[Federal Register Volume 80, Number 20 (Friday, January 30, 2015)]
[Notices]
[Pages 5182-5188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-01753]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74134; File No. SR-CBOE-2015-005]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend the Fees Schedule

January 26, 2015.
    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 January 14, 2015, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 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 make a number of changes to its Fees 
Schedule.\3\
---------------------------------------------------------------------------

    \3\ The Exchange initially filed the proposed fee changes on 
December 31, 2014 (SR-CBOE-2014-097). On January 14, 2015, the 
Exchange withdrew that filing and submitted this filing.
---------------------------------------------------------------------------

COB Taker Surcharge
    The Exchange proposes to implement a Complex Order Book (``COB'') 
Taker Surcharge. Specifically, the Exchange proposes to adopt a $0.05 
per contract per side surcharge for non-customer complex order 
executions that take liquidity from the COB in all underlying classes 
except OEX, XEO, SPX (including SPXW), SPXpm, SRO, VIX, VXST, 
Volatility Indexes and binary options (``Underlying Symbol List A'') 
and mini-options. Additionally, the Exchange proposes to provide that 
the COB Taker Surcharge will not be assessed on non-customer complex 
order executions in the Complex Order Auction (``COA''), the Automated 
Aim Mechanism (``AIM''), orders originating from a Floor Broker PAR, or 
electronic

[[Page 5183]]

executions against single leg markets. The purpose of the COB Taker 
Surcharge is to help offset the rebate given to complex orders under 
the Volume Incentive Program (``VIP''). The Exchange notes that even 
with the additional surcharge, the amount of Exchange fees assessed for 
non-customer complex order-to-complex order executions that take 
liquidity are less than those assessed for similar transactions on 
certain other exchanges.\4\
---------------------------------------------------------------------------

    \4\ See e.g., NYSE Arca, Inc. (``Arca'') Options Fees Schedule, 
page 7 (Electronic Complex Order Executions) which provides that for 
complex order-to-complex order transactions, non-customers are 
assessed $0.50 in penny pilot options and $0.85 in non-penny pilot 
options. Depending upon the type of market participant a CBOE TPH 
is, non-customer CBOE TPHs would be assessed between $0.08 and $0.65 
(which includes the proposed surcharge) for such transactions (see 
CBOE Fees Schedule).
---------------------------------------------------------------------------

CBOE Proprietary Products Sliding Scale
    The CBOE Proprietary Products Sliding Scale table provides that 
Clearing Trading Permit Holder Proprietary transaction fees and 
transaction fees for Non-Clearing Trading Permit Holder Affiliates in 
OEX, XEO, SPX, SPXpm, VIX, VXST, and VOLATILITY INDEXES are reduced 
provided a Clearing Trading Permit Holder (``Clearing TPH'') reaches 
certain average daily volume (``ADV'') thresholds in all underlying 
symbols excluding Underlying Symbol List A and mini-options on the 
Exchange in a month. The Exchange proposes to implement two changes to 
the CBOE Proprietary Products Sliding Scale. First, the Exchange 
proposes to increase the current qualifying ADV thresholds. 
Specifically, the threshold 18,000 ADV to 71,999 ADV would be changed 
to 20,000 ADV to 79,999 ADV, and the threshold 72,000 ADV and above 
would be changed to 80,000 ADV and above. The purpose of the proposed 
change is to account for increased trading volume in multi-listed 
products across the industry. The Exchange also proposes to make 
corresponding changes related to the ADV thresholds to Footnote 23, 
which Footnote relates to the CBOE Proprietary Products Sliding Scale. 
The Exchange next proposes to increase the rates set forth in the B3 
and B2 tiers (for Proprietary Product Volume from 0.00% to 8.50% of 
total Monthly Proprietary Product Firm (F) volume) by 2 cents and 5 
cents, respectively, and the rate in the A2 tier (for Proprietary 
Product Volume from 0.00% to 6.50% of total Monthly Proprietary Product 
Firm (F) volume) by 1 cent. The proposed changes are further detailed 
below.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                      Current                                                                     Proposed
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          Proprietary product     Transaction fee                               Proprietary product     Transaction fee
                 Tier                      volume thresholds        per contract              Tier               volume thresholds        per contract
--------------------------------------------------------------------------------------------------------------------------------------------------------
>=18,000 ADV <=71,999 ADV in multi list products                                    >=20,000 ADV <=79,999 ADV in multi list products
--------------------------------------                          ---------------------------------------------
    B3...............................  0.00%-6.50%.............              $0.18    B3                      0.00%-6.50%............              $0.20
    B2...............................  6.51%-8.50%.............               0.05    B2                      6.51%-8.50%............               0.10
    B1...............................  Above 8.50%.............               0.02    B1                      Above 8.50%............               0.02
----------------------------------------------------------------                   ---------------------------------------------------
>=72,000 ADV in multi list products                                                 >=80,000 ADV in multi list products
--------------------------------------                          ---------------------------------------------
    A2...............................  0.00%-6.50%.............               0.15    A2                      0.00%-6.50%............               0.16
    A1...............................  Above 6.50%.............               0.01    A1                      Above 6.50%............               0.01
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The purpose of increasing the Transaction Fee Per Contract rates 
(and thereby reducing the amount of the discount Clearing TPHs may 
receive on proprietary products) is to moderate the discount levels for 
these products in view of their growth and performance. Particularly, 
the Exchange does not believe it's necessary to maintain the existing 
discounted rates for these tiers, but seeks to maintain an incremental 
incentive for Clearing TPHs to strive for the highest tier level.
Volume Incentive Program
    The Exchange next proposes to amend the VIP rebate schedule. By way 
of background, under VIP, the Exchange credits each Trading Permit 
Holder (``TPH'') the per contract amount set forth in the VIP table 
resulting from each public customer (``C'' origin code) order 
transmitted by that TPH (with certain exceptions) which is executed 
electronically on the Exchange in all underlying symbols excluding 
Underlying Symbol List A, RUT, DJX, XSP, XSPAM, credit default options, 
credit default basket options and mini-options, provided the TPH meets 
certain volume thresholds in a month.\5\
---------------------------------------------------------------------------

