Federal Register / Vol. 83, No. 164 / Thursday, August 23, 2018 / Notices 42739 

11 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(ii). 

4 17 CFR 240.19b–4(f)(2). 

5The Exchange initially filed the proposed fee 

change on August 1, 2018 (SR–CboeEDGX–2018– 

028) for August 1, 2018 effectiveness. On business 

date August 9, 2018, the Exchange withdrew that 

SR–CboeBZX–2018–055 and submitted SR– 

CboeBZX–2018–062 in its place. On business date 

August 10, 2018 the Exchange withdrew SR– 

CboeBZX–2018–062 and submitted this filing. 

6The Exchange notes that its regulatory 

responsibilities with respect to compliance with 

options sales practice rules has been allocated to 

the Financial Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) under a 17d–2 Agreement. The ORF is 

not designed to cover the cost of options sales 

practice regulation. 

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 No. 

SR–CboeEDGX–2018–034, and should 

be submitted on or before September 13, 

2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–18166 Filed 8–22–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83879; File No. SR– 

CboeBZX–2018–063] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend the 

Options Regulatory Fee 

August 17, 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 August 

10, 2018, Cboe BZX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BZX’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III 

below, which Items have been prepared 

by the Exchange. The Exchange has 

designated the proposed rule change as 

one establishing or changing a member 

due, fee, or other charge imposed by the 

Exchange under Section 19(b)(3)(A)(ii) 

of the Act 3 and Rule 19b–4(f)(2) 

thereunder,4 which renders the 

proposed rule change effective upon 

filing with the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange filed a proposal to 

amend its fee schedule related to the 

Options Regulatory Fee. 

The text of the proposed rule change 

is available at the Exchange’s website at 

www.markets.cboe.com, at the principal 

office of the Exchange, 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 parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to modify the 

fee schedule applicable to the 

Exchange’s options platform (‘‘BZX 

Options’’) to amend the rate of its 

Options Regulatory Fee (‘‘ORF’’).5

Currently, the Exchange charges an ORF 

in the amount of $0.0005 per contract 

side. The Exchange proposes to decrease 

the amount of ORF from $0.0005 per 

contract side to $0.0002 per contract 

side. The proposed change to ORF 

should continue to balance the 

Exchange’s regulatory expenses against 

the anticipated revenue. 

The ORF is assessed by the Exchange 

on each Member for options 

transactions cleared by the Member that 

are cleared by the Options Clearing 

Corporation (OCC) in the customer 

range, regardless of the exchange on 

which the transaction occurs. In other 

words, the Exchange imposes the ORF 

on all customer-range transactions 

cleared by a Member, even if the 

transactions do not take place on the 

Exchange. The ORF is collected by OCC 

on behalf of the Exchange from the 

Clearing Member or non-Clearing 

Member that ultimately clears the 

transaction. With respect to linkage 

transactions, the Exchange reimburses 

its routing broker providing Routing 

Services for options regulatory fees it 

incurs in connection with the Routing 

Services it provides. 

Revenue generated from ORF, when 

combined with all of the Exchange’s 

other regulatory fees and fines, is 

designed to recover a material portion of 

the regulatory costs to the Exchange of 

the supervision and regulation of 

Member customer options business. 

Regulatory costs include direct 

regulatory expenses and certain indirect 

expenses for work allocated in support 

of the regulatory function. The direct 

expenses include in-house and third 

party service provider costs to support 

the day to day regulatory work such as 

surveillances, investigations and 

examinations. The indirect expenses 

include support from such areas as 

human resources, legal, information 

technology and accounting. These 

indirect expenses are estimated to be 

approximately 10% of BZX Options’ 

total regulatory costs for 2018. Thus, 

direct expenses are estimated to be 

approximately 90% of total regulatory 

costs for 2018. In addition, it is BZX 

Options’ practice that revenue generated 

from ORF not exceed more than 75% of 

total annual regulatory costs. These 

expectations are estimated, preliminary 

and may change. There can be no 

assurance that our final costs for 2018 

will not differ materially from these 

expectations and prior practice; 

however, the Exchange believes that 

revenue generated from the ORF, when 

combined with all of the Exchange’s 

other regulatory fees and fines, will 

cover a material portion, but not all, of 

the Exchange’s regulatory costs.6

The Exchange will continue to 

monitor the amount of revenue 

collected from the ORF to ensure that it, 

in combination with its other regulatory 

fees and fines, does not exceed the 

Exchange’s total regulatory costs. The 

Exchange monitors its regulatory costs 

and revenues at a minimum on a semiannual basis. If the Exchange 


daltland on DSKBBV9HB2PROD with NOTICES
42740 Federal Register / Vol. 83, No. 164 / Thursday, August 23, 2018 / Notices 

7 15 U.S.C. 78f. 

