[Federal Register Volume 78, Number 97 (Monday, May 20, 2013)]
[Notices]
[Pages 29422-29424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-11898]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69574; File No. SR-CBOE-2013-047]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to Amend the Fees Schedule
May 14, 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 May 1, 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.
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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 ament [sic] 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 Footnote 24 of its Fees Schedule.
[[Page 29423]]
Specifically, the Exchange would like to add to Footnote 24 the
statement that, if a Market-Maker or its affiliate (``affiliate''
defined as having at least 75% common ownership between the two
entities as reflected on each entity's Form BD, Schedule A) receives a
credit under the Exchange's Volume Incentive Program (``VIP''), that
Market-Maker will receive a credit on its Market-Maker Trading Permit
fees corresponding to the VIP tier reached (10% Market-Maker Trading
Permit fee credit for reaching Tier 2 of the VIP, 20% Market-Maker
Trading Permit fee credit for reaching Tier 3 of the VIP, and 30%
Market-Maker Trading Permit fee credit for reaching Tier 4 of the VIP).
This credit will not apply to Market-Maker Trading Permits used for
appointments in SPX, SPXpm, VIX, OEX and XEO.
For example, consider a Market-Maker holds 23 Market-Maker Trading
Permits (excluding those used with appointments in SPX, SPXpm, VIX, OEX
and XEO) and has an affiliate that electronically transacts 2.50% of
the national customer volume in multiply-listed options classes over
the course of a month (putting that affiliate at Tier 3 on the VIP).
Currently, that Market-Maker would be assessed a fee of $102,500 for
that month for the Market-Maker's 23 Market-Maker Trading Permits
($5,500 for each of the first ten permits, $4,000 for each of the next
ten permits, and $2,500 for the final three permits).\3\ However, under
the proposed change, the Market-Maker would receive a 20% credit
($20,500) on its Market-Maker Trading Permit fees (because its
affiliate reached Tier 3 of the VIP), and therefore would only be
assessed a fee of $82,000 for the 23 Market-Maker Trading Permits
($102,500-$20,500).
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\3\ See CBOE Fees Schedule, Market-Maker Trading Permit Sliding
Scale table.
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The purpose of the proposed change is to incentivize the sending of
orders to CBOE by firms that have both Market-Maker and order-router
arms. In the options industry, many options orders are routed by
consolidators, which are firms that have both order router and Market-
Maker arms. CBOE wants to be aware not only of the importance of
providing credits on the order side in order to encourage the sending
of orders to CBOE but also costs of operation on Market-Maker side. The
Exchange has determined to address both sides by providing relief both
on the order flow side (via the credits provided in the VIP) and the
Market-Maker side (with the credits proposed herein). The resulting
increased volume should benefit all CBOE market participants. Further,
other options exchanges also provide credits to Market-Makers if a
Market-Maker's affiliate's adds a certain amount of customer liquidity
to that exchange.\4\ The Exchange proposes to exclude Market-Maker
Trading Permits used for appointments in SPX, SPXpm, VIX, OEX and XEO
from this credit because such permits are excluded from the Market-
Maker Trading Permit Sliding Scale, and because the Exchange expended
considerable resources developing those products and therefore desires
not to give a credit related to those products in order to recoup those
expenditures.
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\4\ See The NASDAQ Stock Market, LLC Options Market (``NOM'')
Options Pricing, specifically Tier 3 of the table describing The NOM
Market Maker Rebate to Add Liquidity in Penny Pilot Options. Under
Tier 3, a NOM Market Maker receives a credit if that Market Maker
and its affiliate under Common Ownership qualify for Tier 8 of NOM's
Customer and Professional Rebate to Add Liquidity in Penny Pilot
Options. See also NYSE Arca, Inc. (``Arca'') Fees and Charges,
specifically the table describing the Market Maker Monthly Posting
Credit Super Tier, under which transaction volume from a Market
Maker's affiliates count towards the Market Maker's ability to
qualify for higher credit tiers.
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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.\5\ Specifically, the Exchange believes the proposed rule change is
consistent with Section 6(b)(4) of the Act,\6\ 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 proposed
change is reasonable because it will allow qualifying Market-Makers to
receive a credit on their Market-Maker Trading Permit fees. The
Exchange believes that this proposed change is equitable and not
unfairly discriminatory because Market-Makers are valuable market
participants that provide liquidity in the marketplace and incur costs
that other market participants do not incur. Market-Makers have a
number of obligations, including quoting obligations, that other market
participants do not have. The purpose of the proposed change is to
incentivize the sending of orders to CBOE by firms that have both
Market-Maker and order-router arms. In the options industry, many
options orders are routed by consolidators, which are firms that have
both order router and Market-Maker arms. CBOE wants to be aware not
only of the importance of providing credits on the order side in order
to encourage the sending of orders to CBOE but also costs of operation
on Market-Maker side. The Exchange has determined to address both sides
by providing relief both on the order flow side (via the credits
provided in the VIP) and the Market-Maker side (with the credits
proposed herein). By incentivizing a Market-Maker or its affiliate to
achieve higher tiers on the VIP, the Exchange seeks to add greater
Customer liquidity, and the resulting increased volume benefits all
market participants (including Market-Makers or affiliates who do not
achieve the higher tiers on the VIP; indeed, this increased volume may
allow them to reach these tiers). This increased volume will also
assist other Trading Permit Holders in achieving higher tiers on the
VIP, including those that do not have affiliated Market-Makers.
Further, other options exchanges also provide credits to Market-Makers
if a Market-Maker's affiliate's adds a certain amount of customer
liquidity to that exchange.\7\ Finally, the proposed credit is
available to all Market-Makers who qualify. The Exchange believes that
it is equitable and not unfairly discriminatory to exclude Market-Maker
Trading Permits used for appointments in SPX, SPXpm, VIX, OEX and XEO
from this credit because such permits are excluded from the Market-
Maker Trading Permit Sliding Scale, and because the Exchange expended
considerable resources developing those products and therefore desires
not to give a credit related to those products in order to recoup those
expenditures.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4).
\7\ See Footnote 4.
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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. The Exchange does not believe
that the proposed change will impose an unnecessary or inappropriate
burden on intramarket competition because Market-Makers are valuable
market participants that provide liquidity in the marketplace and incur
costs that other market participants do not incur. Market-Makers have a
number of obligations, including quoting obligations, that other market
participants do not have. By incentivizing a Market-Maker or its
affiliate to achieve higher tiers on the VIP, the Exchange seeks to add
greater Customer liquidity, and the resulting
[[Page 29424]]
increased volume benefits all market participants (including Market-
Makers or affiliates who do not achieve the higher tiers on the VIP;
indeed, this increased volume may allow them to reach these tiers).
This increased volume will also assist other Trading Permit Holders in
achieving higher tiers on the VIP, including those that do not have
affiliated Market-Makers. The Exchange does not believe that the
proposed change will impose an unnecessary or inappropriate burden on
intermarket competition because it only applies to CBOE. To the extent
that this rebate, or the resulting increased volume, proves attractive
to market participants on other options exchanges, such market
participants may elect to become market participants at CBOE.
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 \8\ and paragraph (f) of Rule 19b-4 \9\
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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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 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-2013-047 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-2013-047. 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-2013-047 and should be
submitted on or before June 10, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-11898 Filed 5-17-13; 8:45 am]
BILLING CODE 8011-01-P