[Federal Register Volume 79, Number 182 (Friday, September 19, 2014)]
[Notices]
[Pages 56415-56418]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-22336]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73100; File No. SR-CBOE-2014-070]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend the Fees Schedule
September 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 September 2, 2014, Chicago Board Options Exchange, Incorporated
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (the ``Commission'') the proposed rule
[[Page 56416]]
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 the
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. 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 a number of changes to clarify its Fees
Schedule. First, the Exchange proposes to delete all references to
``SPXQ'' in the Fees Schedule. On July 3, 2014, the options symbol for
the SPX End-Of-Quarter option series changed from SPXQ to SPXW. The
SPXW symbol now includes both End-of-Week and End-of-Quarter PM-settled
options series. Accordingly, the symbol ``SPXQ'' is now obsolete and
therefore unnecessary to maintain in the Fees Schedule. The Exchange
proposes to remove all such references to maintain clarity in the Fees
Schedule and avoid potential confusion.
Next, the Exchange proposes to make certain amendments to Footnote
5 of the Fees Schedule. First, the Exchange proposes to reorganize
Footnote 5 and separate the contents of the footnote into two separate
footnotes. Specifically, Footnote 5 currently addresses both floor
brokerage fees and PAR Official fees. The Exchange proposes to address
floor brokerage fees and PAR Official fees separately by removing the
language in current Footnote 5 relating to PAR Official fees and
relocating that language to new Footnote 33. The Exchange believes the
proposed change would make the Fees Schedule easier to read and reduce
potential confusion. The Exchange notes that the language relating to
PAR Official fees that is being relocated to Footnote 33 is the same
language currently in Footnote 5, with one exception. Particularly,
Footnote 5 currently provides that ``PAR Official Fees are waived for
all classes for February 2011 and for all classes except VIX, VXST and
Volatility Index Options for March 2011.'' The Exchange proposes to
eliminate this sentence and not carry it over to new Footnote 33 as it
is no longer applicable. The Exchange believes deletion of outdated
language further maintains clarity in the Fees Schedule.
The Exchange also proposes to make a clarifying amendment to
Footnote 24 of the Fees Schedule. The first sentence of Footnote 24
provides that the Market-Maker Trading Permit Sliding Scale is
available for all Market-Maker Trading Permits held by affiliated
Trading Permit Holders (TPHs) and TPH Organizations that are used for
appointments in any options classes other than ``SPX, SPXpm, VIX, VXST,
OEX and XEO.'' The second sentence of Footnote 24 however, states ``Any
Market-Maker Trading Permits used for these four classes, whether in
whole or in part, are excluded from this sliding scale and will be
priced at $5,000/month [sic].'' The Exchange proposes to delete the
word ``four'' from Footnote 24 as it does not correspond with the six
classes mentioned in the previous sentence. The Exchange notes that the
reference to the number of classes excluded from the sliding scale was
inadvertently not updated when fees for both SPXpm and VXST were
incorporated into the Fees Schedule. The Exchange believes the removal
of the inaccurate reference to the excluded classes avoids potential
confusion as to which classes are excluded for purposes of the Market-
Maker Trading Permit Sliding Scale.
Next, the Exchange proposes to make certain clarifying changes
related to the Floor Broker Trading Permit Sliding Scale (``Sliding
Scale'') table. The Exchange recently amended its Fees Schedule to add
Footnote 32, which provides ``The Exchange will assess no transaction
fees or surcharges for subcabinet trades (limit orders with a price of
at least $0 but less than $1 per options contract, per Exchange Rule
6.54, Interpretation and Policy .03). Subcabinet trades will also not
count towards any volume thresholds or volume threshold calculations.''
\3\ Footnote 32 was appended to all fee-related programs that provide
for reduced or limited fees based on achieving certain volume
thresholds. The Exchange notes that Footnote 25 (which is appended to
the Sliding Scale table), describes a program that provides rebates to
Floor Broker Trading Permit Holders for executing certain amounts of
customer open outcry contracts in multiply-listed options in a month.