    \5\ Excluded from the VIP credit are options in Underlying 
Symbol List A, RUT, DJX, XSP, XSPAM, credit default options, credit 
default basket options, mini-options, QCC trades, public customer to 
public customer electronic complex order executions, and executions 
related to contracts that are routed to one or more exchanges in 
connection with the Options Order Protection and Locked/Crossed 
Market Plan referenced in Rule 6.80 (see CBOE Fees Schedule, Volume 
Incentive Program).
---------------------------------------------------------------------------

    The Exchange first proposes to reduce the VIP credit for complex 
orders in Tiers 2 and 3 from $0.17 per contract to $0.16. The purpose 
of this change is to adjust the incentive tiers accordingly as 
competition requires while maintaining an incremental incentive for 
TPH's to strive for the highest tier level.
    The Exchange next proposes to implement a cap on VIP credits at 
1,000 contracts per simple order executed electronically in AIM and 
1,000 contracts per leg per complex order executed electronically in 
AIM.\6\ The Exchange also proposes to cap orders executed 
electronically in the Hybrid Agency Liaison (``HAL'') mechanism at 
1,000 contracts per auction quantity.\7\ The Exchange is proposing to 
implement the cap on executions via AIM because the vast majority of 
orders over 1,000 contracts executed via AIM are traded primarily 
against the submitting contra party, for which the Exchange collects 
minimal revenue. Additionally, in HAL, the Exchange provides a HAL 
Step-Up Rebate \8\ which reduces the collected net Exchange

[[Page 5184]]

transaction fees to those market participants that qualify. The 
Exchange notes that generally, the parties which collect this credit 
have greater participation in larger orders. As such, it would not be 
viable for the Exchange to pay credits on contracts that do not create 
corresponding and offsetting revenue for the Exchange. The Exchange 
notes that all contracts executed in AIM (including complex AIM) and 
all contracts executed in HAL will continue to be counted towards the 
qualifying percentage thresholds, as the Exchange would like to 
continue to encourage the use of these price improvement mechanisms.
---------------------------------------------------------------------------

