Daily Rules, Proposed Rules, and Notices of the Federal Government
The Exchange proposes to modify the text of Rule 6.18, "Disaster Recovery Facility," to clarify how the Exchange intends to continue to operate in the event the Exchange's trading floor or trading systems are compromised. The text of the proposed rule change is available on the Exchange's Web site (
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.
CBOE Rule 6.18 (Disaster Recovery Facility) currently provides for a disaster recovery site in the event that open outcry trading is not available. In such an event, Trading Permit Holders ("TPHs") are required to utilize a floorless configuration of the trading system similar to the electronic component of the Exchange's Hybrid System platform, the primary difference being that this configuration is not programmed to require open outcry. Because of a change in location of the Exchange's back-up data center (the Exchange is moving its primary data center to the East coast and will use its current Chicago data center as the back-up data center), the Exchange is proposing to amend Rule 6.18 in order to provide that (1) in the case the Exchange must use the back-up data center, the Exchange's trading floor may still be operable, and (2) TPHs will need to use the alternate trading system if the Exchange's trading floor should become inoperable. Finally, the Exchange is proposing to make conforming changes to the entire rule to reflect this change in location by eliminating references to a "Disaster Recovery Facility" and eliminating portions of the rule that are no longer relevant. This change in location of the Exchange's primary and back-up data centers is anticipated to take effect on December 3, 2012.
First, the Exchange is proposing to modify Rule 6.18 to clarify that when an event or other circumstance renders the Exchange's primary electronic platform inoperable, assuming the trading floor has not been affected, TPHs may still be able to utilize the Exchange's trading floor. The Exchange's current Rule 6.18 specifies that if the Disaster Recovery Facility were used, no open outcry trading would be available. Because of the change of location of the back-up data center, this will no longer be the case. In the event the Exchange back-up data center must be utilized, the Exchange's trading floor may still be operable and all Exchange rules associated with the trading floor, including those codifying the integration of the electronic trading platform with the trading floor, will remain in effect. As such, trading on the Exchange would not change.
Second, the Exchange is proposing to amend Rule 6.18 to clarify that TPHs will need to use the floorless configuration in the event a disaster or other unusual circumstance renders the Exchange trading floor inoperable. In the current Exchange rules, TPHs must only utilize a floorless configuration in the event the Disaster Recovery Facility is utilized. In the proposed changes, TPHs will need to use this configuration of the trading system if the trading floor is inoperable which could be the case in an instance when the primary data center is still operating. In this configuration, there will be no change in the Exchange trading rules associated with electronic trading. TPHs will be required to follow the same rules associated with electronic trading as they would if the trading floor were operable. This proposed change is also a result of the change in location of the Exchange's various data centers.
Finally, other conforming changes have been made throughout the rule to eliminate references to a Disaster Recovery "Facility" to reflect that dual locations may now be used in the event the Exchange experiences an event or other circumstance rendering either the trading floor or the primary data center inoperable. In addition, references to
It should be noted, however, that no material changes are being made to the Exchange Rule 6.18(b) which states that the Exchange will announce, prior to the commencement of trading, all classes that will continue to trade. Depending upon the specifics of the circumstances, the Exchange's trading floor may or may not be operable. In this announcement, the Exchange will clarify the current status of the trading floor. In addition, pursuant to the current Exchange Rule 6.18(d), TPHs will still be required to maintain access to both the primary electronic platform and the back-up data center in order to continue trading in all circumstances.
The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In particular, the modification to Exchange Rule 6.18 fully clarifies how TPHs can trade in the event that unforeseen circumstances arise. The proposed changes promote just and equitable principles of trading by putting all TPHs, and other market centers, on notice about how the Exchange intends to operate in the event either the primary data center or the trading floor becomes inoperable which also provides for a free and open market for all TPHs. The proposed changes also prevent fraudulent and manipulative acts on the Exchange as the changes more clearly explain different venues available to the TPHs and alert TPHs of how the Exchange will operate if such circumstance should arise. Finally, it protects investors by alerting all TPHs to the different trading alternatives if one of these events should occur so they are aware of their options.
The Exchange also believes the proposed rule change is consistent with Section 6(b)(1) of the Act,
CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange neither solicited nor received comments on the proposed rule change.
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.
After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of the Act, including Section 6(b) of the Act,
In its filing, the Exchange requested that the Commission approve the proposal on an accelerated basis pursuant to Section 19(b)(2) of the Act, so that the proposal may become operative in time to accommodate the Exchange's planned transfer of its primary data center to the East coast of the United States.
CBOE also has proposed to eliminate paragraph (e) of Rule 6.18, as its new back-up systems will no longer necessitate that it retain the ability to restrict access to its back-up data facility. Other than the elimination of paragraph (e), CBOE has not proposed any material changes to Rule 6.18, or how it would operate in recovery mode.
Finally, CBOE's Rule 6.18 will continue to require TPHs to take action to be able to accommodate CBOE's ability to trade options through the back-up data center in the event that CBOE operates in disaster recovery mode.
Accordingly, the Commission believes that accelerated approval of the proposed rule change to clarify the operation of CBOE Rule 6.18 in light of CBOE's planned relocation of its primary data facility to the East coast will allow CBOE to effectively revise its disaster recovery rule without delay and thereby avoid any potential interruption to CBOE's exchange operations. CBOE's proposed changes to Rule 6.18 are not material and consist of technical updates to its rule to allow for CBOE to resume operations on its physical floor in Chicago (along with its back-up data center in Chicago) in the event of a disruption to its primary data center on the East coast. Thus, accelerated approval of this proposed rule change will grant CBOE the ability to continue its operations to the fullest extent possible under its rules if a disaster recovery situation were to occur between the time of transfer of its primary data center to the East coast on December 3, 2012 and the time that CBOE would have otherwise been able to obtain Commission action on its proposed rule change under Section 19(b)(2) of the Act