[Federal Register Volume 79, Number 139 (Monday, July 21, 2014)]
[Notices]
[Pages 42384-42386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-17013]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72608; File No. SR-CBOE-2014-055]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to Amend Its Fees Schedule
July 15, 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 July 1, 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, 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fees Schedule, to be effective
July 1, 2014. First, the Exchange proposes to increase the fees for
electronic Professional/Voluntary Professional (W) (``Professional'')
and Joint Back Office (J) (``JBO'') executions in equity, ETF, ETN and
index options classes (except, SPX, SPXW, SPXpm, SRO, OEX, XEO, VIX,
VXST and VOLATILITY INDEXES (the ``Special Classes'')) from $0.30 to
$0.45 for Penny Pilot Classes and $0.60 for Non-Penny Pilot Classes.
The Exchange notes that the proposed fees are the same amount that are
currently assessed to Broker-Dealers and non-Trading Permit Holder
Market Makers. The Exchange also notes that this change is being
proposed due to competitive reasons and that the increased amount is
within the range of fees assessed for similar transactions on other
exchanges.\3\
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\3\ See PHLX Pricing, Section II, Multiply Listed Options Fees.
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The Exchange also proposes to amend its Fees Schedule to adopt a
fee of $200 per report per FBW group \4\ per month for daily reports
provided to requesting users of the Exchange's aggregation Floor Broker
Workstation (which are used on the Exchange trading floor to enter
orders) (``FBW''). The Exchange licenses the FBW software from a third-
party vendor, which vendor operates FBW on behalf of the Exchange. This
vendor also provides upon request by TPHs on an ad hoc basis reports
related to their use of FBW. For example, some TPHs request reports
related to the orders they enter on FBWs. Other TPHs request reports
related to their market access control settings.\5\ Currently, TPHs
receive these ad hoc reports at no charge. Recently, however, FBW users
have requested that they automatically receive reports on a daily
basis. The
[[Page 42385]]
FBW vendor has determined that the cost to provide a daily report for a
TPH (or a TPH's FBW aggregation group, if applicable) is $200 per month
and will assess to the Exchange a fee in this amount for the provision
of each daily report (for each FBW aggregation group) to a TPH.\6\ As
such, the Exchange proposes to charge a fee in the same amount ($200
per report per month) \7\ to each TPH that requests to receive a daily
report(s) (for each FBW aggregation group, if applicable). The proposed
fee essentially passes through to each requesting TPH the cost charged
to the Exchange for daily reports for that TPH so that the Exchange can
recoup this cost. Receipt of the daily reports, and thus the proposed
fee, will be optional for TPHs.
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\4\ For business purposes, a Trading Permit Holder (``TPH'')
firm may group FBW users within that firm into an FBW aggregation
group (for example, a TPH may have an index group and an equity
group). If a TPH has FBW aggregation groups, the proposed fee will
be applied to each group. For example, if a TPH has an FBW index
group and an FBW equity group, and the TPH requests that it receive
daily market access control reports for both groups, the Exchange
will charge the TPH $400/month under the proposed fee.
\5\ FBW includes a market access control window in which TPHs
can input parameters and settings (which are displayed for each FBW
aggregation group) with respect to their orders to help them manage
their trading risk. These risk controls include pre-order controls
(such as quantity of contracts per order, premium amount per order,
number of identical orders and frequency of order entry) and
aggregate controls (such as actual and predictive values for premium
amount per day, quantity of contracts per day, and the number of
orders with a status of working). Use of the market access control
window is voluntary. Pursuant to the CBOE Fees Schedule, the
Exchange charges TPHs $100/month per login ID (capped at $2,000 per
month for a TPH) for use of the market access controls window costs.
\6\ TPHs that want to receive daily reports should request them
from the Exchange (as they currently do with respect to the ad hoc
reports).
\7\ For example, if a TPH requests that it receive a daily
report for its orders and a daily report for its market access
control settings, the Exchange will charge the TPH $400 per month
($200 for the order report and $200 for the market access control
report).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\8\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \9\ 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. The Exchange
also believes the proposed rule change is consistent with Section
6(b)(4) of the Act,\10\ which provides that Exchange rules may provide
for the equitable allocation of reasonable dues, fees, and other
charges among its Trading Permit Holders.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ 15 U.S.C. 78f(b)(4).
