[Federal Register Volume 79, Number 79 (Thursday, April 24, 2014)]
[Notices]
[Pages 22838-22840]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-09293]
[[Page 22838]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71971; File No. SR-CBOE-2014-037]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Its Fees Schedule
April 18, 2014.
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 April 10, 2014, 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 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, at the Commission's Public
Reference Room, and on the Commission's Web site (http://www.sec.gov).
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fees Schedule. On April 10,
2014, the Exchange begins trading options on the CBOE Short-Term
Volatility Index (``VXST''). VXST is calculated in the same manner as
the CBOE Volatility Index (``VIX''); the substantive differences
between VXST and VIX are related to the fact that VXST is on a shorter
timeframe (VXST's implied volatility period is nine days while VIX's is
thirty, and VXST options expire weekly while VIX options expire
monthly).\3\ Due to the similarities between VXST and VIX, the Exchange
proposes to apply the same fees structure to VXST as is currently
applied to VIX. As such, the Exchange proposes to apply to VXST the
same fees, fee programs, and fee exceptions that apply to VIX (with two
exceptions). Wherever VIX is mentioned in the Fees Schedule, the
Exchange proposes to add VXST (aside from the two exceptions). The two
exceptions are that the Exchange assesses a monthly VIX Tier
Appointment fee of $2,000 to any Market-Maker Trading Permit Holder
that either (a) has a VIX Tier Appointment at any time during a
calendar month and trades at least 100 VIX options contracts
electronically while that appointment is active; or (b) trades at least
1,000 VIX options contracts in open outcry during a calendar month.\4\
The Exchange also assesses a monthly Floor Broker VIX Surcharge of
$2,000 per month to any Floor Broker Trading Permit Holder that
executes more than 20,000 VIX contracts during the month.\5\ The
Exchange does not propose to assess these fees in regards to VXST. The
Exchange has expended significant resources in developing VXST and
believes that not assessing these fees in regards to VXST will
encourage trading in VXST.
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\3\ For more information about VXST and the differences between
VXST options and VIX options, see Securities Exchange Act Release
No. 71764 (March 21, 2014), 79 FR 17212 (March 27, 2014) (SR-CBOE-
2014-003).
\4\ See the Exchange Fees Schedule's listing of the VIX Tier
Appointment fee for more information.
\5\ See the Exchange Fees Schedule's listing of the Floor Broker
VIX Surcharge for more information.
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On a VIX settlement day, the Exchange waives the Hybrid 3.0
Execution Surcharge for orders in SPX options in the SPX electronic
book that are executed during opening rotation on the final settlement
date of VIX options and futures. This is because the only way to
participate in the settlement process is electronically; there is no
open outcry alternative. Therefore, the Exchange does not want to
assess a surcharge for the only possible method of participation in the
VIX settlement process. VXST, because it expires weekly instead of
monthly, uses SPXW options to determine the 9-day VXST settlement value
except for the one week a month for which there are not expiring SPXW
options. That week is the standard third-Friday expiration, and for
that week, VXST uses SPX options to determine the 9-day VXST settlement
value.
Therefore, similar to the manner described above, in which the
Hybrid 3.0 Execution Surcharge for orders in SPX options in the SPX
electronic book that are executed during opening rotation on the final
settlement date of VIX options and futures is waived on VIX settlement
day, the Exchange proposes to waive the Hybrid 3.0 Execution Surcharge
for orders in SPX options in the SPX electronic book that are executed
during opening rotation on the final settlement date of VXST options
and futures in which SPX options are being used to determine the final
settlement value. This concept also applies, in relation to VXST, to
the Customer Priority Surcharge for SPXW. The Exchange proposes to
waive the SPXW Customer Priority Surcharge for orders in SPXW options
in the SPXW electronic book that are executed during opening rotation
on the final settlement date of VXST options and futures in which SPXW
options are being used to determine the final settlement value. The
Exchange does not want to assess a surcharge for the only possible
method of participation in the VXST settlement process. The Exchange
proposes to add these exceptions to those listed in footnotes 21 and 31
of the Fees Schedule.