8 15 U.S.C. 78f(b)(4). 

9 15 U.S.C. 78s(b)(3)(A). 

10 17 CFR 240.19b–4(f). 

determines regulatory revenues exceed 

or are insufficient to cover a material 

portion of its regulatory costs, the 

Exchange will adjust the ORF by 

submitting a fee change filing to the 

Commission. The Exchange notifies 

Members of adjustments to the ORF via 

regulatory circular. The Exchange 

provides Members with such notice at 

least 30 calendar days prior to the 

effective date of the change. 

The Exchange lastly proposes a 

couple of minor clean up changes to the 

Fees Schedule. Particularly, the ORF is 

listed as being $0.0009 per contract 

through January 31, 2018 and $0.0005 

per contract effective February 1, 2018. 

As these dates have passed and the ORF 

is now simply $0.0002 per contract, the 

Exchange proposes to delete the 

reference to the ORF being $0.0009 per 

contract through January 31, 2018 and 

the February 1, 2018 effective date of 

the $0.0005 per contract ORF. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder that 

are applicable to a national securities 

exchange, and, in particular, with the 

requirements of Section 6 of the Act.7

Specifically, the Exchange believes that 

the proposed rule change is consistent 

with Section 6(b)(4) of the Act,8 in that 

it provides for the equitable allocation 

of reasonable dues, fees and other 

charges among members and other 

persons using its facilities. The 

Exchange notes that it operates in a 

highly competitive market in which 

market participants can readily direct 

order flow to competing venues or 

providers of routing services if they 

deem fee levels to be excessive. 

The Exchange believes the decreased 

ORF is equitable and not unfairly 

discriminatory because it would be 

objectively allocated to Members in that 

it would be charged to all Members on 

all their transactions that clear as 

customer transactions at the OCC. The 

Exchange believes that decreasing the 

ORF is reasonable because the 

Exchange’s collection of ORF needs to 

be balanced against the amount of 

regulatory revenue collected by the 

Exchange. The Exchange believes that 

the proposed adjustment noted herein 

will serve to continue to balance the 

Exchange’s regulatory revenue against 

its anticipated regulatory costs. 

The Exchange has designed the ORF 

to generate revenues that, when 

combined with all of the Exchange’s 

other regulatory fees, will be less than 

or equal to the Exchange’s regulatory 

costs, which is consistent with the 

Commission’s view that regulatory fees 

be used for regulatory purposes and not 

to support the Exchange’s business side. 

In this regard, the Exchange believes 

that the decreased level of the fee is 

reasonable and appropriate. 

The Exchange believes the proposal to 

eliminate obsolete language with respect 

to past ORF rates maintains clarity in 

the rules and alleviates potential 

confusion, thereby protecting investors 

and the public interest. 

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 not 

necessary or appropriate in furtherance 

of the purposes of the Act. This 

proposal does not create an unnecessary 

or inappropriate intra-market burden on 

competition because the ORF applies to 

all customer activity, thereby raising 

regulatory revenue to offset regulatory 

expenses. It also supplements the 

regulatory revenue derived from noncustomer activity. This proposal does 

not create an unnecessary or 

inappropriate inter-market burden on 

competition because it is a regulatory 

fee that supports regulation in 

furtherance of the purposes of the Act. 

The Exchange is obligated to ensure that 

the amount of regulatory revenue 

collected from the ORF, in combination 

with its other regulatory fees and fines, 

does not exceed regulatory costs. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any written 

comments from members or other 

interested parties. 

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 thereunder.10 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. 

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 rule-comments@

sec.gov. Please include File No. SR– 

CboeBZX–2018–063 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 No. 

SR–CboeBZX–2018–063. 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 No. 

SR–CboeBZX–2018–063, and should be 

submitted on or before September 13, 

2018. 


daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 164 / Thursday, August 23, 2018 / Notices 42741 

11 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 42201 

(December 3, 1999), 64 FR 69305 (December 10, 

1999) (Notice of Filing of File No. SR–NASD–99– 

65). 

4See Rule 7730. 

5Currently, 61 members have direct FIX 

connections for TRACE reporting, 32 have direct 

CTCI connections, and 709 members have web 

browser access (the 709 firms with web browser 

access also may have CTCI or FIX access for 

connecting to TRACE). The top five members that 

connect through CTCI for reporting transactions to 

TRACE represent 63% of all TRACE reports 

submitted directly using a CTCI connection. In 

addition, five service bureaus report to TRACE 

through CTCI connections and five report through 

FIX connections. The five service bureaus that use 

CTCI report transactions to TRACE on behalf of 191 

members in aggregate, with over 95% of these 

transaction reports received from one service 

bureau. For all TRACE-eligible securities, 

approximately 33% of all transaction reports are 

received via CTCI, which consists of 23% submitted 

by members with direct CTCI connections and 10% 

by service bureaus connected via CTCI. 

