Submission of Subordination Agreements
In accordance with Appendix D of the Securities Exchange Act of 1934 (“SEA”) Rule 15c3-1, every broker or dealer registered pursuant to SEA Section 15 that enters into a proposed subordination agreement or secured demand note agreement must file such agreements with the firm’s designated examining authority (“DEA”) for review and approval, unless otherwise exempt. Effective April 1, 2016, Trading Permit Holders for whom CBOE or C2 Options Exchange is the Designated Examining Authority (“DEA”) will be required to electronically submit requests for approval of proposed subordination loan agreements and secured demand note agreements, including any renewals or amendments of existing agreements, to CBOE or C2 via the FINRA Firm Gateway platform. This submission method will replace the current submission of subordination agreement approval requests (which is via hardcopy or email to DMFRNotification@cboe.com). CBOE and C2 will no longer accept requests filed in hardcopy or email.
• CBOE Regulatory Circular RG16-063/C2 Regulatory Circular RG16-017 (March 29, 2016): Submission of Subordination Agreements
CBOE and C2 submitted rule filings to amend CBOE and C2 rules governing Exchange liability and payments to Trading Permit Holders (TPHs) in connection with certain types of losses that TPHs may allege arose out of business conducted on or through the Exchange or in connection with the use of the Exchange’s facilities.
Among other things, CBOE Rule 6.7 (Exchange Liability Disclaimers and Limitations) and C2 Rule 6.42 (Disclaimers and Limitations) have been amended to establish: (i) a minimum threshold amount for all compensation requests and (ii) notification and submission deadlines for compensation requests. The proposed changes became effective on July 1, 2015.
• CBOE Regulatory Circular RG15-096/C2 Regulatory Circular RG15-027 (June 30, 2015): Exchange Liability
Tied to Stock Order Marking and Reporting Requirements
The SEC approved the adoption of CBOE Rules 6.53(y), 6.77(e) and 15.2A that require each TPH to, on the business day following order execution date, report to the CBOE certain information regarding the executed stock or convertible security legs of Qualified Contingent Cross orders, stock-options orders and other Tied to Stock Orders that the TPH executed on CBOE that trading day.
CBOE Regulatory Circular RG15-056 previously announced the implementation date for the tied to stock marking requirement as July 1, 2015 (see also SR-CBOE-2015-004). That circular also announced the postponement of the reporting requirement for tied to stock orders under CBOE Rule 15.2A. CBOE Regulatory Circular RG15-093 (i) confirms the July 1, 2015 implementation date of the tied to stock marking requirement only with respect to orders sent to CBOE for non-electronic processing (i.e., orders received and systematized by floor brokers handling orders on the CBOE trading floor), (ii) delays for six to 18 months the implementation date of the tied to stock marking requirement with respect to all other orders (i.e., orders submitted to the Exchange for electronic processing), and (iii) confirms that the implementation date for the reporting requirement has been delayed 12 to 18 months (except for Qualified Contingent Cross orders).
• CBOE Regulatory Circular RG15-093 (June 19, 2015): Updates to CBOE Rules 6.53(y) and 15.2A and TPH Information Session (This circular updates RG15-056)
• CBOE Regulatory Circular RG15-056 (April 7, 2015): Tied to Stock Orders New Implementation Date for Order Marking Requirement Proposed Postponement of the Implementation of Reporting Requirement (This circular updates RG15-018)
• CBOE Regulatory Circular RG15-018 (February 11, 2015): Delayed Implementation of Tied to Stock Order Marking and Reporting Requirements
• CBOE Regulatory Circular RG14-171 (December 10, 2014): Implementation Date for the Tied to Stock Order Marking and Reporting Requirements
CBOE Rule 6.79 – Floor Broker Practices
Effective May 30, 2015, new CBOE Rule 6.79 replaces CBOE Regulatory Circular RG95-49 (Floor Brokerage Practices). CBOE Rule 6.79 sets forth requirements for floor brokers related to the liquidation or reduction of error account positions, erroneously executed orders, lost or misplaced market orders, legging multi-part orders, print-throughs, stopping orders, and documentation of errors and record keeping requirements. Regulatory Circular RG15-088 highlights particular provisions of CBOE Rule 6.79. Please see CBOE Rule 6.79 and SR-CBOE-2015-030 for a complete description of the requirements of CBOE Rule 6.79.
