[Federal Register Volume 78, Number 32 (Friday, February 15, 2013)]
[Notices]
[Pages 11243-11245]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-03570]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68901; File No. SR-CBOE-2013-018]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to Amend the Fees Schedule
February 11, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on February 1, 2013, Chicago Board Options Exchange, Incorporated
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (the ``Commission'') the proposed rule change as described
in Items I, II and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to amend the Fees Schedule. The text of
the proposed rule change is available on the Exchange's Web site
(http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the
Exchange's Office of the Secretary, and at the Commission.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
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.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to amend its Fee Schedule. Specifically,
the Exchange is proposing to increase the threshold in which it waives
customer transaction fees, implement a $0.25 marketing fee for trading
in SPY and QQQ options, and eliminate the complex order surcharge.
First, the Exchange is proposing to increase the threshold at which
the Exchange waives the customer transaction fee in ``ETF, ETN and
HOLDRs Options.'' Currently, the Exchange waives transaction fees for
customer orders of 99 contracts or less in transactions in ETFs, ETNs,
and HOLDRs options. Any order that is 100 contracts or more is charged
a fee of $0.18. The Exchange is proposing to increase this threshold
and waive transaction fees for customer orders of 249 contracts or less
in these options. The Exchange will charge any leg of a complex orders
in these options that exceeds 249 even if the leg is only partially
executed below the 249 threshold. For orders 250 contracts and above,
the Exchange will continue to charge a fee of $0.18. Corresponding
edits will also be made to Footnote 9 in the Fees Schedule to reflect
the change. Raising the threshold for which the Exchange will waive
transaction fees will allow customers who engage in ETF, ETN and HOLDRs
options trading the opportunity to pay lower fees for larger
transactions and provide greater incentives for such trading. In
addition, increasing this threshold will encourage more interaction
with Exchange customers and encourage the direction of customer ETF,
ETN and HOLDRs options orders to the Exchange.
Next, the Exchange is proposing to implement a $0.25 marketing fee
for electronic trading in SPY and QQQ options. Currently, the Marketing
Fee assessed on all Penny Pilot Exchange-Traded Fund (``ETF'') options
is $0.25 per contract, with the exception of SPY and QQQ. The Exchange
only charges a $0.25 fee per contract in SPY and QQQ options for
qualifying complex orders that trade via the Exchange Complex Order
Book against individual leg markets. The Exchange is proposing to amend
the Fees Schedule to assess this $0.25 fee per contract on all
qualifying orders whether simple or complex. This change will place SPY
and QQQ on the same footing regarding the Marketing Fee as other
options in the Penny Pilot classes. Other exchanges assess their
marketing fees on SPY and QQQ.\3\ To correspond with this proposed
change, the Exchange also proposes to eliminate the ``Notes'' section
of the ``Marketing Fee'' table of the Fees Schedule to reflect this
change.\4\
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\3\ See Section II, ``Payment for Order Flow Fees,'' of the
Nasdaq OMX PHLX (``Phlx'') Fee Schedule.
\4\ The ``Notes'' section of the ``Marketing Fee'' table reads
``The marketing fee will not be assessed on electronic transactions
in SPY and QQQ, except for electronic transactions resulting from
AIM and complex orders that trade in either COA or COB (excluding
complex orders that trade against the leg markets, on which the
marketing fee will not be assessed). The marketing fee will continue
to be assessed on open outcry transactions in SPY and QQQ.'' Because
the Exchange proposes to assess the Marketing Fee to SPY and QQQ in
the same manner as it applies to other Penny Pilot classes the SPY-
and QQQ-specific specifications set out in the ``Notes'' section are
no longer relevant and can be deleted.
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Finally, the Exchange is proposing to eliminate the surcharge on
complex orders. Currently, the Exchange has a $0.10 surcharge per
contract for the electronic execution leg of a complex order in
multiply-listed options that executes against a customer complex order.
This surcharge is in addition to the other transaction fees. The
Exchange is proposing to eliminate this surcharge. Eliminating the
surcharge for complex orders will allow Trading Permit Holders
(``TPHs'') who engage in complex order trading the opportunity to pay
lower fees for such transactions and provide greater incentives for
such trading. In addition, eliminating the $0.10 surcharge will
encourage more interaction with Exchange customers.
Thus, the proposed changes are designed to attract greater order
flow to the Exchange. This would bring greater liquidity to the market,
which benefits all market participants. The propose changes are to take
effect on February 1, 2013
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the
[[Page 11244]]
``Act'') and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\5\ Specifically, the Exchange believes the proposed rule change is
consistent with Section 6(b)(4) of the Act,\6\ which provides that
Exchange rules may provide for the equitable allocation of reasonable
dues, fees, and other charges among its Trading Permit Holders and
other persons using its facilities.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4).