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In particular, the Exchange's proposal to increase the electronic
Professional and JBO options transaction fee in Penny Pilot Options to
$0.45 per contract and in Non-Penny Pilot Options to $0.60 is
reasonable because the Exchange's fees will remain competitive with
fees at other options markets.\11\ The Exchange believes that this
proposed change is equitable and not unfairly discriminatory because
the Exchange will assess Professionals, JBOs, Broker-Dealers and non-
Trading Permit Holder Market Makers the same electronic options
transaction fees in Penny Pilot options and Non-Penny options. The
Exchange notes that it does not assess Customers the electronic options
transaction fees in Penny Pilot and Non-Penny Pilot options because
Customer order flow enhances liquidity on the Exchange for the benefit
of all market participants. Specifically, Customer liquidity benefits
all market participants by providing more trading opportunities, which
attracts Market Makers. An increase in the activity of these market
participants in turn facilitates tighter spreads, which may cause an
additional corresponding increase in order flow from other market
participants. The Exchange notes that Market Makers are assessed lower
electronic options transaction fees in Penny Pilot and Non-Penny Pilot
options as compared to Professionals, JBOs, Broker Dealers and non-
Trading Permit Holder Market Makers because they have obligations to
the market and regulatory requirements, which normally do not apply to
other market participants (e.g., obligations to make continuous
markets). Accordingly, the differentiation between electronic
transaction fees for Customers, Market Makers and other market
participants recognizes the differing contributions made to the
liquidity and trading environment on the Exchange by these market
participants.
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\11\ See PHLX Pricing, Section II, Multiply Listed Options Fees.
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The Exchange believes that the proposed fee of $200 per file per
month (for each FBW aggregation group, if applicable) for the receipt
of daily reports is reasonable because this is the cost imposed on the
Exchange by the third-party vendor for the provision of these reports.
The proposed fee merely allows the Exchange to recoup this cost by
passing it through to the requesting TPH. The Exchange will not keep
any of the fees assessed on TPHs. The Exchange believes that the
proposed fee is equitable and not unfairly discriminatory because this
fee is optional and will be assessed uniformly to all TPHs that request
the daily market access control.
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 because, while different
electronic transaction fees are assessed to different market
participants, these different market participants have different
obligations and different circumstances (as described in the
``Statutory Basis'' section above). For example, Market Makers have
quoting obligations that other market participants do not have and
Customer order flow enhances liquidity on the Exchange for the benefit
of all market participants as described in above. The Exchange believes
that the proposal to increase the fee amount assessed to electronic
Professional and JBO executions in Penny Pilot and Non-Penny Pilot
options will not cause an unnecessary burden on intermarket competition
because the fee and fee amount is similar to fees assessed at other
exchanges.\12\ To the extent that the proposed changes make CBOE a more
attractive marketplace for market participants at other exchanges, such
market participants are welcome to become CBOE market participants.
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\12\ See PHLX Pricing, Section II, Multiply Listed Options Fees.
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Finally, CBOE does not believe that the proposed rule change to
adopt a FBW Report Fee will impose any burden on competition that is
not necessary or appropriate in furtherance of the purposes of the Act.
The proposed fee will be assessed uniformly to all TPHs that use FBW
and request the daily reports. Receipt of the daily reports (and thus
the proposed fee) will be optional for TPHs. In addition, the proposed
fee applies only to users of FBWs located at the Exchange and is not
intended for competitive reasons. The proposed fee merely allows the
Exchange to recoup the cost imposed on it by the third-party vendor for
the provision of these daily reports by passing it through to each
requesting TPH.
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.
[[Page 42386]]
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 \13\ and paragraph (f) of Rule 19b-4 \14\
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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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 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 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-2014-055 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-2014-055. 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-2014-055 and should be
submitted on or before August 11, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-17013 Filed 7-18-14; 8:45 am]
BILLING CODE 8011-01-P