    \6\ For example, a 750-lot butterfly spread would total 3,000 
contracts. As each leg of the order is below 1,000 contracts, the 
Exchange would pay credits for each contract of each leg, totaling 
3,000 contacts. If for example leg 1 of a complex order was for 600 
contracts and leg 2 of the order was for 1,200 contracts, the 
Exchange would pay a VIP credit for a total of 1,600 contracts 
(i.e., all 600 contracts on leg 1 and 1,000 contracts on leg 2).
    \7\ To demonstrate this cap, consider the following: a TPH 
submits an order for 1500 contracts. Of the 1500 contracts, 400 
contracts execute electronically against a Market-Maker quote. The 
remaining 1,100 contracts are executed via HAL. The Exchange would 
pay credits for a total of 1,400 contracts (i.e., the 400 contracts 
executed outside of HAL and 1,000 contracts executed in HAL).
    \8\ See CBOE Fees Schedule, Hybrid Agency Liaison (``HAL'') Step 
Up Rebate.
---------------------------------------------------------------------------

    Finally with respect to VIP, the Exchange proposes to provide that 
multiple simple orders from the same TPH in the same series on the same 
side of the market that are received within three hundred (300) seconds 
and executed in AIM or HAL will be aggregated for purposes of 
determining the order quantity subject to the cap discussed above. For 
this aggregation, activity in AIM and HAL will be aggregated 
separately. The AIM aggregation timer will begin with an order entered 
into AIM and continue for 300 seconds, aggregating any other orders 
entered into AIM in the same series on the same side of the market by 
the same affiliated TPH. The HAL aggregation timer will begin at the 
start of a HAL auction and continue for 300 seconds, aggregating any 
other orders executed in HAL in the same series on the same side of the 
market for the same affiliated TPH. Any portion of the original order 
quantity that is executed outside of HAL will not be part of the 
aggregation or counted towards the 1,000 contract threshold. The 
Exchange believes this change should prevent TPHs from breaking up 
their orders in order to avoid the fee cap.
    Finally, the Exchange proposes to relocate the language currently 
set forth in the Notes section of the VIP table to a new footnote 
(Footnote 36). In light of the additional language being added to the 
current Notes section of the VIP table, the Exchange believes the 
relocation of the existing language to a new and separate footnote will 
make the Fees Schedule easier to read. No substantive changes to the 
relocated language are being made.
SPX Customer Large Trade Discount
    The Customer Large Trade Discount program (the ``Discount'') 
provides a discount in the form of a cap on the quantity of customer 
(``C'' origin code'') contracts that are assessed transactions fees in 
certain options classes. The Discount table in the Fees Schedule sets 
forth the quantity of contracts necessary for a large customer trade to 
qualify for the Discount, which varies by product. Currently, under the 
``Products'' section in the Discount table, the following S&P products 
for which the Discount is in effect are listed: ``SPX, SPXw, SPXpm, 
SRO.'' Customer transaction fees for each of these products are 
currently only charged up to the first 10,000 contracts. The Exchange 
proposes to raise the quantity of SPX, SPXw, SPXpm, and SRO contracts 
necessary for a large customer trade to qualify for the Discount from 
10,000 contracts per order to 15,000 contracts per order. The purpose 
of the proposed rule change is to moderate the discount level for 
Customer (C) orders in the SPX product group in view of its mature and 
established position in the industry.
Facility Fees Communications
    The Exchange proposes to increase the Exchangefone relocation fee 
from $116 to $129. The Exchange contracts with a vendor to provide the 
Exchangefone relocations, and this vendor has increased its fees, so 
the Exchange proposes to increase the Exchangefone relocation fee to 
reflect the increased vendor cost.
    The Exchange also proposes to eliminate certain telecommunication 
fees. The Exchange currently assesses monthly fees for three types of 
services the Exchange offers related to PhoneMail: (i) Basic Service, 
(ii) PhoneMail with Outcall and (iii) PhoneMail with Outcall & Pager. 
The Exchange notes that no TPHs have availed themselves of these 
services in a number of years. As such, the Exchange believes offering 
such services is no longer necessary and proposes to accordingly delete 
all fees for and references to such services from the Fees Schedule.
Floor Broker Workstation and PULSe Workstation
    The Exchange proposes raising the Floor Broker Workstation 
(``FBW'') fee from $350 per month (per login ID) to $400 per month (per 
login ID). The Exchange's vendor that provides the FBW charges the 
Exchange more than $350 per month (per login ID) for the FBW (actually, 
more than $350 per month (per login ID), and the Exchange had been 
subsidizing those costs for FBW users. However, it is no longer 
economically feasible to subsidize those costs to that great an extent. 
As such, the Exchange proposes increasing the FBW fee to $400 per month 
(per login ID), which still includes a subsidy for FBW users (though 
smaller).
    Additionally, the Exchange proposes to establish a FBW fee for an 
updated version of FBW (``FBW2''), which will be made available shortly 
to all TPHs. The fee for FBW2 will be the same as the existing FBW fee 
(i.e., $400 per month (per login ID). The Exchange also proposes 
adopting a fee waiver for the months of January and February 2015. 
Additionally, the Exchange proposes to provide that, after March 1, 
2015 the monthly fee for FBW2 login IDs will be waived for the first 
month.\9\ The purpose of the proposed fee waivers is to give new users 
time to become familiar with and fully acclimated to the new FBW 
workstation functionality. The Exchange notes that after February 2015 
(and absent an applicable fee waiver noted above), TPHs will be charged 
each of $400 for FBW and FBW2 (i.e., total of $800) if such users 
continue to use both FBW and FBW2.
---------------------------------------------------------------------------

