[Federal Register Volume 78, Number 144 (Friday, July 26, 2013)]
[Notices]
[Pages 45279-45282]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-17974]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70014; File No. SR-CBOE-2013-072]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend the Fees Schedule
July 22, 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 July 11, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its 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's Public Reference Room.
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 proposes to amend its Fees Schedule. First, the
Exchange proposes to eliminate the $200-per-month Hybrid Quoting
Infrastructure User Fee, which is assessed to Trading Permit Holders
(``TPHs'') to help cover the costs associated with hardware and
maintenance services to third-party vendors that provide quoting
software used by TPHs to trade on the Exchange's Hybrid Trading System
(``Hybrid''). This elimination will allow TPHs to avoid paying this
fee, and may encourage more market participants to trade on CBOE.
The Exchange also proposes to make an amendment to the Fees
Schedule regarding Clearing Trading Permit Holder Proprietary
Facilitation fees. On April 10, 2013, the Exchange amended its Fees
Schedule to, in part, make more clear the fact that the Exchange will
assess no Clearing Trading Permit Holder Proprietary transaction fees
for certain types of facilitation orders (as defined in Footnote 11 of
the Fees Schedule), including those executed via the Exchange's
Automated Execution Mechanism (``AIM''), in certain classes.\3\
However, regular (non-AIM) electronic Clearing Trading Permit Holder
Proprietary facilitation orders remained subject to transaction fees.
The Exchange hereby proposes to cease assessing transaction fees on
such orders.\4\ This will mean that electronic Clearing Trading Permit
Holder Proprietary Facilitation orders will be assessed no fees
regardless of whether they are executed via AIM or the Exchange's
regular electronic mechanism (placing such executions on the same
footing with regard to fees).
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 69422 (April 22,
2013), 78 FR 25112 (April 29, 2013) (SR-CBOE-2013-042).
\4\ As such, along with amending the Equity Options Rate Table,
the ETF and ETN Options Rate Table, and the Index Options Rate
Table--All Index Products Excluding SPX, SPXW, SPXpm, SRO, OEX, XEO,
VIX and VOLATILITY INDEXES, to reflect this change, the Exchange
also proposes to amend Footnote 11 to state that no Clearing Trading
Permit Holder Proprietary transaction fees will be assessed for
facilitation orders electronically (including via AIM).
---------------------------------------------------------------------------
Next, the Exchange proposes to amend its Fees Schedule with regard
to fees for SPXPM. On February 19, 2013, the Exchange adopted a set of
fees for the trading of SPXPM.\5\ The Customer SPXPM fees were set at
the same rates as the Customer SPX fees. However, SPXPM trades on the
Exchange's Hybrid System, while SPX trades on the Exchange's Hybrid 3.0
trading platform. As such, SPXPM is eligible to trade on AIM, while SPX
currently does not trade on AIM. Therefore, the Exchange proposes to
create separate lines for
[[Page 45280]]
Customer rates in SPXPM on the Specified Proprietary Index Options Rate
Table--SPX, SPXW, SPXpm, SRO, OEX, XEO, VIX and VOLATILITY INDEXES and
remove SPXPM from those lines listing SPX rates in order to eliminate
any potential confusion about where SPXPM can trade. The rate amounts
for SPXPM AIM trades will be listed as the same as for other SPXPM
trades (as they are now; $0.44 per contract for SPXpm Premium > or = $1
and $0.35 per contract for SPXpm Premium < $1). The AIM Agency/Primary
and AIM Contra columns, which reference the AIM Agency/Primary and AIM
Contra Execution Fees, as well as delineate which securities (and types
of transactions) are eligible for AIM executions, will be modified to
state ``SPXpm and VIX Only'' to demonstrate that SPXPM is eligible for
AIM executions.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 69025 (March 4,
2013), 78 FR 15076 (March 8, 2013) (SR-CBOE-2013-025).
