[Federal Register Volume 79, Number 243 (Thursday, December 18, 2014)]
[Notices]
[Pages 75599-75602]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-29619]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73832; File No. SR-CBOE-2014-092]


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

December 12, 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 1, 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

    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 amend its Fees Schedule, effective 
December 1, 2014. First, the Exchange proposes to amend the Trade 
Processing Services fee. Currently, the Exchange assesses a $0.0025 fee 
per contract side for each matched and unmatched trade. The Exchange 
notes that unmatched trades are also charged if and when they become 
matched. As such, the Exchange does not believe it's necessary to 
charge unmatched trades the Trading Processing Fee, as the trades 
ultimately will be charged once matched. The Exchange further notes 
that when the fee was adopted, the billing processes were done manually 
and the fee helped offset the work involved in processing each of the 
trades, both matched and unmatched. The Exchange notes that this 
billing process is now automated and does not believe it is necessary 
to continue to bill unmatched trades. The Exchange additionally 
proposes to explicitly state in the Fees Schedule that for billing 
purposes, the Trade Processing Services fee will be rounded to the 
nearest $0.01 using standard rounding rules on a monthly basis.
    Currently, the Fees Schedule states that the quoting bandwidth 
allowance for a Market-Maker Trading Permit is equivalent to a maximum 
of 32,400,000 quotes over the course of a trading day. The Exchange 
intends to increase quoting bandwidth allowance by 10%. As such, the 
Exchange seeks to make a corresponding amendment to the Fees Schedule. 
Specifically, the Exchange proposes to update the number of maximum 
quotes over the course of trading day from 32,400,000 to 35,640,000. 
The Exchange notes that the increase of quoting bandwidth allowance 
applies to all Market-Maker Trading Permits and all Quoting and Order 
Entry Bandwidth Packets.
    The Exchange always strives for clarity in its rules and Fees 
Schedule, so that market participants may best understand how rules and 
fees apply. As such, the Exchange proposes to clarify its use of the 
terms ``multiply-listed'' (or ``multi listed'') and ``single-listed'' 
options classes in the Fees Schedule. In conjunction with these 
clarifying changes, the Exchange also proposes to use the term 
``Underlying Symbol List A'' in the Fees Schedule to refer to a 
specific set of proprietary products (i.e., OEX, XEO, SPX (including 
SPXw), SPXpm, SRO, VIX, VXST, VOLATILITY INDEXES and binary options).
    By way of background, the Exchange notes that a specific set of 
proprietary products are commonly listed out in the Fees Schedule as 
being included or excluded from a variety of programs, qualification 
calculations and transactions fees. In lieu of listing out

[[Page 75600]]