    \9\ For example, if a user adds a new login ID in March 2015, 
the user will receive a fee waiver for that login ID for March 2015.
---------------------------------------------------------------------------

    The Exchange also proposes raising the PULSe On-Floor Workstation 
(``PULSe'') fee. Currently, the Exchange charges a fee of $350 per 
month for the first 10 users of a TPH workstation and $100 per month 
for all subsequent users. TPHs may also make the workstation available 
to their customers, which may include non-broker dealer public 
customers and non-TPH broker dealers (referred to herein as ``non-
TPHs''). For such non-TPH workstations, the Exchange charges a fee of 
$350 per month per workstation. The Exchange proposes raising the PULSe 
On-Floor Workstation fee from $350 per month to $400 per month for both 
TPH and non-TPH workstations. The Exchange expended significant 
resources developing PULSe, and intends to recoup some of those costs. 
Further, because PULSe and FBW serve similar functions, the Exchange 
desires to assess equivalent fees for each so as not to offer a pricing 
advantage for one over the other.
Proprietary Registration Fees
    The Exchange next proposes to raise the Initial Proprietary 
Registration fee from $50 to $65 and the Annual Proprietary 
Registration fee from $25 to $40. The Initial Proprietary Registration 
fee is payable by any TPH organization for the registration of any 
associated person on WebCRD \10\ with the Proprietary Trader 
registration. The Annual Proprietary Registration fee is payable 
annually by any TPH organization for each associated person

[[Page 5185]]

that the TPH organization maintains registered on WebCRD with the 
Proprietary Trader registration. By way of background, the Exchange 
adopted these fees in conjunction with the implementation of the then 
new Proprietary Trading registration requirement (the ``Proprietary 
Trading Registration Program'' or ``Program''). These fees were adopted 
to recoup some of the costs expended to maintain the Program. The 
Exchange notes that the Proprietary Trading Registration Program 
continues to require on-going work, including testing and monitoring of 
the WebCRD system, as well as consideration of new applicants. In order 
to offset these increasing costs, the Exchange proposes to increase the 
Initial Proprietary Registration fee and the Annual Proprietary 
Registration fee.
---------------------------------------------------------------------------

    \10\ WebCRD is the Central Registration Depository system which 
is operated by the Financial Industry Regulatory Authority, 
Incorporated (``FINRA'').
---------------------------------------------------------------------------

CBOE Command Connectivity Changes
    Next, the Exchange proposes to increase Network Access Port fees. 
By way of background, CBOE market participants can access the 
Exchange's trading systems via Network Access Ports, and can elect for 
a Network Access Port (or Ports) of either 1 gigabit per second 
(``Gbps'') or 10 Gbps. Currently, the Exchange assesses a fee of $500 
per month for a 1 Gbps Network Access Port and a fee of $3,000 per 
month for a 10 Gbps Network Access Port. The Exchange has expended 
significant resources setting up, providing and maintaining this 
connectivity, and the costs related to such provision and maintenance 
has increased. The Exchange desires to recoup such increased costs. 
Therefore, the Exchange proposes to amend its Network Access Port fees 
to increase the fee for a 1 Gbps Network Access Port to $750 per month 
and for a 10 Gbps Network Access Port to $3,500 per month. These new 
fee amounts are still within the range of, and in some cases less than, 
similar fees assessed by other exchanges.\11\
---------------------------------------------------------------------------

