Joanne Moffic-Silver

1 Executive Vice-President
General Counsel and Corporate Secretary
EXECUTE SUCCESS

Phone: 312-786-7462
Fax: 312-786-7919
mofficj@cboe.com

Thank you for considering our comments. If you have any questions, please contact me.

Sincerely,

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anne Moffic-Silver

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cboe.com CBOE 400 South LaSalle Street | Chicago, IL 60605


Joanne Moffic-Silver

i Executive Vice-President
General Counsel and Corporate Secretary
EXECUTE SUCCESS”

Phone: 312-786-7462
Fax; 312-786-7919
mofficj@cboe.com

July 20, 2015

Office of Exemption Determinations
Employee Benefits Security Administration
Attention: D-11712

U.S. Department of Labor

122 C Street, NW

Suite 400

Washington DC 20001

and
Office of Regulations and Interpretations
Employee Benefits Security Administration

Attn: Conflict of Interest Rule and Related Exemptions
Room N-5655

Re: | Comments Regarding ZRIN: 1210-ZA25 and RIN: AB32

CBOE Holdings, Inc. welcomes this opportunity to comment on two recent proposals by
the Department of Labor (the “Department”): “Definition of Term ‘Fiduciary’; Conflict of
Interest Rule -- Retirement Investment Advice [RIN: 1210-AB32]” (the “Fiduciary Proposal”)!
and “Proposed Best Interest Contract Exemption, Application No. D-11712 [ZRIN: 1210-
ZA25)” (the “BIC Exemption Proposal”).?

CBOE Holdings is the holding company for three regulated, derivative exchanges, among
other subsidiaries: Chicago Board Options Exchange, Incorporated (“CBOE”), C2 Options
Exchange Incorporated (“C2”), and CBOE Futures Exchange, LLC (“CFE”). CBOE and C2
provide markets for exchange-traded options on securities, while CFE provides a market for
exchange-traded futures. CBOE is the largest U.S. options exchange and the creator of listed
options, and is an industry leader in product innovation, trading technology and investor
education.

CBOE is also a member of the U.S. Securities Market Coalition (the “Coalition”) and
fully supports the Coalition’s comments on the Fiduciary Proposal and the BIC Exemption
Proposal which the Coalition is submitting. We incorporate by reference the Coalition’s
comments with respect to both proposals.

BIC Exemption Proposal

80 Federal Register 21928 (Apr. 20, 2015).
* 80 Federal Register 21960 (Apr. 20, 2015)

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cbhoe.com CBOE 400 South LaSalle Street | Chicago, IL 60605


Joanne Moffic-Silver

7 Executive Vice-President
General Counsel and Corporate Secretary
EXECUTE SUCCESS”

Phone: 312-786-7462
Fax: 312-786-7919

BIC Exemption Proposal mofficj@cboe.com

We write separately to underscore our concern that the BIC Exemption Proposal, if
implemented as proposed, would take away the current ability of investors to use exchange-
traded options on securities and exchange-traded futures in Employee Retirement Income
Security Act of 1974, as amended (“ERISA”) plans, such as 401(k) plans, and individual
retirement accounts (“IRAs”). This result would harm investors by limiting their ability to
protect stock positions, manage risks and create income through the use of these products in their
retirement accounts, particularly at a time when more and more investors are responsible for
their own retirement savings. For instance, selling covered call options is a very popular strategy
utilized by these accounts to generate increased investment income from a stock position. CBOE
Holdings therefore requests that the Department amend the BIC Exemption Proposal to
specifically include exchange-traded options and exchange-traded futures in the definition of
“Asset.”

In addition to the Fiduciary Proposal, the Department proposed new exemptions to the
prohibited transactions rules that apply to ERISA plans, such as 401(k) plans, and IRAs.’ In the
BIC Exemption Proposal, the Department issued a new proposed prohibited transaction class
exemption entitled the “Best Interest Contract Exemption” that is intended to permit certain
transactions between a fiduciary and an ERISA plan or IRA that would otherwise be prohibited.
Specifically, the BIC Exemption Proposal would permit certain “Advisers,” “Financial
Institutions,” and their affiliates and related entities to receive compensation for services
provided to “Retirement Investors” in connection with a purchase, sale or holding of an “Asset”
by a Plan, participant or beneficiary account, or IRA, as a result of the Adviser’s and Financial
Institution’s advice. For this purpose, “Asset” is defined as bank deposits, CDs, shares or
interests in registered investment companies (mutual funds), bank collective funds, insurance
company separate accounts, exchange-traded REITs, exchange-traded funds, corporate bonds
offered pursuant to a registration statement under the Securities Act of 1933, agency debt
securities, U.S. Treasury securities, insurance and annuity contracts (both securities and non-
securities), guaranteed investment contracts, and exchange-traded equity securities.’ The
definition of “Asset”, however, excludes exchange-traded options on securities (e.g., a put, call,
straddle or other option to buy an equity security from or sell an equity security to another
without being bound to do so) and exchange-traded futures.

