Trading Permit Information for 8/1/2013 through 8/7/2013

Transcription

1 August 09, 2013 Volume 41, Number 32 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 8/1/2013 through 8/7/2013 TRADING PERMIT APPLICATIONS RECEIVED FOR WHICH BULLETIN PUBLICATION IS REQUIRED Ryan N. Clinton Andrie Trading LLC 440 S. LaSalle St. Suite 1970 Chicago, IL TERMINATIONS EFFECTIVE TRADING PERMIT HOLDERS Individuals Nominee: Effective Date Gabriel M Zelwin (GMZ) 8/1/13 WSP Commodity Trading LLC Type of Business to be Conducted: Market Maker Individuals Nominee: Termination Date Jason E. Chippas (JXC) 8/5/13 Israel A. Englander & Co., LLC August 09, 2013 Volume 41, Number 32 1

2 Research Circulars The following Research Circulars were distributed between August 06, 2013 and August 08, 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 August 6, 2013 Cabot Oil & Gas Corporation ("COG") 2-for-1 Stock Split Ex-Distribution Date: August 15, 2013 Research Circular #RS August 7, 2013 Direxion Daily Healthcare Bull 3X Shares ("CURE") 2-for-1 ETF Split Ex-Distribution Date: August 20, 2013 Research Circular #RS August 7, 2013 Direxion Daily Gold Miners Bear 3X Shares ("DUST") 2-for-1 ETF Split Ex-Distribution Date: August 20, 2013 August 09, 2013 Volume 41, Number 31 2

3 August 9, 2013 Volume RB24, Number 32 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 CBOE Regulatory Circular RG CFE Regulatory Circular RG Date: August 1, 2013 To: CBOE Trading Permit Holders and CFE Trading Privilege Holders From: Regulatory Services Division RE: Follow-Up to Trading Privilege Holder Educational Session on CFE Exchange of Contract for Related Position Transactions The slides for the educational session regarding Exchange of Contract for Related Position (ECRP) transactions that was held on July 31, 2013 are now posted to the CFE website at The session addressed the requirements for ECRP transactions under CFE rules. The futures leg of an ECRP transaction is a CFE off-exchange transaction and occurs outside of CFE's electronic order book. It is separately reported to the CFE Help Desk. One question that arose during the session related to tied trades (i.e., trades involving both a CFE product and CBOE product). Some tied trades may be accomplished as an ECRP if they satisfy the ECRP requirements. The slides provide an overview of the ECRP requirements and reference applicable CFE rules and circulars as well as related CBOE rules. The futures portion of other tied trades are permitted to be executed via CFE's electronic order book (or, as a block trade, if it qualifies) and these tied trades do not have to satisfy ECRP requirements. The futures portion of these tied trades needs to satisfy the CFE requirements for trading via CFE's electronic order book (or for a block trade). Another question that arose during the session related to delta neutral tied trades involving VIX futures and VIX options. A delta neutral transaction involving VIX futures and VIX options may qualify as an ECRP if (i) there is high degree of price correlation between the components so that the futures component of the transaction would serve as an appropriate hedge for the options component and (ii) there is quantitative equivalence between the futures and options components. In other words, transactions with equivalent economic risk and exposure on both the futures and options sides of the transaction may qualify as an ECRP. Parties are expected to be able to reasonably demonstrate that the transaction was delta neutral and satisfies the ECRP requirements. There will be a follow-up session today in the VIX trading crowd to further discuss questions that have been received. August 9, 2013 Volume RB24, Number 32 1

4 Additional Information: Subsequent questions may be directed to the Regulatory Services Division's Interpretation and Guidance Team by phone at (312) or by to Regulatory Circular RG Date: August 5, 2013 To: Trading Permit Holders From: Regulatory Services Department of Member Firm Regulation RE: Proprietary Trader Continuing Education Program (S501) The Proprietary Trader Continuing Education Program (S501) is scheduled to be available on August 19, Pursuant to CBOE Rule 3.6A Qualification and Registration of Trading Permit Holders and Associated Persons, interpretations and policies.04, each individual required to be registered under this rule is required to satisfy the continuing education requirements set forth in CBOE Rule 9.3A or any other applicable continuing education requirements as prescribed by the Exchange. The Proprietary Trader Continuing Education Program (S501) is a computer-based education program developed by many of the self-regulatory organizations and administered by FINRA to ensure that registered persons are kept current on regulatory, compliance and trading practice matters in the industry. The Proprietary Trader Continuing Education Program (S501) has been established for those registrants who are registered as Proprietary Traders ( Series 56 ) and do not maintain a Series 7 registration in WebCRD. The fee for the Proprietary Trader Continuing Education Program (S501) is $60. Individuals that are registered as Proprietary Traders ( Series 56 ) and maintain a Series 7 registration will be required to continue taking the Series 7 Continuing Education Program (S101). To assist a registrant in preparation for participation in the Proprietary Trader Continuing Education Program (S501), a Content Outline is available on the CBOE website at: Additional Information: Questions concerning this Regulatory Circular can be directed to the Regulatory Interpretations and Guidance line at (312) or RegInterps@cboe.com. August 9, 2013 Volume RB24, Number 32 2