---------------------------------------------------------------------------
2. Statutory Basis
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.\6\ Specifically, the Exchange believes the proposed rule change is
consistent with Section 6(b)(4) of the Act,\7\ which requires that
Exchange rules provide for the equitable allocation of reasonable dues,
fees, and other charges among its Trading Permit Holders and other
persons using its facilities. The Exchange believes that the
elimination of the Hybrid Quoting Infrastructure User Fee is reasonable
because it will prevent market participants to whom the fee would
otherwise apply from having to pay the fee. This change is equitable
and not unfairly discriminatory because it will apply to all market
participants.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes that the proposed change to cease assessing
transaction fees on regular (non-AIM) electronic Clearing Trading
Permit Holder Proprietary facilitation orders is reasonable because
Clearing Trading Permit Holders who would otherwise have had to pay for
such transactions now will not be required to do so. The Exchange
believes that this proposed change is equitable and not unfairly
discriminatory because it will place regular electronic (non-AIM)
Clearing Trading Permit Holder Proprietary facilitation orders on the
same footing (with regards to fees) as Clearing Trading Permit Holder
Proprietary facilitation orders executed in AIM. Further, the Exchange
believes that it is equitable and not unfairly discriminatory to permit
Clearing Trading Permit Holders to execute Proprietary Facilitation
orders electronically for free and not give this opportunity to other
market participants because Clearing Trading Permit Holders have a
number of obligations (such as membership with the Options Clearing
Corporation), significant regulatory burdens, and financial
obligations, that other market participants do not need to take on.
Finally, this proposed change applies to all regular electronic (non-
AIM) Clearing Trading Permit Holder Proprietary facilitation orders
equally.
The Exchange believes that the clarification regarding SPXPM and
its eligibility for AIM executions is consistent with the Section
6(b)(5) \8\ requirements that the rules of an exchange be designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitation transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. Making the Fees Schedule
more clear that SPXPM trades on AIM will remove any potential
confusion, thereby removing an impediment to and perfecting the
mechanism of a free and open market and a national market system, and,
in general, protecting investors and the public interest.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange also believes that assessing Customer transactions in
SPXPM (Premium < $1) a fee of $0.35 per contract is consistent with
Section 6(b)(4) of the Act,\9\ which requires that Exchange rules
provide for the equitable allocation of reasonable dues, fees, and
other charges among its Trading Permit Holders and other persons using
its facilities. The Exchange believes this is reasonable, as well as
equitable and not unfairly discriminatory, because it is the same
amount as is assessed to Customer transactions in SPX (Premium < $1)
(SPX and SPXPM are based on the same underlying index, the S&P 500).
The Exchange believes that assessing a higher fee for Customer
transactions in SPXPM options whose premium is greater than or equal to
$1.00 than for Customer transactions in SPXPM options whose premium is
less than $1.00 is equitable and not unfairly discriminatory because
nearly all options based on the S&P 500 Index are priced at well above
$1.00. However, most Customers, at the end of an expiration cycle,
desire to continue to hold options based on the S&P 500 Index
(including both SPX and SPXPM), and because it is the end of an
expiration cycle, such options are priced very low. The Exchange
therefore offers lower pricing for Customer SPX and SPXPM options in
order to encourage such trading and thus encourage Customers to open
SPX and SPXPM options positions in the next cycle. As these new
positions will almost certainly be priced above $1.00, offering the
lower pricing for SPXPM options whose premium is below $1.00 therefore
benefits market participants trading SPXPM options whose premium is at
or above $1.00 by encouraging Customers to open up those positions
(thereby providing greater liquidity). Further, other options based on
the S&P 500 Index, such as SPX, offer higher pricing for options with a
premium of greater than or equal to $1.00 than for those with a premium
of less than $1.00.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes that it is equitable and not unfairly
discriminatory to offer a higher fee for Customer SPXPM transactions
(Premium < $1) than for CBOE Market-Maker/DPM/e-DPM/LMM and Clearing
Trading Permit Holder Proprietary SPXPM transactions (Premium < $1)
because those market participants undertake certain obligations with
respect to trading at CBOE, such as quoting obligations (for CBOE
Market-Makers/DPMs/e-DPMs/LMMs) and membership with the Options
Clearing Corporation, significant regulatory burdens, and financial
obligations, (for Clearing Trading Permit Holders) that Customers do
not undertake. The Exchange believes that it is equitable and not
unfairly discriminatory to offer a lower Customer fee for SPXPM
transactions (Premium < $1) than for similar transactions by Joint
Back-Office, Broker-Dealer, Non-Trading Permit Holder Market-Maker,
Professional, and Voluntary Professional market participants because
such market participants often seek to trade with Customers. Further,
the lower fee for Customers will encourage more Customer trading, which
provides more liquidity and trading opportunities (with this preferred
trading partner) for these other market participants. Also, Customers
are often not as sophisticated market participants, and there is a long
history of permitting preferential pricing
[[Page 45281]]
treatment of Customers in the options industry (indeed, in a number of
places, the Exchange Fees Schedule offers lower pricing for Customers
than for other market participants). Finally, the Exchange believes
that it is equitable and not unfairly discriminatory to assess a higher
fee for Customer SPXPM transactions (Premium < $1) than for Customer
transactions in other index products (including non-proprietary index
products) (Premium < $1) because the Exchange has expended significant
resources developing SPXPM and desires to recoup some of such costs.
