[Federal Register Volume 80, Number 3 (Tuesday, January 6, 2015)]
[Notices]
[Pages 598-603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-30893]



[[Page 598]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73955; File No. SR-CBOE-2014-094]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Fees for the CBOE Book Depth Data Feed 
and for Certain Other CBOE Real-Time Data Feeds

December 30, 2014.
    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 December 17, 2014, 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

    Chicago Board Options Exchange, Incorporated (the ``Exchange'' or 
``CBOE'') proposes to establish fees for the CBOE Book Depth Data Feed 
and amend fees for certain other CBOE real-time data feeds. 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 purpose of the proposed rule change is to: (1) Amend fees for 
the CBOE BBO Data Feed and Complex Order Book (``COB'') Data Feeds; (2) 
establish fees for the CBOE Book Depth Data Feed; and (3) establish 
fees for distribution of CBOE data via a ``Display Only Service'' (as 
defined below). These data feeds are made available by CBOE's affiliate 
Market Data Express, LLC (``MDX'').
BBO, Book Depth and COB Data Feeds
    BBO Data Feed: The BBO Data Feed is a real-time, low latency data 
feed that includes the following content: (i) Outstanding quotes and 
standing orders at the best available price level on each side of the 
market, with aggregate size (``BBO data''), and last sale data; \3\ 
(ii) totals of customer versus non-customer contracts at the BBO, (iii) 
All-or-None contingency orders priced better than or equal to the BBO, 
(iv) BBO and last sale data for complex strategies (e.g., spreads, 
straddles, buy-writes, etc.); (v) expected opening price (``EOP'') and 
expected opening size (``EOS'') information that is disseminated prior 
to the opening of the market and during trading rotations, (vi) end-of-
day (``EOD'') summary messages that are disseminated after the close of 
a trading session that include summary information about trading in 
CBOE listed options (i.e., product name, opening price, high and low 
price during the trading session and last sale price), (vii) ``recap 
messages'' that are disseminated during a trading session any time 
there is a change in the open, high, low or last sale price of a CBOE 
listed option, as well as product name and total volume traded in the 
product during the trading session; and (viii) product IDs and codes 
for all CBOE listed options contracts. The data in the BBO Data Feed is 
refreshed periodically during the trading session. The BBO and last 
sale data contained in the BBO Data Feed is identical to the data sent 
to the Options Price Reporting Authority (``OPRA'') for redistribution 
to the public.\4\
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    \3\ ``Best bid and offer'' or ``BBO'' data is sometimes referred 
to as ``top-of-book'' data. Data with respect to executed trades is 
referred to as ``last sale'' data.
    \4\ MDX makes available to Customers the BBO data and last sale 
data that is included in the BBO Data Feed no earlier than the time 
at which the Exchange sends that data to OPRA.
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    Book Depth Data Feed: The Book Depth Data Feed is a real-time, low 
latency data feed that includes all data contained in the BBO Data Feed 
(as described above) plus outstanding quotes and standing orders up to 
the first four price levels on each side of the market, with aggregate 
size (``Book Depth''). The Book Depth Data Feed includes market data 
for simple options as well as complex strategies.\5\
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    \5\ See Securities Exchange Act Release No. 71774 (March 24, 
2014), 79 FR 17619 (March 28, 2014).
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    COB Data Feed: The COB Data Feed is a subset of the Book Depth Data 
Feed. It is a real-time data feed that includes data regarding the 
Exchange's Complex Order Book and related complex order information. 
The COB Data Feed includes BBO, Book Depth and last sale data for all 
CBOE-traded complex order strategies and identifies customer orders and 
trades.\6\
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    \6\ MDX also offers a real-time Flexible Exchange (``FLEX'') 
Options Data Feed that includes BBO and last sale data for FLEX 
options traded on the CBOE FLEX Hybrid Trading System, including BBO 
and last sale data for FLEX complex strategies. The FLEX Options 
Data Feed is currently made available at no charge. The Exchange is 
not proposing to establish fees for the FLEX Options Data Feed at 
this time.
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Fees
    BBO Data Feed Fees: MDX currently charges a ``Data Fee'', payable 
by a Customer, of $5,000 per month for internal use and external 
redistribution of the BBO Data Feed.\7\ The Data Fee entitles a 
Customer to provide the BBO Data Feed to an unlimited number of 
internal users and Devices \8\ within the Customer. A Customer 
receiving the BBO Data Feed from another Customer is assessed the Data 
Fee by MDX pursuant to its own market data agreement with MDX, and is 
entitled to use the Data internally and/or distribute it externally.\9\ 
All Customers have the same rights to utilize the data internally and/
or distribute it externally as long as the Customer has entered into a 
written agreement with MDX for the data and pays the Data Fee.
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    \7\ A BBO Data Feed ``Customer'' is currently defined as any 
entity that receives the BBO Data Feed either directly from MDX's 
system or through a connection to MDX provided by an approved 
redistributor (i.e., a market data vendor or an extranet service 
provider) and distributes it externally or uses it internally. The 
MDX fee schedule for CBOE data is located at https://www.cboe.org/MDX/CSM/OBOOKMain.aspx.
    \8\ A ``Device'' means any computer, workstation or other item 
of equipment, fixed or portable, that receives, accesses and/or 
displays data in visual, audible or other form.
    \9\ A Customer may choose to receive the data from another 
Customer rather than directly from MDX's system because it does not 
want to or is not equipped to manage the technology necessary to 
establish a direct connection to MDX.
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    The Exchange proposes to increase the Data Fee from $5,000 per 
month to $6,000 per month. The Exchange also