these products in various sections of the Fees Schedule, the Exchange 
proposes to use the term ``Underlying Symbol List A,'' to represent 
these products, which the Exchange believes will simplify the Fees 
Schedule and make it easier to read. Underlying Symbol List A shall 
represent the following: OEX, XEO, SPX (including SPXw), SPXpm, SRO, 
VIX, VXST, VOLATILITY INDEXES and binary options. The Exchange proposes 
to add a new Footnote (i.e., Footnote 34), which defines the term 
``Underlying Symbol List A'' as referring to the products listed above.
    The Exchange next proposes to amend the Liquidity Provider Sliding 
Scale table. The Liquidity Provider Sliding Scale provides reduced 
transaction fees for a CBOE Market-Maker based on the Market-Maker 
executing a certain number of contracts per month. Currently, the 
Liquidity Provider Sliding Scale table provides that the volume 
thresholds are ``based on total national Market-Maker volume of any 
option classes with traded volume on CBOE during the calendar month.'' 
Additionally, the notes section of the Liquidity Provider Sliding Scale 
table provides that the reduced transaction fees are not applicable to 
``mini-options, SPX, SPXpm, SRO, VIX, VXST, VOLATILITY INDEXES, OEX or 
XEO.'' The Exchange proposes to change how the volume thresholds are 
calculated. Specifically, the Exchange proposes that the volume 
thresholds be based on the total national Market-Maker volume in all 
underlying symbols excluding those in Underlying Symbol List A and 
mini-options. The Exchange notes that currently, the calculation of the 
volume thresholds for the Liquidity Provider Sliding Scale is based on 
total national Market-Maker volume of any options classes with traded 
volume on CBOE during the calendar month and excludes volume in 
products that may not be listed on CBOE. As certain options classes may 
have volume traded on CBOE in some months, but not others, the Exchange 
believes it is more challenging for Trading Permit Holders (``TPHs'') 
to anticipate which classes will be part of the calculation each month 
and how that may or may not affect which tier and transaction fee will 
apply to them. The Exchange believes the proposed rule change 
eliminates this uncertainty by including all options classes except 
those in Underlying Symbol List A (and mini-options), which will reduce 
confusion and make it easier for TPHs to calculate and anticipate what 
volume threshold tier they will fall into each month and consequently 
which rates will be applicable to them. Additionally, the Exchange 
believes the proposed change will more accurately reflect which option 
classes are counted towards the qualifying volume thresholds. Lastly 
with respect to the Liquidity Provider Sliding Scale, the Exchange 
proposes to replace the list of products for which the Liquidity 
Provider Sliding Scale does not apply with the term ``Underlying Symbol 
List A.''
    The Exchange also proposes to amend the CBOE Proprietary Products 
Sliding Scale table. Currently, 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 reaches 
certain volume thresholds in ``multiply-listed'' options classes on the 
Exchange in a month. The Exchange proposes to replace the list of 
proprietary products set forth in the notes section with the term 
``Underlying Symbol List A.'' \3\ The Exchange also proposes to replace 
the term ``multiply-listed'' with the following language: ``all 
underlying symbols excluding Underlying Symbol List A and mini-
options.'' The Exchange notes that the proposed change more accurately 
describes which option classes are included in the qualification 
thresholds for the CBOE Proprietary Products Sliding Scale. 
Particularly, the Exchange notes that DJX, XSP, and XSPAM are included 
towards the qualification thresholds of the CBOE Proprietary Products 
Sliding Scale. Specifically, DJX and XSP are used to compete with 
multi-listed products that are also listed on CBOE (for example, the 
singly-listed XSP options compete with the multiply-listed SPY options, 
both of which approximate 1/10 of the S&P 500 Index, and the singly-
listed DJX options compete with the multiply-listed DIA options, both 
of which are based on 1/100 of the value of the Dow Jones Industrial 
Average). Including the multiply-listed products for qualification 
towards the CBOE Proprietary Products Sliding Scale while excluding 
their singly-listed competitors could create a pricing advantage that 
might discourage trading in some of the singly-listed products that the 
Exchange expended resources to develop. As such, the Exchange includes 
these singly-listed products for qualification towards the CBOE 
Proprietary Products Sliding Scale along with their multiply-listed 
competitors. The Exchange believes the proposed change makes the CBOE 
Proprietary Sliding Scale table easier to read and more clearly 
describes the option classes included and excluded in the threshold 
volumes. The Exchange also proposes to make corresponding changes to 
Footnote 23, which Footnote relates to the CBOE Proprietary Sliding 
Scale.
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    \3\ Although included in the proposed Footnote 34 definition of 
``Underlying Symbol List A,'' the Exchange notes that SROs are 
excluded from the CBOE Proprietary Products Sliding Scale. This 
exclusion is already, and will continue to be, referenced in the 
Notes section of the CBOE Proprietary Products Sliding Scale table.
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    The Exchange next proposes to amend the Volume Incentive Program 
(VIP) table. Under VIP, the Exchange credits each TPH the per contract 
amount set forth in the VIP table resulting from each public customer 
(``C'' origin code) order transmitted by that TPH which is executed 
electronically on the Exchange in all ``multiply-listed option 
classes,'' with certain exclusions, provided the TPH meets certain 
volume thresholds in ``multiply-listed options classes.'' The Exchange 
proposes to replace the term ``multiply-listed options classes'' with 
the phrase ``all underlying symbols excluding Underlying Symbol List A, 
RUT, DJX, XSP, XSPAM, credit default options, credit default basket 
options and mini-options.'' The Exchange notes that the VIP Program has 
always been limited to multiply-listed options classes (i.e., options 
listed and traded on another national securities exchange) and mini-
options. The Exchange believes the proposed change more clearly 
describes the option classes that are currently excluded from the VIP 
volume thresholds and per contract credit.
    The Exchange proposes to similarly amend Footnote 12 (relating to 
Clearing Trading Permit Holder Proprietary Transaction Fees). 
Currently, Footnote 12 of the Fees Schedule provides that the Clearing 
Trading Permit Holder Proprietary Transaction Fee will be waived for 
Clearing Trading Permit Holders executing facilitation orders in 
``multiply-listed'' FLEX Options classes. The Exchange proposes to 
change the reference to ``multiply-listed'' FLEX options to ``FLEX 
options in all underlying symbols excluding Underlying Symbol List A, 
credit default options and credit default basket options.'' The 
Exchange believes the proposed change more accurately describes which 
Flex options will and will not have the Clearing Trading Permit Holder 
Transaction Fee waived. For the reasons described above, the Exchange 
notes that Clearing Trading Permit Holder Proprietary Transaction Fees 
are waived for DJX, XSP, and

[[Page 75601]]