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In particular, the proposed change to increase the threshold at
which the Exchange waives the transaction fee for customer orders is
reasonable because it will allow customers who engage in such trading
to trade larger orders without any electronic transaction fee. It is
equitable and not unfairly discriminatory because, while customers are
assessed different, and often lower, fee rates than other market
participants, this is a common practice within the options marketplace,
and customers often do not have the sophisticated trading algorithms
and systems that other market participants often possess. Further, to
the extent that any change in intramarket competition may result from
the proposed change to the threshold for waiving options customer
transaction fees, such possible change is justifiable and offset
because the changes to such fees are designed to attract greater
customer order flow to the Exchange. This would bring greater liquidity
to the market, which benefits all market participants. Further, the
proposed change will be applied to all customers equally.
Next, the proposed change to assess a $0.25 marketing fee for all
SPY and QQQ options contracts is reasonable because it puts trading in
SPY and QQQ options on the same footing regarding the Marketing Fee as
other options in the Penny Pilot Classes. It is equitable and not
unfairly discriminatory because it is applied to all TPHs equally and
puts TPHs trading SPY and QQQ on the same footing, with regards to the
Marketing Fee, as other Penny Pilot classes. Moreover, other exchanges
assess their marketing fees on SPY and QQQ transactions.\7\
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\7\ See Section II, ``Payment for Order Flow Fees,'' of the Phlx
Fee Schedule.
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Finally, the proposed change to eliminate the complex order
surcharge is reasonable because it will allow TPHs who engage in
complex order trading the opportunity to pay lower fees for such
transactions. It is equitable and not unfairly discriminatory because
it is applied to all TPHs equally and will no longer place non-customer
market participants on a different footing, with regards to the complex
order surcharge, from customers.
B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule changes will impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange does not believe
that the proposed changes to increase the threshold for waiving the
electronic customer transaction fee will cause any unnecessary burden
on intramarket competition because, while customers are assessed
different, and often lower, fee rates than other market participants,
this is a common practice within the options marketplace, and customers
often do not have the sophisticated trading algorithms and systems that
other market participants often possess. Further, to the extent that
any change in intramarket competition may result from the proposed
change to the threshold for waiving options customer transaction fees,
such possible change is justifiable and offset because the changes to
such fees are designed to attract greater customer order flow to the
Exchange. This would bring greater liquidity to the market, which
benefits all market participants. The Exchange does not believe that
the proposed change will cause any unnecessary burden on intermarket
competition because the changes are minimal. Further, to the extent
that this change makes trading on CBOE more attractive to customers or
other market participants on other exchanges, they can always elect to
send orders to CBOE.
The Exchange does not believe the proposed changes to assess a
$0.25 fee in SPY and QQQ options will cause any unnecessary burden on
intramarket competition because it merely puts these options classes on
the same footing regarding the Marketing Fee as other options in the
Penny Pilot Classes and will be assessed to the same market
participants as other classes to which the Marketing Fee is assessed.
The Exchange does not believe that the proposed change will cause any
unnecessary burden on intermarket competition because the fee is
similar to fees assessed at other exchanges assess their marketing fees
on these classes.\8\
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\8\ See Section II, ``Payment for Order Flow Fees,'' of the Phlx
Fee Schedule.
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Finally, the Exchange does not believe the proposed changes to
eliminate the complex order surcharge will cause any unnecessary burden
on intramarket competition because the change is minimal and applies to
a specific set of orders. Further, it puts non-customer market
participants on the same footing, with regards to the complex order
surcharge, as customers. Moreover, to the extent that any change in
intramarket competition may result from the proposed change, such
possible change is justifiable and offset because the changes to such
fees are designed to attract greater customer order flow to the
Exchange. This would bring greater liquidity to the market, which
benefits all market participants. The Exchange does not believe that
the proposed change will cause any unnecessary burden on intermarket
competition because the changes are very minimal and specific to
certain order types. Further, to the extent that this change makes
trading on CBOE more attractive to market participants on other
exchanges, they can always elect to send orders to CBOE.
The Exchange also notes that it operates in a highly-competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive. The proposed rule changes reflects a competitive pricing
structure designed to incent market participants to direct their order
flow to the Exchange, and the Exchange believes that such structure
will help the Exchange remain competitive with those fees and rebates
assessed by other venues.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \9\ and paragraph (f) of Rule 19b-4\10\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f).
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[[Page 11245]]
IV. Solicitation of Comments
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:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CBOE-2013-018 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2013-018. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at CBOE's principal office. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-CBOE-2013-018, and should be
submitted on or before March 8, 2013
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03570 Filed 2-14-13; 8:45 am]
BILLING CODE 8011-01-P