[[Page 599]]

proposes to establish a ``User Fee'', payable by a Customer, of $50 per 
month per Device or user ID for use of data in the BBO Data Feed by 
``Display Only Service'' users. A ``Display Only Service'' would allow 
a natural person end-user to view and manipulate data using a 
Customer's computerized service, but not to save, copy, export or 
transfer the data or any results of the manipulation to any other 
computer hardware, software or media, except for printing it to paper 
or other non-magnetic media. User fees would be payable only for 
``external'' Display Only Service users (Devices or user IDs of users 
who are not employees or natural person independent contractors of the 
Customer, the Customer's affiliates or an authorized service 
facilitator).
    The Exchange proposes to amend the definition of a ``Customer'' to 
make it uniformly applicable to the BBO Data Feed and the other CBOE 
real-time data feeds described above. The term ``Customer'' would mean 
any person, company or other entity that, pursuant to a market data 
agreement with MDX, is entitled to receive data, either directly from 
MDX or through an authorized redistributor (i.e., a Customer or an 
extranet service provider), whether that data is distributed externally 
or used internally. An entity or person that receives BBO data from a 
Customer through a Display Only Service is not a ``Customer'' unless it 
has a market data agreement in place with MDX.
    Book Depth Data Feed Fees: The Exchange proposes to amend the MDX 
fee schedule to establish fees for the Book Depth Data Feed. MDX would 
charge a ``Data Fee'', payable by a Customer (as defined above), of 
$6,000 per month for internal use and external redistribution of the 
Book Depth Data Feed. The Data Fee for the Book Depth Data Feed would 
entitle a Customer to provide the Book Depth Data Feed to an unlimited 
number of internal users and Devices within the Customer. A Customer 
receiving the Book Depth Data Feed from another Customer would be 
assessed the Data Fee by MDX pursuant to its own market data agreement 
with MDX, and would be entitled to use the Data internally and/or 
distribute it externally. All Customers would have the same rights to 
utilize the Book Depth data internally and/or distribute it externally 
as long as the Customer has entered into a written agreement with MDX 
for the data and pays the Data Fee. BBO Data Feed Customers could 
upgrade to become Book Depth Data Feed Customers without paying any 
additional Data Fee.\10\
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    \10\ Such Customers would still be subject to Display Only 
Service User Fees as described below.
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    MDX would also charge a Book Depth Data Feed Customer a User Fee of 
$50 per month per Device or user ID for use of the data in the Book 
Depth Data Feed by Display Only Service users (as defined above). User 
Fees would be payable only for ``external'' Display Only Service Users 
(as defined above). An entity or person that receives Book Depth data 
from a Customer through a Display Only Service is not a ``Customer'' 
unless it has a market data agreement in place with MDX.
    COB Data Feed Fees: MDX currently charges Customers of the COB Data 
Feed a Data Fee of $3,000 per month plus applicable User Fees.\11\ The 
Data Fee for the COB Data Feed is waived for Customers of the BBO Data 
Feed.\12\
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    \11\ A COB Data Feed Customer is currently defined as any entity 
that receives the COB Data Feed, either directly from MDX's system 
or through a connection to MDX provided by an approved redistributor 
(i.e., a market data vendor or an extranet service provider), and 
distributes it externally or uses it internally, except that an 
entity or person that receives the COB Data Feed from a Customer and 
only uses it internally is not a ``Customer'' if it receives the COB 
Data Feed from a Customer subject to a form of ``Subscriber 
Agreement'' that has been approved by MDX.
    \12\ Such COB Data Feed Customers are still subject to User Fees 
as described below.
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    MDX currently charges a Customer User Fees of $25 per month per 
Device or user ID for receipt of the data by ``Professional Users'' 
\13\ and $1 per month for receipt of the data by ``Non-Professional 
Users.'' \14\ User Fees are subject to a cap of $2,000 per month (i.e., 
a Customer pays no more than $2,000 in User Fees for a given month).
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    \13\ A ``Professional User'' is any natural person recipient of 
