[Federal Register Volume 83, Number 75 (Wednesday, April 18, 2018)]
[Notices]
[Pages 17203-17205]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-08055]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83041; File No. SR-CBOE-2018-027]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
to the Select Customer Options Reduction Program
April 12, 2018.
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 2, 2018, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change a 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 the Select Customer Options
Reduction program.
The text of the proposed rule change is also available on the
Exchange's
[[Page 17204]]
website (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 the Select Customer Options
Reduction program (``SCORe'').\3\ By way of background, SCORe is a
recently adopted discount program for Retail ,\4\ Non-FLEX Customer
(``C'' origin code) volume in the following options classes: SPX
(including SPXW), VIX, RUT, MXEA, MXEF & XSP (``Qualifying Classes'').
The SCORe program is available to any Trading Permit Holder (``TPH'')
Originating Clearing Firm or non-TPH Originating Clearing Firm that
sign up for the program.\5\ The SCORe program currently utilizes two
measures for participation and discounts: (1) The Qualifying Tiers,
which determine whether a firm qualifies for the discounts in either
Tier A or Tier B and (2) the Discount Tiers, which determine the
Originating Firm's applicable discount tiers and corresponding
discounts. The Exchange proposes to amend the lower threshold for Tier
B of the Qualifying Tiers.
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\3\ The proposed SCORe amendment will be effective April 1, 2018
(i.e., April discounts will be based on March 2018 volume using the
proposed threshold change).
\4\ For purposes of the program ``Retail'' orders will be
defined as Customer orders for which the original order size (in the
case of a simple order) or largest leg size (in the case of a
complex order) is 100 contracts or less.
\5\ For this program, an ``Originating Clearing Firm'' is
defined as either (a) the executing clearing Options Clearing
Corporation (``OCC'') number on any transaction which does not also
include a Clearing Member Trading Agreement (``CMTA'') OCC clearing
number or (b) the CMTA in the case of any transaction which does
include a CMTA OCC clearing number.
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To determine an Originating Firm's Qualifying Tier, the Originating
Firm's total Retail volume in the Qualifying Classes is divided by the
Originating Firm's total Customer volume, Retail and non-Retail, in the
Qualifying Classes. Currently if an Originating Firm's Retail volume is
between 35.00% and 69.99%, the Originating Firm will qualify for Tier B
discounts. If an Originating Firm's Retail volume is at or above
70.00%, the Originating Firm will qualify for Tier A discounts. The
Qualifying Tier that is applied in a given month is based on an
Originating Firm's Retail volume in the prior month (e.g., an
Originating Firm's volume in January determines which Qualifying Tier
applies in February). The Exchange proposes to amend the lower
threshold to qualify for Tier B. Particularly, the Exchange proposes to
lower the 35.00% threshold to 20.00% such that in order to qualify for
Tier B discounts, an Originating Firm's Retail volume would need to be
between 20.00% and 69.99%. The purpose of the proposed change is to
adjust for current volume trends and make it easier for Originating
Firms to obtain discounts.
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.\6\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \7\ 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 facilitating
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,\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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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the proposed amendment to SCORe is reasonable
because it adjusts for current volume trends and makes it easier for
Customers orders from Originating Firms that register for the program
to meet the qualifying threshold and receive the corresponding
discount. The Exchange notes that SCORe will continue to provide an
incremental incentive for Originating Firms to strive for the highest
tier level, which provides increasingly higher discounts. The proposed
rule change is designed to encourage increased Retail volume in the
Qualifying Classes, which provides increased volume and greater trading
opportunities for all market participants. The Exchange believes the
proposed change is equitable and not unfairly discriminatory because
the qualifying volume thresholds apply to all registered Originating
Firms uniformly. The Exchange also notes that the rates set forth in
the Discount Tiers are not changing.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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 the discounts
apply only to Customer orders from Originating Firms, the Program is
designed to encourage increased Customer options volume in the
Qualifying Classes, which provides greater trading opportunities for
all market participants. Additionally, there is a history in the
options markets of providing preferential treatment to Customers
orders. The Exchange notes that the proposed change applies to all
Originating Firms uniformly. The Exchange believes that the proposed
rule change will not cause an unnecessary burden on intermarket
competition because the Qualifying Classes are products that only trade
on Cboe Options. To the extent that the proposed changes make the
Exchange a more attractive marketplace for market participants at other
exchanges, such market participants are welcome to become Cboe Options
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.
[[Page 17205]]
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. 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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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 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-2018-027 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-2018-027. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2018-027 and should be submitted on
or before May 9, 2018.
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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-08055 Filed 4-17-18; 8:45 am]
BILLING CODE 8011-01-P