As such, Footnote 32 was also appended to the Sliding Scale table to
make clear that subcabinet trades would not count towards those volume
thresholds. The Exchange notes that although Footnote 25, which is
applicable to the Sliding Scale, references a volume based rebate
program, the Floor Broker Sliding Scale itself is not based upon volume
thresholds but rather number of actual Trading Permits held by a
Trading Permit Holder. The Exchange believes that as such, it may be
confusing to append a footnote that relates to volume thresholds (as
well as unrelated transaction fees for subcabinet trades) to a table
referencing a sliding scale that itself is not based upon volume
thresholds. The Exchange therefore proposes to eliminate the reference
to Footnote 32 from the Sliding Scale table and in its place amend
Footnote 25 to explicitly state that subcabinet trades do not count
towards the volume thresholds for the rebate program described in
Footnote 25. The Exchange notes that no substantive changes are being
made by the proposed rule change. The Exchange is proposing this change
to merely alleviate potential confusion and make the Fees Schedule
easier to read.
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\3\ See Securities Exchange Act Release No. 71423 (January 28,
2014) 79 FR 6251 (February 3, 2014) (SR-CBOE-2014-008).
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Finally, the Exchange proposes to increase the Linkage fee for non-
customers orders from $0.55 per contract to $0.65 per contract. The
purpose of this proposed change is to cover increased costs associated
with routing orders through Linkage and paying the transaction fees for
such executions at other exchanges. The Exchange notes that the amount
of this fee is lower than corresponding non-
[[Page 56417]]
customer Linkage fees assessed by other exchanges.\4\
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\4\ See, e.g., NASDAQ OMX PHLX LLC (``PHLX'') Pricing, Non-
Customer Routing Fee of $0.97 per contract.
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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.\5\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \6\ 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
[sic] 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 the Section 6(b)(5) \7\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. The Exchange also believes the
proposed rule change is consistent with Section 6(b)(4) of the Act,\8\
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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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
\7\ Id.
\8\ 15 U.S.C. 78f(b)(4).
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In particular, the Exchange believes that the proposed
clarifications to the Fees Schedule will make the Fees Schedule easier
to read and alleviate potential confusion. The alleviation of potential
confusion will remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general,
protect investors and the public interest.
The Exchange's proposal to increase the non-customer Linkage fee
from $0.55 to $0.65 is reasonable because such increase will help
offset the costs associated with routing orders through Linkage and
paying the transaction fees for such executions at other exchanges.
Additionally, the amount of the proposed increase is lower than
corresponding non-customer Linkage fees assessed by other exchanges.\9\
This fee amount will be assessed to all non-customer orders routed via
Linkage. The Exchange believes that this proposed change is equitable
and not unfairly discriminatory because Non-Customer (e.g., broker-
dealer proprietary) orders originate from broker-dealers who are by and
large more sophisticated than public customers and can readily control
the exchange to which their orders are routed. While there may be some
sophisticated customers who are capable of directing the exchange to
which their orders are routed, generally, retail customers submit
orders to their brokerages but do not or cannot specify the exchange to
which a customer order is sent. Therefore, non-customer order flow can,
in most cases, more easily route directly to other markets if desired
and thus avoid Linkage Fees. Therefore, it is equitable to assess a
reasonable fee to cover the costs incurred for processing non-customer
Linkage orders while continuing to exempt such customer orders.
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\9\ See supra note 2 [sic].
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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. In particular, the increase to
the non-customer Linkage Fee will apply equally to all non-customers.
Additionally, although different linkage fees are assessed to different
market participants (i.e., non-customers vs customers), as described
above, non-customer order flow can, in most cases, more easily route
directly to other markets if desired and thus avoid Linkage Fees.
Therefore, it is equitable to assess a reasonable fee to cover the
costs incurred for processing non-customer Linkage orders while
continuing to exempt such customer orders. The Exchange believes that
the proposal to increase the linkage fee amount assessed to non-
customers will not cause an unnecessary burden on intermarket
competition because the fee amount is lower than assessed at other
exchanges.\10\ 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.
Finally, the proposed changes to alleviate confusion are not intended
for competitive reasons and only apply to CBOE.
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\10\ Id.
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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 \11\ and paragraph (f) of Rule 19b-4 \12\
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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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 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-2014-070 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-2014-070. 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
[[Page 56418]]
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 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-2014-070, and should be submitted on or before
October 10, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-22336 Filed 9-18-14; 8:45 am]
BILLING CODE 8011-01-P