Data who is not a Non-Professional User. User Fees for Professional 
Users are payable for both ``internal'' Professional Users (Devices 
or user IDs of employees of a Customer) and ``external'' 
Professional Users (Devices or user IDs of Professional Users who 
receive the Data from a Customer and are not employed by the 
Customer). (Non-Professional Users must be external since a person 
who uses the COB Data Feed for a commercial purpose cannot be a Non-
Professional User.)
    \14\ A ``Non-Professional User'' is a natural person who uses 
the COB Data Feed only for personal purposes and not for any 
commercial purpose and who, if he or she works in the United States, 
is not: (i) Registered or qualified in any capacity with the 
Securities and Exchange Commission, the Commodities Futures Trading 
Commission, any state securities agency, any securities exchange or 
association, or any commodities or futures contract market or 
association; (ii) engaged as an ``investment adviser'' as that term 
is defined in Section 201(11) of the Investment Advisors Act of 1940 
(whether or not registered or qualified under that Act); or (iii) 
employed by a bank or other organization exempt from registration 
under federal or state securities laws to perform functions that 
would require registration or qualification if such functions were 
performed for an organization not so exempt; or, if he or she works 
outside of the United States, does not perform the same functions as 
someone who would qualify as a Non-Professional User if he or she 
worked in the United States.
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    The Exchange proposes to reduce the Data Fee from $3,000 per month 
to $100 per month. The Data Fee would be waived for Customers of the 
Book Depth Data Feed. The Exchange proposes to reduce the User Fee for 
Non-Professional Users from $1 per month to zero.\15\ For the purpose 
of consistency, the Exchange proposes to amend the definition of a COB 
Data Feed Customer so that it is the same definition that is applicable 
to the BBO and Book Depth Data Feeds.\16\
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    \15\ The Exchange proposes to amend the definition of ``Non-
Professional User'' so that it is consistent with the definition of 
``Non-Professional User'' used by OPRA. See OPRA Addendum for 
Nonprofessionals, which is part of Attachments B-1 and B-2 to OPRA's 
Vendor Agreement. A ``Non-Professional User'' would mean a natural 
person or qualifying trust that uses Data only for personal purposes 
and not for any commercial purpose and, for a natural person who 
works in the United States, is not: (i) Registered or qualified in 
any capacity with the Securities and Exchange Commission, the 
Commodities Futures Trading Commission, any state securities agency, 
any securities exchange or association, or any commodities or 
futures contract market or association; (ii) engaged as an 
``investment adviser'' as that term is defined in Section 201(11) of 
the Investment Advisors Act of 1940 (whether or not registered or 
qualified under that Act); or (iii) employed by a bank or other 
organization exempt from registration under federal or state 
securities laws to perform functions that would require registration 
or qualification if such functions were performed for an 
organization not so exempt; or, for a natural person who works 
outside of the United States, does not perform the same functions as 
would disqualify such person as a Non-Professional User if he or she 
worked in the United States.
    \16\ For the same reason, the Exchange proposes to amend the 
definition of a FLEX Options Data Feed Customer so that it is the 
same definition that is applicable to the BBO, Book Depth and COB 
Data Feeds.
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    Systems Fees: MDX currently charges a Port Fee of $500 per data 
port per month for receipt of a data feed through a connection to MDX. 
The Exchange proposes to amend the MDX Fee Schedule to clarify how the 
Port Fee is assessed. First, the Exchange proposes to clarify that the 
Port Fee applies to the receipt of any data feed through a connection 
to MDX, not only for the receipt of the BBO Data Feed. Second, the 
Exchange proposes to amend the description of the fee to clarify that 
it is payable by any Customer that receives data through a direct 
connection to MDX or through a connection to MDX provided by an 
extranet service provider. Lastly, the Exchange proposes to clarify 
that the port fee applies to receipt of any data feed but is only 
assessed once per data port. For example, if a Customer receives two 
data feeds over the same port, the Port Fee is only assessed once for 
that port.