If moving a client’s position into the floor broker’s error account requires the broker to make a change in Continuous Trade Match (CTM) to the series; quantity; buy or sell; premium price; or the origin code from “C” to any other origin code, the floor broker must follow the procedures set forth in CBOE Rule 6.67 (CBOE Trade Match System) and CBOE Regulatory Circular RG15-072 (Procedures Related to Rule 6.67).
• CBOE Regulatory Circular RG15-088 (May 29, 2015): New Rule 6.79 – Floor Broker Practices
CBOE restates its policy concerning prearranged trading. Trading Permit Holders are cautioned that any purchase or sale, transaction or series of transactions, coupled with an agreement, arrangement or understanding, directly or indirectly to reverse such transaction, which is not done for a legitimate economic purpose or without subjecting the transactions to market risk, violates CBOE rules and may be inconsistent with various provisions of the SEA and rules thereunder. All transactions must be effected in accordance with applicable trading rules, subject to risk of the market, and reported for dissemination.
• Cboe Regulatory Circular RG17-188 (December 27, 2017): Prearranged Trades
Modified HOSS Opening Procedures and Special Opening Quotation and Settlement Methodology for Volatility Index Option Contracts
CBOE is reissuing this circular in connection with a change to the strategy order cut-off time being made CBOE. The strategy order cut-off time changed from 8:15 a.m. to 8:20 a.m. (Chicago time) on February 8, 2017. This change will apply to all expirations for all volatility index derivatives going forward. This change is reflected in the reissued circular. In addition, other changes have been made throughout this circular.
• CBOE Regulatory Circular RG17-019 (February 6, 2017): Modified HOSS Opening Procedures and Special Opening Quotation and Settlement Methodology for Volatility Index Options Contracts
Change to Strategy Order Cut-Off Time from 8:15 a.m. (CT) to 8:20 a.m. (CT) EFFECTIVE for February 8, 2017 Weekly VIX Derivatives Expiration EFFECTIVE for February 15, 2017 Standard VIX and RVX Derivatives Expiration
CBO) changed the strategy order cut-off time for all CBOE option series used to calculate the settlement values for volatility index derivatives on their expiration dates. Per CBOE Rule 6.2B.01, CBOE changed the strategy order cut off time from 8:15 a.m. (Chicago time) to 8:20 a.m. (Chicago time). This change went into effect for the Wednesday, February 8, 2017 weekly VIX derivatives expiration and went into effect for the February 15, 2017 standard VIX and RVX derivatives expiration. This change will also apply to all expirations for volatility index derivatives going forward. A strategy order is an order related to positions in, or a trading strategy involving, volatility index options or futures.
• CBOE Regulatory Circular RG17-006 (January 19, 2017): Change to Strategy Order Cut-Off Time from 8:15 a.m. (CT) to 8:20 a.m. (CT) EFFECTIVE for February 8, 2017 Weekly VIX Derivatives Expiration EFFECTIVE for February 15, 2017 Standard VIX and RVX Derivatives Expiration
Best Execution Rule
In light of the increasingly automated market for equity securities and standardized options, and recent advances in trading technology and communications in the fixed income markets, FINRA reiterates the best execution obligations that apply when firms receive, handle, route or execute customer orders in equities, options and fixed income securities. FINRA reminds firms of their obligations, as previously articulated by the SEC and FINRA, to regularly and rigorously examine execution quality likely to be obtained from the different markets trading a security.
• FINRA Regulatory Notice 15-46 (November 2015): Guidance on Best Execution Obligations in Equity, Options and Fixed Income Markets