    \11\ See International Securities Exchange, LLC (``ISE'') 
Schedule of Fees, Section VIII.B., which lists Network Ethernet fees 
of $750 per month for 1 Gigabit and $4,000 per month for 10 
Gigabits, and a Network Ethernet--Low Latency fee of $7,000 per 
month for 10 Gigabits, and see also Miami International Securities 
Exchange LLC (``MIAX'') Options Fees Schedule, Section 5(a), which 
lists connectivity fees of $1,000 per month for 1 Gbps and $5,000 
per month for 10 Gbps.
---------------------------------------------------------------------------

    The ``Notes'' section that describes the Network Access Port fees 
provides detail which states that ``Separate Network Access Port fees 
are assessed for unicast (orders, quotes) and multicast (market data) 
connectivity (i.e., if a TPH uses the 1 Gbps Network Access Port for 
unicast and multicast connectivity, the TPH will be charged $1,000 per 
month and if a TPH uses the 1 Gbps Disaster Recovery Network Access 
Port for unicast and multicast connectivity, the TPH will be charged 
$500 per month.)''. The example provided above that states that, if a 
TPH uses the 1 Gbps Network Access Port for unicast and multicast 
connectivity, the TPH will be charged $1,000 per month, is based on the 
current 1 Gbps Network Access Port fee of $500 per month. Because the 
Exchange herein proposes to increase the fee for a 1 Gbps Network 
Access Port to $750 per month, the Exchange needs to also update the 
example to state that ``if a TPH uses the 1 Gbps Network Access Port 
for unicast and multicast connectivity, the TPH will be charged $1,500 
per month . . .'' The proposed change will accurately reflect the 
proposed new fee amount and provide correct guidance to market 
participants reading the Fees Schedule.
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.\12\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \13\ 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 
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,\14\ 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.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposal to adopt a $0.05 per 
contract per side surcharge for noncustomer complex order executions 
that remove liquidity from the COB is reasonable because although a 
surcharge is being added, the total amount assessed to these 
transactions is still within the range of fees paid by other market 
participants for similar transactions.\15\ Further, other exchanges 
assess higher fees for complex orders than for noncomplex ones.\16\ 
Applying the COB Taker Surcharge to all market participants except 
customers is equitable and not unfairly discriminatory because other 
market participants generally prefer to execute their orders against 
customer orders. By exempting customer orders, the COB Taker Surcharge 
will not discourage the sending of customer orders, and therefore there 
should still be plenty of customer orders for other market participants 
to trade with. Further, the options industry has a long-standing 
practice of assessing preferable fee structures to customers. Excluding 
from the COB Taker Surcharge options in Underlying Symbol List A is 
equitable and not unfairly discriminatory because the Exchange has 
devoted a lot of resources to develop its proprietary options classes, 
and therefore does not desire to risk discouraging the trading of such 
proprietary singly-listed options classes. Excluding mini-options from 
the COB Taker Surcharge is reasonable because the Exchange does not 
currently pay VIP credit for mini-options, so the economic differential 
which the COB taker fee is addressing (i.e., offsetting the VIP complex 
order credits) is not present for mini-options. Excluding mini-options 
from the COB Taker Surcharge is not unfairly discriminatory because it 
will apply to all TPHs. Limiting the COB Taker Surcharge to orders 
entered electronically is equitable and not unfairly discriminatory 
because the Exchange has expended considerable resources to develop its 
electronic trading platforms and seeks to recoup the costs of such 
expenditures. The Exchange believes it is reasonable and not unfairly 
discriminatory to exclude complex orders that originate from a Floor 
Broker PAR station because such transactions are already subject to 
Floor Brokerage fees.\17\ Additionally, Floor Brokers ensure that the 
difficult-to-execute orders (such as large and complex