[[Page 600]]

    The Exchange also proposes to delete from the MDX Fee Schedule the 
statements that MDX will not charge fees for any of the data feeds (or 
the port fee) for any calendar month in which Customer commences 
receipt of the data after the 15th day of the month (or in the case of 
the port fee, establishes the connection after the 15th day of the 
month) or discontinues receipt of the data before the 15th day of the 
month (or in the case of the port fee, disconnects before the 15th day 
of the month). The Exchange believes it would be more appropriate for 
billing policies to be located within MDX's written agreement with 
Customers.
    All of the proposed fee changes would be effective on January 1, 
2015.
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.\17\ Specifically, the 
Exchange believes the proposed rule change is consistent with Section 
6(b)(4) of the Act,\18\ 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 also believes the proposed rule change is 
consistent with the Section 6(b)(5) \19\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(4).
    \19\ Id.
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BBO Data Fees
    The Exchange believes the proposed increase in the Data Fee for BBO 
data is equitable and not unfairly discriminatory because it would 
apply equally to all Customers. The Exchange believes the proposed Data 
Fee is reasonable because it compares favorably to fees that other 
markets charge for similar products. For example, NASDAQ OMX PHLX 
charges Internal Distributors a monthly fee of $4,000 per organization 
and External Distributors a monthly fee of $5,000 per organization for 
its ``TOPO Plus Orders'' data feed, which like the BBO Data Feed 
includes top-of-book data (including orders, quotes and trades) and 
other market data. The International Securities Exchange offers a ``Top 
Quote Feed'', which includes top-of-book data, and a separate ``Spread 
Feed'', which like the BBO Data Feed includes order and quote data for 
complex strategies. ISE charges distributors of its Top Quote Feed a 
base monthly fee of $3,000 and distributors of its Spread Feed a base 
monthly fee of $3,000. NYSE charges a $3,000 per month Access Fee and 
$2,000 per month External Redistribution fee for each of its market 
data products entitled ``NYSE ArcaBook for Amex Options'' and ``NYSE 
ArcaBook for Arca Options'' that include top-of-book and last sale data 
similar to the data in the BBO Data Feed.
    The Exchange believes the proposed Display Only Service User Fee 
for the BBO Data Feed is equitable and not unfairly discriminatory 
because it would apply equally to all Customers that distribute data 
via a Display Only Service. The Exchange believes the proposed User Fee 
is reasonable because it compares favorably to usage fees that other 
markets charge for similar products. For example, NASDAQ OMX PHLX 
charges a $40 per month Professional Subscriber Fee for use of its 
market data products by each of internal and external users. The 
International Securities Exchange charges a $20 per month Controlled 
Device Fee for use of its Top Quote Feed and a separate $25 per month 
Controlled Device Fee for use of its Spread Feed. NYSE charges a $50 
per month Professional User Fee for use of each of its NYSE ArcaBook 
for Amex Options and NYSE ArcaBook for Arca Options market data 
products that include top-of-book and last sale data similar to the 
data in the BBO Data Feed.
    The Exchange believes it is equitable and not unfairly 
discriminatory to charge a lower fee for use of BBO data via a Display 
Only Service because such use would be limited to display use only. The 
Display Only Service would only allow a natural person end-user to view 