As a result, the new prohibited transaction exemptions would not apply to exchange-
traded options on securities and exchange-traded futures transactions entered into by ERISA
plans or IRAs with entities that are fiduciaries with respect to such plans or IRAs. Consequently,
many ERISA plan and IRA accounts would no longer be able to engage in those types of
transactions.

> The Department also issued another new proposed prohibited transaction class exemption intended to permit
principal transactions in certain debt securities, and proposed amendments to and partial revocations of several
existing exemptions currently used by ERISA plans and IRAs to engage in common securities trading transactions.
These comments do not address such proposals.

“ See Section VIII(c) of the Proposed Exemption.

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cbhoe.com CBOE | 400 South LaSalle Street | Chicago, IL 60605


Joanne Moffic-Silver

P Executive Vice-President
General Counsel and Corporate Secretary
EXECUTE SUCCESSTM

Phone: 312-786-7462

Fax: 312-786-7919

mofficj@cboe.com
CBOE Holdings recommends that the Department amend the BIC Exemption Proposal to
specifically include exchange-traded options and exchange-traded futures in the definition of
“Asset,” to preserve the ability of investors to use these types of products in their retirement
accounts,

Exchange-traded options and exchange traded-futures are highly regulated products that
have been traded on national securities exchanges or futures exchanges for many years.
CBOE and C2 (and other members of the Coalition) are national securities exchanges regulated
by the Securities and Exchange Commission, while CFE is a designated contract market
regulated by the Commodities Futures Exchange Commission. Individual investors are
significant participants in the listed options market (accounting for approximately 25% of the
volume on U.S. options markets). Individual investors use listed (or exchange-traded) options,
such as selling “covered” call options to increase investment income or buying protective puts in
their IRAs to manage the risks with owning individual stocks or equity indices, with the goal of
increasing their retirement savings. Exchange-traded futures are similarly used by investors as
an integral component of a diversified portfolio.

The preamble to the BIC Exemption Proposal states that the exemption is intended to
apply to “investments that are commonly purchased by plans, participant and beneficiary
accounts, and IRAs.” Exchange-traded options on securities clearly fall within this classification
of investments that are commonly purchased by IRAs to manage risks and create income.
Exchange-traded futures similarly assist investors in creating a diversified and hedged portfolio.
Accordingly, CBOE Holdings requests that the BIC Exemption Proposal be amended to include
exchange-traded options on securities and exchange-traded futures in the definition of “Asset.”

Fiduciary Proposal

In the Fiduciary Proposal, the Department issued a new proposed regulation that
significantly expands the types of conduct that will cause a person or entity to be considered a
“fiduciary” for purposes of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), and the prohibited transaction provisions of the Internal Revenue Code of 1986, as
amended. As noted in the Coalition’s letter, this expansion goes far beyond the types of conduct
that would cause a person to be considered a fiduciary under the Investment Advisers Act of
1940 and the guidance issued thereunder by the primary regulator for investment advisers, the
SEC. CBOE requests that the Department clarify in the final version of any new rule that certain
actions by brokers would not cause the broker to be considered a fiduciary with respect to such
ERISA plan or IRA. Specifically, CBOE recommends that any final regulation make clear that,
absent other fiduciary conduct, neither the screening by a broker of the owner of an IRA or plan
account nor the determination by a broker that engaging in trading of exchange-traded options
and exchange-traded futures is appropriate for such account owner by itself rises to the level of
fiduciary conduct. Further, CBOE requests that the Department clarify in any final regulation
that the providing of instructional models, videos and interactive education materials regarding
exchange-traded options and exchange-traded futures does not constitute investment advice and
possibly cause the provider of such information to assume a fiduciary status.

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