[[Page 5186]]

orders) are able to be executed manually by accessing the CBOE's in-
person market-maker crowds, while also helping to achieve price 
improvement and the Exchange does not want to discourage this activity. 
The Exchange notes that a similar exemption exists for the Hybrid 3.0 
Surcharge. The Exchange believes that it is equitable and not unfairly 
discriminatory to only assess this surcharge to those removing 
liquidity from the market (``Takers'') and not Makers because the 
Exchange wants to continue to encourage market participation and price 
improvement. The Exchange next notes that when a Market-Maker submits a 
quote, the Market-Maker does not know whether it will trade with a 
simple or complex order. As such, the Exchange believes it is 
reasonable, equitable and not unfairly discriminatory to exclude 
electronic executions against single leg markets because it wants to 
encourage Market-Makers to continue to provide trading opportunities 
and tight spreads, which they may be discouraged to do if there is a 
possibility they will be assessed a surcharge if and when their quotes 
fills against a complex order. Finally, the Exchange believes it's 
reasonable, equitable and not unfairly discriminatory to exclude from 
the COB Taker Surcharge executions in COA and AIM because the Exchange 
wants to continue to encourage price improvement via these 
functionalities and because this exclusion is applicable to all TPHs.
---------------------------------------------------------------------------

    \15\ See e.g., NYSE Arca, Inc. (``Arca'') Options Fees Schedule, 
page 7 (Electronic Complex Order Executions) which provides that for 
complex order-to-complex order transactions, non-customers are 
assessed $0.50 in penny pilot options and $0.85 in non-penny pilot 
options. Depending upon the type of market participant a CBOE TPH 
is, non-customer CBOE TPHs would be assessed between $0.08 and $0.65 
(which includes the proposed surcharge) for such transactions (see 
CBOE Fees Schedule).
    \16\ See ISE Schedule of Fees, Section I (which lists regular 
Maker rebates and fees and Taker fees for Select Symbols) as 
compared to Section II (which lists complex order fees and rebates 
for Select Symbols). Market participants are assessed higher fees 
for executing complex orders.
    \17\ See CBOE Fees Schedule, Floor Brokerage Fees.
---------------------------------------------------------------------------