and manipulate data using the Customer's computerized service, but not 
to save, copy, export or transfer the data or any results of the 
manipulation to any other computer hardware, software or media, except 
for printing it to paper or other non-magnetic media. The Exchange 
notes other exchanges charge fees for market data products based on 
distinctions between ``display'' and ``non-display'' usage.\20\
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    \20\ See e.g., Securities Exchange Act Release No. 69554 (May 
10, 2013), 78 FR 28917 (May 16, 2013), (SR-NYSEArca-2013-47); 
Securities Exchange Act Release No. 69553 (May 10, 2013), 78 FR 
28926 (May 16, 2013), (SR-NYSEMKT-2013-40); Securities Exchange Act 
Release No. 68576 (January 3, 2013), 78 FR 1886 (January 9, 2013), 
(SR-PHLX-2012-145); and Securities Exchange Act Release No. 64652 
(June 13, 2011), 76 FR 35498 (June 17, 2011), (SR-NASDAQ-2011-45).
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Book Depth Data Fees
    The Exchange believes the proposed Data Fee for the Book Depth Data 
Feed is equitable and not unfairly discriminatory because it would 
apply equally to all Customers. All Customers would have the same 
rights to utilize the data (i.e., use the data internally and/or 
distribute it externally) as long as the Customer has entered into a 
market data agreement with MDX for the data and pays the Data Fee.
    The Exchange believes the proposed Data Fee is reasonable because 
it compares favorably to fees that other markets charge for similar 
products. For example, BATS BZX Exchange charges a $1,000 per month 
Internal Use Access Fee and a $5,000 per month External Distribution 
Access Fee for Multicast PITCH, which is its depth of market and last 
sale feed. NASDAQ OMX PHLX charges Internal Distributors a monthly fee 
of $4,000 and External Distributors a monthly fee of a $4,500 for its 
Depth of Market data feed that includes full depth of quotes and orders 
and last sale data for options listed on PHLX. NYSE charges a $3,000 
per month Access Fee and $2,000 per month External Redistribution fee 
for each of its NYSE ArcaBook for Amex Options and NYSE ArcaBook for 
Arca Options market data products that include top-of-book, last sale 
and depth of quote data.
    The Exchange believes the proposal to allow BBO Data Feed Customers 
to upgrade to become Book Depth Data Feed Customers without any 
additional Data Fee is equitable and not unfairly discriminatory 
because it would apply equally to all BBO Data Feed Customers. BBO Data 
Feed Customers currently pay MDX $5,000 per month for the right to use 
and redistribute the data in the BBO Data Feed. The Book Depth Data 
Feed includes all of the data in the BBO Data Feed. The proposed fee 
arrangement would allow a Book Depth Data Feed Customer who has 
upgraded from a BBO Data Feed to use and redistribute Book Depth data 
for no additional charge, thereby incentivizing further redistribution 
of the data in the Book Depth Data Feed. The Exchange notes other 
exchanges offer similar fee arrangements.\21\
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    \21\ For example, the Exchange believes the NASDAQ Options 
Market charges only one distributor fee to allow a subscriber access 
to its ``NASDAQ ITCH-to-Trade Options'' (ITTO) and ``Best of NASDAQ 
Options'' (BONO) products. The Exchange believes NASDAQ OMX BX 
charges only one distributor fee to allow a subscriber access to its 
``BX Options Depth of Market'' (BX Depth) and ``BX Options Top of 
Market'' (BX Top) products. In addition, the Exchange believes the 
International Securities Exchange charges no additional fee to 
subscribers of its ``Depth of Market'' Feed that also access its Top 
Quote Feed.

