execution into the solicitation auction mechanism (the Auction ) pursuant to this Rule. (a) Auction Eligibility Requirements. A Trading Permit Holder (the Initiating Trading Permit Holder ) may initiate an Auction provided all of the following are met: (1) The Agency Order is in a class designated as eligible for Auctions as determined by the Exchange and within the designated Auction order eligibility size parameters as such size parameters are determined by the Exchange (however, the eligible order size may not be less than 500 standard option contracts or 5,000 mini-option contracts); (2) (3) No changes. (b) No changes.... Interpretations and Policies: No changes. SR-CBOE Fees Schedule On March 18, 2013, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to amend the Market Data Express, LLC ( MDX, an affiliate of CBOE) Fees Schedule for the BBO Data Feed for CBOE listed options. Any questions regarding the rule change may be directed to Jaime Galvan, Legal Division, at The rule filing is available at CBOE pdf. SR-CBOE Fees Schedule On March 18, 2013, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to amend the CBOE Fees Schedule to adopt fees for mini-options. Any questions regarding the rule change may be directed to Jeff Dritz, Legal Division, at The rule filing is available at SR-CBOE Fees Schedule On March 21, 2013, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to amend the MDX Fees Schedule for the BBO Data Feed for securities traded on CBSX. Any questions regarding the rule change may be directed to Jaime Galvan, Legal Division, at The rule filing is available at March 22, 2013 Volume RB24, Number 12 12