    The Exchange believes the proposal to change the qualifying volume 
thresholds for the reduced fees in the CBOE Proprietary Products 
Sliding Scale is reasonable because the changes account for the 
increase in multi-listed trading volumes since the ADV thresholds were 
established. The Exchange believes it is equitable and not unfairly 
discriminatory because the proposed changes to the qualifying volume 
thresholds apply to all Clearing TPHs.
    The Exchange believes increasing the rates in the B3, B2 and A2 
tiers of the CBOE Proprietary Products Sliding Scale (and thereby 
reducing the overall discount) is reasonable because it still provides 
Clearing TPHs an opportunity to receive notable discounted rates on 
classes in Underlying Symbol list A for reaching certain qualifying 
volume thresholds that they would not otherwise receive (now just a 
smaller discount). Additionally, the Exchange notes that lower fees for 
executing more contracts is equitable and not unfairly discriminatory 
because it provides market participants with an incentive to execute 
more contracts on the Exchange. This brings greater liquidity and 
trading opportunity, which benefits all market participants. The 
Exchange believes that the proposed change is not unfairly 
discriminatory because it will apply to all Clearing TPHs that meet the 
qualifying volume thresholds. The Exchange also believes offering lower 
fees under the CBOE Proprietary Products Sliding Scale to Clearing TPHs 
and not other CBOE market participants is equitable and not unfairly 
discriminatory because Clearing TPHs must take on certain obligations 
and responsibilities, such as clearing and membership with the Options 
Clearing Corporation, as well as significant regulatory burdens and 
financial obligations, that other market participants are not required 
to undertake.
    The Exchange believes it's reasonable to reduce the VIP credit for 
complex orders in Tiers 2 and 3 from $0.17 per contract to $0.16 
because it is decreasing a mere $0.01 and it still provides an 
opportunity for TPHs to receive credits for complex orders for reaching 
certain qualifying volume thresholds that they would not otherwise 
receive (now just a smaller discount). The Exchange believes the 
proposed change is equitable and not unfairly discriminatory because it 
applies to all TPHs that meet the qualifying volume thresholds.
    The Exchange believes that the proposal to implement a cap on VIP 
credits at 1,000 contracts per simple order and 1,000 contracts per leg 
per complex order for orders executed electronically in AIM and a cap 
of 1,000 contracts per auction quantity for orders executed in HAL is 
reasonable because in both cases the exchange collects little or no net 
transaction fees from the contra parties, and as such, the Exchange 
does not wish to also provide a credit on these transactions as it 
would result in the Exchange paying for such transactions without 
collecting any revenue (a net negative), which would not be 
economically prudent. Additionally, the Exchange believes the proposed 
cap is equitable and not unfairly discriminatory because it applies to 
all TPHs.
    The Exchange believes it's reasonable, equitable and not unfairly 
discriminatory to provide that all contracts executed in AIM (including 
complex AIM) and all contracts executed in HAL will continue to be 
counted towards the percentage thresholds because the Exchange would 
like to continue to encourage the use of these price improvement 
mechanisms and because the proposed change would apply to all TPHs. The 
Exchange also believes its reasonable, equitable and not unfairly 
discriminatory to provide that multiple simple orders from the same TPH 
in the same series on the same side of the market that are received 
within three hundred (300) seconds will be aggregated for purposes of 
determining the order quantity subject to the cap, as the Exchange 
believes this should prevent TPHs from breaking up their orders in 
order to avoid the fee cap and it would apply to all TPHs.
    The Exchange believes the relocation of the current language in the 
Notes section of the VIP table to a new Footnote of the Fees Schedule 
will make the Fees Schedule easier to read and avoid potential 
confusion, thereby removing impediments to and perfecting the mechanism 
of a free and open market and a national market system, and, in 
general, protecting investors and the public interest.
    The Exchange believes that raising the discount threshold for SPX 
(including SPXw), SPXPM and SROs is reasonable because customers will 
still be receiving a discount for large trades that they would not 
otherwise receive. This change is equitable and not unfairly 
discriminatory because all customers whose large trades qualify for the 
Discount will still receive it and the SPX product group has reached a 
mature and established level since its introduction while other 
products, such as VIX, have not.
    The Exchange believes that the increased Exchangefone relocation 
fee is reasonable because the increase is being enacted to reflect an 
increase in the amount that a vendor charges the Exchange to provide 
the Exchangefone relocations. The Exchange believes that this change is 
equitable and not unfairly discriminatory because the increased 
Exchangefone relocation fee will apply to all market participants who 
request an Exchangefone relocation. Additionally, the Exchange believes 
the deletion of the PhoneMail services and fees is reasonable, 
equitable and not unfairly discriminatory because it merely removes 
fees associated with outdated services that have not been used by TPHs 
in a number of years.
    Increasing the PULSe fee from $350 per month to $400 per month for 
the first 10 users of a TPH workstation and from $350 to $400 per month 
per workstation for non-TPH workstations is reasonable because the 
Exchange expended significant resources developing PULSe and desires to 
recoup some of those costs. Moreover, the Exchange will be assessing 
the same amount for the FBW, which is a similar product. This change is 
equitable and

[[Page 5187]]