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[[Page 601]]

    The Exchange believes the proposed Display Only Service User Fee 
for the Book Depth Data Feed is equitable and not unfairly 
discriminatory because it would apply equally to all Customers that 
distribute data via a Display Only Service. The Exchange believes the 
proposed User Fee is reasonable because it compares favorably to usage 
fees that other markets charge for similar products. For example, 
NASDAQ OMX PHLX charges a $40 per month Professional Subscriber Fee for 
use of its market data products by each of internal and external users. 
The International Securities Exchange charges a $50 per month 
Controlled Device Fee for use of its Depth of Market Feed. NYSE charges 
a $50 per month Professional User Fee for use of each of its NYSE 
ArcaBook for Amex Options and NYSE ArcaBook for Arca Options market 
data products.
    The Exchange believes it is equitable and not unfairly 
discriminatory to charge a lower fee for use of Book Depth data via a 
Display Only Service because such use would be limited to display use 
only. The Display Only Service would only allow a natural person end-
user to view and manipulate data using the Customer's computerized 
service, but not to save, copy, export or transfer the data or any 
results of the manipulation to any other computer hardware, software or 
media, except for printing it to paper or other non-magnetic media. As 
noted above, other exchanges charge fees for market data products based 
on distinctions between ``display'' and ``non-display'' usage.\22\
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    \22\ Supra footnote 20.
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    COB Data Fees: The Exchange believes the proposed reductions of the 
Data Fee and Non-professional User Fee for the COB Data Feed are 
equitable and not unfairly discriminatory because they would apply 
equally to all Customers of the COB Data Feed. The Exchange believes 
the proposed Data Fee is reasonable because it compares favorably to 
fees that other markets charge for similar products. For example, as 
noted above, the International Securities Exchange charges distributors 
of its Spread Feed a base monthly fee of $3,000. The proposed lower 
Data Fee may permit wider distribution of the COB Data Feed at a lower 
cost to Customers, and the reduced User Fee may make it less costly for 
Customers to distribute data to Non-professional Users, thereby 
benefitting both Customers and Non-professional Users, including public 
investors.
    The Exchange believes the proposal to allow Book Depth Data Feed 
Customers to become COB Data Feed Customers without any additional Data 
Fee is equitable and not unfairly discriminatory because it would apply 
equally to all Book Depth Data Feed Customers. Book Depth Data Feed 
Customers would pay MDX $6,000 per month for the right to use and 
redistribute the data in the Book Depth Data Feed. The COB Data Feed is 
a subset of the Book Depth Data Feed. The proposed fee arrangement 
would allow a Book Depth Data Feed Customer to use and redistribute the 
COB Data Feed for no additional charge, thereby incentivizing further 
redistribution of the data in the COB Data Feed. The Exchange notes 
other exchanges offer similar fee arrangements.\23\
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    \23\ Supra footnote 21.
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    Systems Fees and Billing Policy: The Exchange believes the proposed 
changes to the description of the Port Fee are equitable, reasonable 
and not unfairly discriminatory because they would benefit all 
Customers by clarifying how the Port Fee is assessed. The Exchange 
believes removing the billing policy from the MDX Fee Schedule is 
equitable, reasonable and not unfairly discriminatory because MDX 
believes it would be more appropriate for billing policies to be 
located within MDX's written agreement with Customers along with other 
policies related to MDX's market data services.
    For the reasons cited above, the Exchange believes the proposed 
fees for the BBO, Book Depth and COB Data Feeds are equitable, 
reasonable and not unfairly discriminatory. In addition, the Exchange 
believes that no substantial countervailing basis exists to support a 
finding that the proposed fees for the BBO, Book Depth and COB Data 
Feeds fail to meet the requirements of the Act.