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 rule change to eliminate the Hybrid Quoting
Infrastructure User Fee will impose any burden on intramarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act because it applies to all CBOE market participants.
The Exchange does not believe that the proposed rule change to cease
assessing transaction fees on regular (non-AIM) electronic Clearing
Trading Permit Holder Proprietary facilitation orders will impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act because it places regular
(non-AIM) electronic Clearing Trading Permit Holder Proprietary
facilitation orders on the same footing (with regards to fees) as
Clearing Trading Permit Holder Proprietary facilitation orders executed
in AIM. Further, Clearing Trading Permit Holders have a number of
obligations (such as membership with the Options Clearing Corporation),
significant regulatory burdens, and financial obligations, that other
market participants do not need to take on. Finally, this proposed
change applies to all regular electronic (non-AIM) Clearing Trading
Permit Holder Proprietary facilitation orders equally.
The Exchange does not believe that the proposed clarification
regarding SPXPM fees will impose any burden on intramarket competition
that is not necessary or appropriate in furtherance of the purposes of
the Act because it merely clarifies the Fees Schedule and also applies
equally. Further, the Exchange does not believe that assessing Customer
transactions in SPXPM (Premium < $1) a higher fee than for CBOE Market-
Maker/DPM/e-DPM/LMM and Clearing Trading Permit Holder Proprietary
SPXPM transactions (Premium < $1) will impose any burden on intramarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act because those market participants undertake certain
obligations with respect to trading at CBOE, such as quoting
obligations (for CBOE Market-Makers/DPMs/e-DPMs/LMMs) and membership
with the Options Clearing Corporation, significant regulatory burdens,
and financial obligations, (for Clearing Trading Permit Holders) that
Customers do not undertake. The Exchange does not believe that
assessing Customer transactions in SPXPM (Premium < $1) a lower fee
than for similar transactions by Joint Back-Office, Broker-Dealer, Non-
Trading Permit Holder Market-Maker, Professional, and Voluntary
Professional market participants because such market participants often
seek to trade with Customers. Further, the lower fee for Customers will
encourage more Customer trading, which provides more liquidity and
trading opportunities (with this preferred trading partner) for these
other market participants. Also, Customers are often not as
sophisticated market participants, and there is a long history of
permitting preferential pricing treatment of Customers in the options
industry (indeed, in a number of places, the Exchange Fees Schedule
offers lower pricing for Customers than for other market participants).
The Exchange does not believe that the proposed rule changes to
eliminate the Hybrid Quoting Infrastructure User Fee and to cease
assessing transaction fees on regular (non-AIM) electronic Clearing
Trading Permit Holder Proprietary facilitation orders will impose any
burden on intermarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act because they may encourage
other exchanges to adopt fee changes that will provide more attractive
pricing on such exchanges (thereby enhancing intermarket competition).
Further, all the proposed rule changes apply only to trading on CBOE.
Indeed, the Exchange does not believe that assessing Customer
transactions in SPXPM (Premium < $1) a fee of $0.35 per contract will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because SPXPM is
only traded on CBOE. To the extent that market participants on other
exchanges may be attracted to CBOE due to the proposed changes, such
market participants may always elect to become CBOE market
participants.
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 \10\ and paragraph (f) of Rule 19b-4 \11\
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. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------
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-2013-072 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-2013-072. 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
[[Page 45282]]
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 the filing also will be available for inspection
and copying at the principal office of the Exchange. 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-2013-072, and should be
submitted on or before August 16, 2013.
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-17974 Filed 7-25-13; 8:45 am]
BILLING CODE 8011-01-P