The Exchange always strives for clarity in its rules and Fees
Schedule, so that market participants may best understand how rules and
fees apply. As such, the Exchange proposes to clarify its Fees
Schedule. First, the Exchange proposes to move the listing of its
Continuing Education and Qualification Examination Waiver Fee into the
Web CRD\SM\ section, as these fees are actually fees that are collected
and retained by FINRA via the Web CRD\SM\ registration system (like the
other Web CRD\SM\ fees listed on the Fees Schedule). This is not a
substantive fee change.
[[Page 22839]]
Next, the Exchange proposes to delete the listing of the CBSX \6\
Trading Permit fee from the CBOE Fees Schedule. For one thing, the Fees
Schedule does not list a fee for this type of Trading Permit (the
listing says ``No Access Fee''), so it is unnecessary to list the CBSX
Trading Permit. Moreover, CBSX has its own Fees Schedule that lists
access fees, and therefore any future fee that would be assessed for a
CBSX Trading Permit could be listed on the CBSX Fees Schedule. Finally,
CBSX intends to cease market operations on April 30, 2014,\7\ which
further reduces any rationale for listing the CBSX Trading Permit on
the CBOE Fees Schedule. This is not a substantive fee change.
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\6\ ``CBSX'' stands for CBOE Stock Exchange.
\7\ See CBOE/CBSX Regulatory Circular RG14-053 (April 7, 2014).
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The Exchange also proposes to remove all fees associated with In-
House Pagers from its Fees Schedule.\8\ The Exchange no longer provides
these services (In-House Pagers) and therefore no longer assesses the
fees associated with such services. This is not a substantive fee
change.
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\8\ Currently, the CBOE Fees Schedule lists fees for the
Purchase, Purchase with Trade-in of Old System Pager, Annual
Maintenance, and Abusive Damage Repair of pagers.
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The Exchange also proposes, in footnote 6 of its Fees Schedule, to
move the listing of XEO to after the listing of OEX in order to have
VIX, VXST and VOLATILITY INDEXES together in order (due to their
relation). This is not a substantive fee change.
The Exchange also proposes to make a non-substantive change to
achieve continuity in its Fees Schedule. VIX is a VOLATILITY INDEX, and
most references to VIX and VOLATILITY INDEXES in the Fees Schedule read
``VIX and VOLATILITY INDEXES''. However, in a few places, only
``VOLATILITY INDEXES'' are listed, and such listings implicitly include
VIX (unless VIX is explicitly excepted out). As such, the Exchange
proposes to amend the Fees Schedule to read ``VIX and VOLATILITY
INDEXES'' in all places that VIX is currently only implicitly included
in the listing of VOLATILITY INDEXES (and, following this proposed rule
change, VXST will now also be listed explicitly in these places) in
order to achieve continuity in the Fees Schedule and eliminate
confusion. This way, in the few places where VIX (and now, VXST) is
subject to different fees than the other VOLATILITY INDEXES, it will be
more clear. This is not a substantive fee change.
Finally, the Exchange proposes to make a clarifying change to the
Notes section regarding the Hybrid Agency Liaison (``HAL'') Step-Up
Rebate. Currently, the Notes section states: ``The Exchange shall
rebate to a market-maker against transaction fees generated from a
transaction on the HAL system in a penny pilot class, provided that at
least 70% of the market-maker's quotes in that class (excluding mini-
options and quotes in LEAPS series) in the prior calendar month were on
one side of the NBBO.'' The exclusion language in the parenthetical
means that the Exchange does not rebate against fees for mini-options
transactions on the HAL system in a penny pilot class, and does not
include mini-options quotes or quotes in LEAPS series towards the 70%
threshold (hence the blanket exclusion of mini-options and the specific
exclusion of quotes in regards to LEAPS). That said, while the Exchange
has never received any questions regarding the wording in this section
or the applicability of the HAL Step-Up Rebate to mini-options or
LEAPS, the Exchange recognizes that this language is somewhat
confusing. As such, the Exchange proposes to amend this language to
state: ``The Exchange shall rebate to a market-maker against
transaction fees generated from a transaction on the HAL system in a
penny pilot class (excluding mini-options transactions), provided that
at least 70% of the market-maker's quotes in that class (excluding
quotes in LEAPS series and mini-options) in the prior calendar month
were on one side of the NBBO.'' This is not a substantive fee change.