5 Regulatory Circular RG Date: August 7, 2013 To: Trading Permit Holders From: API Group RE: Connectivity to the CBOE Back-up Data Center This circular replaces CBOE Regulatory Circular RG which was issued on November 30, As announced in RG12-163, the primary data center for CBOE relocated to the Equinix NY4 Data Center in Secaucus, New Jersey. The circular also announced the Exchange s expectation that Trading Permit Holders (TPHs) maintain connectivity to the back-up data center in the Exchange s Chicago building. This circular sets forth which TPHs need to maintain connectivity to the Exchange back-up data center in Chicago. More specifically, the Exchange has determined that, pursuant to Rule 6.18, the following TPH categories are required to connect to the back-up data center: All Market-Makers in option classes exclusively listed on CBOE 1 who are streaming quotes in such classes; All Designated Primary Market-Makers (DPMs) in multiply listed option classes; and All TPHs connected to the CBOE primary data center and transacting non-tph customer business unless a TPH can demonstrate ready access to the back-up data center through another TPH connected to the back-up data center. The Exchange notes that all other TPHs are encouraged to maintain connectivity to the CBOE back-up data center and may connect at their discretion. Additional Information: Please contact the API Group at (312) for connectivity questions or additional information. 1 Exclusively listed by the Exchange means an option that is listed exclusively by the Exchange because the Exchange has an exclusive license to use, or has proprietary rights in, the interest underlying the option. August 9, 2013 Volume RB24, Number 32 3

6 BUSINESS CONDUCT COMMITTEE DECISIONS At its meeting on July 17, 2013, the Business Conduct Committee ( BCC ) resolved the following disciplinary matters by accepting 3 Offers of Settlement and 1 Letter of Consent in which the Respondents and Subject, respectively, consented to stipulations of facts and findings as detailed below without admitting or denying that Exchange Rules had been violated. In the Matter of Hold Brothers Capital, LLC, File No (Letter of Consent, Decision issued July 29, 2013). Hold Brothers Capital, LLC ("Hold Brothers ), a CBSX Trading Permit Holder, was censured and fined $20,000 for the following conduct. Hold Brothers: (i) failed to register two officers of the firm as a Proprietary Trader Principal (TP) in WebCRD; (ii) failed to notify the Exchange in writing of a new Financial and Operations Principal and failed to register its previous Financial and Operations Principal with the Exchange; and (iii) failed to establish written supervisory procedures which were relevant to the nature of its business in that the written supervisory procedures made several references to customers. 1 (Exchange Rules 3.6A Qualification and Registration of Trading Permit Holders and Associated Persons and 4.2 Adherence to Law) In the Matter of Toro Trading, LLC, File No (Offer of Settlement, Decision issued July 29, 2013). Toro Trading, LLC ( Toro Trading ), an Exchange TPH organization, was censured and fined $10,000 for the following conduct. Pursuant to Rule 15c3-5 under the Act, a broker or dealer with market access, or that provides a customer or any other person with access to an exchange or alternative trading system through the use of its market participant identifier or otherwise, shall establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the financial, regulatory, and other risks of this business activity. Toro Trading failed to establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the financial, regulatory, and other risks of this business activity. (Exchange Rule 4.2 Adherence to Law; and Rule 15c3-5 - Risk Management Controls for Brokers or Dealers with Market Access under the Securities and Exchange Act of 1934, as amended (the Act )) In the Matter of Consolidated Trading LLC, Colby Lamberson and Ilan Shalit; File No (Offer of Settlement, Decision issued July 29, 2013). Consolidated Trading LLC ( Consolidated ), an Exchange TPH organization, Colby Lamberson ( Lamberson ) and Ilan Shalit ( Shalit ), Managers and Associated Persons of Consolidated, were each censured and jointly and severally fined $30,000 for the following conduct. Consolidated: (i) failed to register and qualify its Chief Compliance Officer as a Proprietary Trader Compliance Officer (CT) in WebCRD; (ii) failed to properly register and qualify two Associated Persons as Proprietary Traders (PT) in WebCRD; (iii) associated with an individual that was subject to a statutory disqualification in contravention of Exchange Rule 3.18; (iv) failed to maintain adequate Written Supervisory Procedures for its Insider Trading Program addressing review of employees outside brokerage accounts; and (v) failed to obtain outside brokerage account attestations for 10 of 66, or 15%, of its employees. In addition, Lamberson and Shalit permitted an individual that was subject to a statutory disqualification to associate with Consolidated in contravention of Exchange Rule (Exchange Rules 3.6A Qualification and Registration of Trading Permit Holders and Associated Persons, 3.18 Trading Permit Holders and Associated Person Who Are or Become Subject to a Statutory Disqualification, 4.1 Just and Equitable Principles of Trade, 4.2 Adherence to Law, 4.18 Prevention of the Misuse of Material, Nonpublic Information and 15.1 Maintenance, Retention and Furnishing of Books, Records and Other Information; and Section 15(g) of the Securities Exchange Act of 1934, as amended (the Act )) In the Matter of Keystone Trading Partners, Consolidated File Nos and (Offer of Settlement, Decision issued July 29, 2013). 1 Hold Brothers is not approved to conduct a public customer business. August 9, 2013 Volume RB24, Number 32 4

7 Keystone Trading Partners ( Keystone ), a former Exchange TPH organization, was censured and fined $45,000 for the following conduct. Keystone: (i) failed to designate a Chief Compliance Officer on Schedule A of its Form BD in a timely manner; (ii) failed to register and qualify the minimum number of individuals required to register as a Proprietary Trader Principal (TP) in WebCRD by November 5, 2011; and (iii) did not conduct adequate supervision in that it failed to register and qualify the minimum number of individuals required to register as a Proprietary Trader Principal (TP) in WebCRD by November 5, (Exchange Rules 3.6A Qualification and Registration of Trading Permit Holders and Associated Persons, 4.2 Adherence to Law and 15.1 Maintenance, Retention and Furnishing of Books, Records and Other Information) August 9, 2013 Volume RB24, Number 32 5