not unfairly discriminatory because all market participants who desire 
to use PULSe will be assessed the same fee, and because the same amount 
is being assessed for use of a similar product, the FBW.
    Increasing the FBW fee from $350 per month (per login ID) to $400 
per month (per login ID) is reasonable because the Exchange is charged 
by the vendor that provides the FBW more than $350 per month (per login 
ID) and simply wants to reduce the extent to which the Exchange 
subsidizes such costs. This change is equitable and not unfairly 
discriminatory because all market participants who desire to use the 
FBW will be assessed the same fee.
    Implementing a $400 per month (per login ID) for FBW2 is reasonable 
because the Exchange will be charged by the vendor that provides FBW2 
more than $400 per month (per login ID) and again simply wants to 
reduce the extent to which the Exchange subsidizes these costs. This 
change is equitable and not unfairly discriminatory because all market 
participants who desire to use FBW2 will be assessed the same fee. The 
Exchange believes it is reasonable to provide a waiver for the months 
of January 2015 and February 2015 because it allows new users time to 
become familiar with and fully acclimated to the new FBW functionality 
and incentivizes the users to begin this process as soon as the new 
functionality becomes available. The Exchange believes it is reasonable 
to provide a waiver for the first month for a new login ID beginning 
March 1, 2015, because it allows a new user after February 2015 to 
fully acclimate to the new FBW functionality. The Exchange believes 
that the proposed changes regarding the fee waivers are equitable and 
not unfairly discriminatory because it applies to all new users of 
FBW2.
    Increasing the Initial Proprietary Registration Fee from $50 to $65 
and the Annual Proprietary Registration fee from $25 to $40 is 
reasonable because the Exchange continually expends resources in 
maintaining the Proprietary Trading Registration Program and desires to 
recoup some of the increasing costs. This change is equitable and not 
unfairly discriminatory because all market participants who register 
for the Proprietary Trader registration will be assessed the same fee.
    The Exchange believes that the proposed changes to the Network 
Access Port fees are reasonable because the Exchange has expended 
significant resources setting up, providing and maintaining this 
connectivity, and the costs related to such provision and maintenance 
have increased. The Exchange merely desires to recoup such increased 
costs. The Exchange believes that the proposed changes to the Network 
Access Port fees are equitable and not unfairly discriminatory because 
the newly-increased fees will, as before, be applied in the same manner 
to all CBOE market participants (in that all CBOE market participants 
who seek a 1 Gbps Network Access Port will be assessed the new $750 per 
port per month fee, and all CBOE market participants who seek a 10 Gbps 
Network Access Port will be assessed the new $3,500 per port per month 
fee). Assessing a higher fee for 10 Gbps connectivity than for 1 Gbps 
connectivity is equitable and not unfairly discriminatory because 10 
Gbps connectivity is more robust than 1 Gbps connectivity, and requires 
more costly equipment and maintenance, and the Exchange must recoup the 
costs related to providing such connectivity. Further, these new fee 
amounts are still within the range of, and in some cases less than, 
similar fees assessed by other exchanges.\18\
---------------------------------------------------------------------------

    \18\ See ISE Schedule of Fees, Section VIII.B., which lists 
Network Ethernet fees of $750 per month for 1 Gigabit and $4,000 per 
month for 10 Gigabits, and a Network Ethernet--Low Latency fee of 
$7,000 per month for 10 Gigabits, and see also MIAX Options Fees 
Schedule, Section 5(a), which lists connectivity fees of $1,000 per 
month for 1 Gbps and $5,000 per month for 10 Gbps.
---------------------------------------------------------------------------

    The Exchange believes that the proposed change to the example 
provided in the Notes section that describes the Network Access Port 
fees serves 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 by preventing any potential 
confusion regarding the application of the Network Access Port fees and 
the proposed new fee amounts.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition that are not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe that the proposed rule change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because, while different fees 
and rebates are assessed to different market participants in some 
circumstances, these different market participants have different 
obligations and different circumstances (as described in the 
``Statutory Basis'' section above). For example, Clearing TPHs have 
clearing obligations that other market participants do not have. 
Market-Makers have quoting obligations that other market participants 
do not have. There is a history in the options markets of providing 
preferential treatment to Customers, as they often do not have as 
sophisticated trading operations and systems as other market 
participants, which often makes other market participants prefer to 
trade with Customers. Further, the Exchange fees and rebates, both 
current and those proposed to be changed, are intended to encourage 
market participants to bring increased volume to the Exchange (which 
benefits all market participants), while still covering Exchange costs 
(including those associated with the upgrading and maintenance of 
Exchange systems).
    The Exchange does not believe that the proposed rule changes will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
proposed changes are intended to promote competition and better improve 
the Exchange's competitive position and make CBOE a more attractive 
marketplace in order to encourage market participants to bring 
increased volume to the Exchange (while still covering costs as 
necessary). Further, the proposed changes only affect trading on CBOE. 
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.

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 written 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 \19\ and paragraph (f) of Rule 19b-4 \20\ 
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

[[Page 5188]]

Commission takes such action, the Commission will institute proceedings 
to determine whether the proposed rule change should be approved or 
disapproved.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#6012150c054d030f0d0d050e1413201305034e070f16"><span class="__cf_email__" data-cfemail="3c4e495059115f5351515952484f7c4f595f125b534a">[email protected]</span></a>. Please include 
File Number SR-CBOE-2015-005 on the subject line.

Paper Comments

    <bullet> 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-2015-005. 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-2015-005 and should be 
submitted on or before February 20, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
---------------------------------------------------------------------------

    \21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-01753 Filed 1-29-15; 8:45 am]
BILLING CODE 8011-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>