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.
    An exchange's ability to price its proprietary data feed products 
is constrained by (1) the existence of actual competition for the sale 
of such data, (2) the joint product nature of exchange platforms, and 
(3) the existence of alternatives to proprietary data.
    The Existence of Actual Competition. The Exchange believes 
competition provides an effective constraint on the market data fees 
that the Exchange, through MDX, has the ability and the incentive to 
charge. CBOE has a compelling need to attract order flow from market 
participants in order to maintain its share of trading volume. This 
compelling need to attract order flow imposes significant pressure on 
CBOE to act reasonably in setting its fees for market data, 
particularly given that the market participants that will pay such fees 
often will be the same market participants from whom CBOE must attract 
order flow. These market participants include broker-dealers that 
control the handling of a large volume of customer and proprietary 
order flow. Given the portability of order flow from one exchange to 
another, any exchange that sought to charge unreasonably high data fees 
would risk alienating many of the same customers on whose orders it 
depends for competitive survival. CBOE currently competes with eleven 
options exchanges (including CBOE's affiliate, C2 Options Exchange) for 
order flow.\24\
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    \24\ The Commission has previously made a finding that the 
options industry is subject to significant competitive forces. See 
e.g., Securities Exchange Act Release No. 59949 (May 20, 2009), 74 
FR 25593 (May 28, 2009) (SR-ISE-2009-97) (order approving ISE's 
proposal to establish fees for a real-time depth of market data 
offering).
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    In addition, in the case of products that are distributed through 
market data vendors, the market data vendors themselves provide 
additional price discipline for proprietary data products because they 
control the primary means of access to certain end users. These vendors 
impose price discipline based upon their business models. For example, 
vendors that assess a surcharge on data they sell are able to refuse to 
offer proprietary products that their end users do not or will not 
purchase in sufficient numbers. Internet portals, such as Google, 
impose price discipline by providing only data that they believe will 
enable them to attract ``eyeballs'' that contribute to their 
advertising revenue. Similarly, Customers will not offer the BBO, Book 
Depth or COB Data Feeds unless these products will help them maintain 
current users or attract new ones. For example, a broker-dealer will 
not choose to offer the BBO, Book Depth or COB Data Feeds to its retail 
customers unless the broker-dealer believes that the retail customers 
will use and value the data and the provision of such data will help 
the broker-dealer maintain the customer relationship, which allows the 
broker-dealer to generate profits for itself. Professional users will 
not request any of these feeds from Customers unless they can use the 
data for profit-generating purposes in their businesses. All of these 
operate as constraints on pricing proprietary data products.
    Joint Product Nature of Exchange Platform. Transaction execution 
and

[[Page 602]]