6For example, members may report trades to the 

recently approved second FINRA/Nasdaq Trade 

Reporting Facility via FIX but firms will not have 

the option to report trades via CTCI. See Securities 

Exchange Act Release No. 83082 (April 20, 2018), 

83 FR 18379 (April 26, 2018) (Notice of Filing of 

File No. SR–FINRA–2018–013). 

7FINRA will be eliminating CTCI as a means of 

connectivity for reporting to all FINRA trade 

reporting facilities. 

8 In addition to general outreach (industry-wide 

calls and a Technical Notice), FINRA will contact 

each individual firm that directly reports to TRACE 

via CTCI by email and telephone to provide 

information and assistance in connection with the 

migration. 

9 15 U.S.C. 78o–3(b)(6). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–18164 Filed 8–22–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83868; File No. SR–FINRA– 

2018–030] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of a 

Proposed Rule Change To Amend 

FINRA Rule 7730 (Trade Reporting and 

Compliance Engine (TRACE)) To 

Remove Computer-to-Computer 

Interface as a Technological Option for 

TRACE Reporting 

August 17, 2018. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on August 

15, 2018, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by FINRA. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to amend FINRA 

Rule 7730 to modify the technological 

connectivity options available to 

members for reporting transactions to 

TRACE. 

The text of the proposed rule change 

is available on FINRA’s website at 

http://www.finra.org, at the principal 

office of FINRA 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, 

FINRA 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. FINRA 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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

FINRA is proposing to amend Rule 

7730 (Trade Reporting and Compliance 

Engine (TRACE)) to remove Computerto-Computer Interface (‘‘CTCI’’) as a 

technological means of connectivity for 

use in reporting transactions to TRACE. 

Technology and connectivity options 

have evolved since the inception of the 

TRACE system (at which time CTCI, 

rather than Financial Information 

eXchange (‘‘FIX’’), was made available 

for TRACE reporting purposes).3 FINRA 

has determined that it is now 

appropriate to remove CTCI—a Nasdaq 

proprietary protocol—as a means of 

connectivity. Accordingly, firms would 

be required to report transactions to 

TRACE using one of the remaining 

currently available options: (i) Web 

browser access; (ii) FIX line access; or 

(iii) indirectly via third-party 

intermediaries (e.g., service bureaus).4

FINRA notes that FIX—an industry 

standard protocol—is an immediately 

available and viable alternative to CTCI 

that already is widely used by members. 

Since adding FIX as a protocol for 

transaction reporting to TRACE in 2011 

for Securitized Products (and for 

corporates and Agency Debt Securities 

in 2012), approximately two thirds of 

firms with direct connections, and half 

of the service bureaus, have opted to 

migrate from CTCI to FIX. In fact, the 

majority of members that report trades 

to TRACE currently connect via FIX,5

and FINRA believes that an increasing 

amount of firms and service bureaus 

will continue to migrate to FIX.6 FINRA 

also believes that removing CTCI as a 

means of connectivity will reduce 

operational overhead and risk for 

FINRA. 

Accordingly, FINRA is proposing to 

amend Rule 7730 to remove CTCI as a 

means of connectivity for members to 

report transactions to TRACE.7 FINRA 

intends to provide ample time, until 

February 3, 2020, to allow firms that 

still use CTCI as a means of connectivity 

to migrate, and will permit members to 

migrate at any point throughout the 

implementation period. During that 

timeframe, FINRA also will engage in 

extensive outreach with the industry to 

assist in migration awareness and 

efforts.8

If the Commission approves the 

proposed rule change, the effective date 

of the proposed rule change will be 

February 3, 2020. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,9 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. 

FINRA is proposing to amend Rule 

7730 to remove CTCI as a means of 

connectivity for members to report 

transactions to TRACE. FINRA does not 

believe the proposed rule change will 

have a significant impact, as a majority 

of members already use FIX as a means 

of connectivity to report trades to 

TRACE, and FINRA believes that an 

increasing amount of members and 

service providers are migrating to 

exclusive use of FIX. FIX is an industry 

standard protocol that is an immediately 

available and viable alternative for the 

minority of members who directly use 

CTCI as a means of connectivity to 

report transactions to TRACE. 


daltland on DSKBBV9HB2PROD with NOTICES