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.\9\ Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \10\ 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.
Additionally, the Exchange believes the proposed rule change is
consistent with Section 6(b)(4) of the Act,\11\ 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.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that it is reasonable, equitable and not
unfairly discriminatory to apply the same fees and fees structure to
VXST options as currently apply to VIX options because both are
volatility indexes and they share significant similarities in
underlying products and product structure. The Exchange believes that
it is reasonable to not assess the VIX Tier Appointment fee and Floor
Broker VIX Surcharge in regards to VXST because those market
participants trading VXST will not be assessed such fees. The Exchange
believes that this is equitable and not unfairly discriminatory because
the Exchange has expended significant resources in developing VXST and
believes that not assessing these fees in regards to VXST will
encourage trading in VXST. The Exchange believes that the VXST-related
changes to footnote 21 related to the Hybrid 3.0 Execution Surcharge
and footnote 31 related to the SPXW Customer Priority Surcharge are
reasonable because they will result in market participants at times not
being required to pay these Surcharges for SPX and/or SPXW transactions
in the circumstances described. The Exchange believes that this is
equitable and not unfairly discriminatory because, first, the Exchange
makes similar exceptions in relation to VIX. Further, the Exchange does
not want to assess a surcharge for the only possible method of
participation in the VXST settlement process. Also, the Exchange has
expended significant resources in developing its proprietary products
and desires to encourage the uses of such products.
The Exchange believes that the removal of the listing of the CBSX
Trading Permit and In-House Pager fees from the CBOE Fees Schedule will
prevent any potential confusion, as these are not fees that are
currently assessed by the Exchange. Similarly, the Exchange believes
that moving the listing of its Continuing Education and Qualification
Examination Waiver Fee into the Web CRD\SM\ section will also prevent
any potential confusion, as these fees are actually fees that are
collected and retained by FINRA via the Web CRD\SM\ registration system
(like the other Web CRD\SM\ fees listed on the Fees Schedule). The
Exchange also believes that cleaning up the exclusion language
[[Page 22840]]
in the HAL Step-Up Rebate will prevent any possible confusion. The
Exchange also believes that moving the listing of XEO in footnote 6 and
specifically listing out VIX separate from the other VOLATILITY INDEXES
will prevent any possible confusion. Indeed, the Exchange believes that
all of the non-substantive changes proposed herein will prevent
possible confusion. The prevention of possible confusion serves 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.
B. Self-Regulatory Organization's Statement on Burden on Competition
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 does not believe
that the proposed application of the VIX options fees structure to VXST
options will impose any burden on intramarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act
because market participants will be assessed the same fees for VXST
options as are assessed to VIX options (with the two exceptions
described above), and all qualifying market participants will be
assessed the relevant fees equally. The Exchange does not believe that
the proposed application of the VIX options fees structure to VXST
options will impose any burden on intermarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act
because VXST options will only be listed on CBOE, and the proposed fees
only apply to trading on CBOE. The Exchange does not believe that the
non-substantive changes proposed herein will impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act because these are merely non-substantive clarifying
changes intended to prevent confusion and are not intended for
competitive purposes.
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 \12\ and paragraph (f) of Rule 19b-4 \13\
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.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposal 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-2014-037 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2014-037. 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 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-2014-037 and should be
submitted on or before May 15, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-09293 Filed 4-23-14; 8:45 am]
BILLING CODE 8011-01-P