proprietary data products are complementary in that market data is both 
an input and a byproduct of the execution service. In fact, market data 
and trade executions are a paradigmatic example of joint products with 
joint costs. The decision whether and on which platform to post an 
order will depend on the attributes of the platforms where the order 
can be posted, including the execution fees, data quality, and price 
and distribution of their data products. The more trade executions a 
platform does, the more valuable its market data products become. The 
costs of producing market data include not only the costs of the data 
distribution infrastructure, but also the costs of designing, 
maintaining, and operating the exchange's transaction execution 
platform and the cost of regulating the exchange to ensure its fair 
operation and maintain investor confidence. The total return that a 
trading platform earns reflects the revenues it receives from both 
products and the joint costs it incurs. Moreover, an exchange's broker-
dealer customers view the costs of transaction executions and market 
data as a unified cost of doing business with the exchange.
    Analyzing the cost of market data product production and 
distribution in isolation from the cost of all of the inputs supporting 
the creation of market data and market data products will inevitably 
underestimate the cost of the data and data products. Thus, because it 
is impossible to obtain the data inputs to create market data products 
without a fast, technologically robust, and well-regulated execution 
system, system costs and regulatory costs affect the price of both 
obtaining the market data itself and creating and distributing market 
data products. It would be equally misleading, however, to attribute 
all of an exchange's costs to the market data portion of an exchange's 
joint products. Rather, all of an exchange's costs are incurred for the 
unified purposes of attracting order flow, executing and/or routing 
orders, and generating and selling data about market activity. The 
total return that an exchange earns reflects the revenues it receives 
from the joint products and the total costs of the joint products.
    The level of competition and contestability in the market is 
evident in the numerous alternative venues that compete for order flow, 
including 12 options self-regulatory organization (``SRO'') markets, as 
well as internalizing broker-dealers (``BDs'') and various forms of 
alternative trading systems (``ATSs''), including dark pools and 
electronic communication networks (``ECNs''). Competition among trading 
platforms can be expected to constrain the aggregate return that each 
platform earns from the sale of its joint products, but different 
platforms may choose from a range of possible, and equally reasonable, 
pricing strategies as the means of recovering total costs. For example, 
some platforms may choose to pay rebates to attract orders, charge 
relatively low prices for market data products (or provide market data 
products free of charge), and charge relatively high prices for 
accessing posted liquidity. Other platforms may choose a strategy of 
paying lower rebates (or no rebates) to attract orders, setting 
relatively high prices for market data products, and setting relatively 
low prices for accessing posted liquidity. In this environment, there 
is no economic basis for regulating maximum prices for one of the joint 
products in an industry in which suppliers face competitive constraints 
with regard to the joint offering.
    The Existence of Alternatives. CBOE is constrained in pricing the 
BBO, Book Depth and COB Data Feeds by the availability to market 
participants of alternatives to purchasing these products. CBOE must 
consider the extent to which market participants would choose one or 
more alternatives instead of purchasing the exchange's data. Other 
options exchanges can and have produced their own top-of-book, book 
depth and complex strategies market data products, and thus are sources 
of potential competition for MDX. For example, as noted above, BATS, 
ISE, NASDAQ OMX PHLX and NYSE offer market data products that compete 
with the BBO, Book Depth and COB Data Feeds. The large number of SROs, 
BDs, and ATSs that currently produce proprietary data or are currently 
capable of producing it provides further pricing discipline for 
proprietary data products. Each SRO, ATS, and BD is currently permitted 
to produce proprietary data products, and many currently do. In 
addition, the OPRA data feed is a significant competitive alternative 
to the BBO and last sale data included in the BBO and Book Depth Data 
Feeds.
    Further, data products are valuable to professional users only if 
they can be used for profit-generating purposes in their businesses and 
valuable to non-professional users only insofar as they provide 
information that such users expect will assist them in tracking prices 
and market trends and making trading decisions.
    The existence of numerous alternatives to the Exchange's products, 
including proprietary data from other sources, ensures that the 
Exchange cannot set unreasonable fees, or fees that are unreasonably 
discriminatory, when vendors and subscribers can elect these 
alternatives or choose not to purchase a specific proprietary data 
product if its cost to purchase is not justified by the returns any 
particular vendor or subscriber would achieve through the purchase.

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 \25\ and paragraph (f) of Rule 19b-4 \26\ 
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.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78s(b)(3)(A).
    \26\ 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#1062657c753d737f7d7d757e6463506375733e777f66"><span class="__cf_email__" data-cfemail="790b0c151c541a1614141c170d0a390a1c1a571e160f">[email protected]</span></a>. Please include 
File Number SR-CBOE-2014-094 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2014-094. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your

[[Page 603]]

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-2014-094 and should be submitted on or before 
January 27, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2014-30893 Filed 1-5-15; 8:45 am]
BILLING CODE 8011-01-P


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