XSPAM, as not waiving Clearing Trading Permit Holder Proprietary 
Transaction Fees for both these products and their multiply-listed 
competitors could create a pricing advantage that might discourage 
trading in some of the singly-listed products that the Exchange 
expended resources to develop.
    Current Footnote 25, which governs rebates on Floor Broker Trading 
Permits, also references the term ``multiply-listed options classes.'' 
Specifically, Footnote 25 provides that any Floor Broker that executes 
a certain average of customer open-outcry contracts per day over the 
course of a calendar month in ``multiply-listed option classes,'' 
excluding subcabinet trades, will receive a rebate on that Floor 
Broker's Trading Permit Holder's Floor Broker Trading Permit Fees. The 
Exchange proposes to replace the term multiply-listed options classes'' 
with ``all underlying symbols excluding Underlying Symbol List A, DJX, 
XSP, XSPAM, credit default options, credit default basket options'' and 
also proposes to not count mini-options towards the Floor Broker 
Trading Permit rebate. The Exchange believes the proposed rule change 
provides consistency in the Fees Schedule and makes clear which option 
classes are meant to be included (and excluded) in the calculation of 
the volume threshold used to qualify for the rebate.
    Finally, the Exchange proposes to remove the reference to ``single-
listed options traded on CBOE'' in Footnotes 29 and 30 (relating to the 
Order Router Subsidy (``ORS'') and Complex Order Router Subsidy 
(``CORS'') Programs) and instead reference the options classes 
``included in Underlying Symbol List A, DJX, XSP or XSPAM.'' The 
Exchange notes that each of the products listed in Underlying Symbol 
List A are considered ``single-listed'' products, as are DJX, XSP and 
XSPAM (i.e., not listed and traded on another national securities 
exchange) and that no substantive changes are being made by this 
change. Rather, the proposed change is intended to provide further 
consistency and clarity in 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.\4\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \5\ 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 the 
Section 6(b)(5) \6\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Exchange also believes the proposed rule 
change is consistent with Section 6(b)(4) of the Act,\7\ 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.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Id.
    \7\ 15 U.S.C. 78f(b)(4).
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    In particular, the Exchange believes it is reasonable and equitable 
to cease charging the Trade Processing Services fee for unmatched trade 
data. As noted above, unmatched trades will be charged if and when they 
become matched. As such, the Exchange does not believe it's necessary 
to assess the Trading Processing Fee to unmatched trades. Additionally, 
when the fee was originally introduced, the billing processes for 
assessing this fee were done manually and the fee helped offset the 
work involved in matched and unmatched data. As the billing process is 
now automated, the Exchange does not believe it is necessary to 
continue to bill unmatched trades. The Exchange believes it's 
reasonable to cease charging unmatched trade data the Trade Processing 
Services fee because it will merely result in Trading Permit Holders no 
longer being subject to this fee. The Exchange believes the proposed 
change is not unfairly discriminatory as it applies equally to all 
Trading Permit Holders, who no longer will be charged the fee for 
unmatched trade data. Additionally, all trades, once matched, will 
continue to be charged the fee. The Exchange believes providing in the 
Fees Schedule that for billing purposes, the Trade Processing Services 
fee will be rounded to the nearest $0.01 using standard rounding rules 
on a monthly basis, will alleviate confusion as to how the fee, which 
is under $0.01, will be assessed. The alleviation of potential 
confusion will remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, 
protect investors and the public interest. The Exchange also believes 
that amending the Fees Schedule to accurately reflect the increase in 
quoting bandwidth allowance, alleviates confusion, thereby removing 
impediments to and perfecting the mechanism of a free open market and a 
national market system, and, in general, protect investors and the 
public interest.
    The Exchange believes it is equitable, reasonable and not unfairly 
discriminatory to include DJX, XSP and XSPAM towards qualification of 
the CBOE Proprietary Products Sliding Scale and to waive Clearing 
Trading Permit Holder Proprietary Transaction Fees for DJX, XSP and 
XSPAM as these products are used to compete with multi-listed products 
that are also listed on CBOE (as explained above). The Exchange also 
believes it is reasonable, equitable and not unfairly discriminatory to 
not count mini-option volume towards the Floor Broker Trading Permit 
rebate. The Exchange notes that it funds the costs associated with 
mini-options with revenues only from those participants who trade them. 
The Exchange also notes that the cost to process quotes, orders and 
trades in mini-options is the same as for standard options. Including 
mini-option volume towards the qualifying threshold for a Floor Broker 
Trading Permit rebate might necessitate raising costs for other market 
participants; therefore, the Exchange believes that the exclusion of 
mini-options is both reasonable and equitable. Further, as the 
measuring stick to determine whether a Trading Permit Holder meets the 
qualifying thresholds is the number of contracts traded, it would be 
difficult for the Exchange to count mini-option contracts, since they 
effectively function as 1/10th of a regular standard options contract.
    Finally, the Exchange believes that eliminating potentially vague 
terms like ``multiply-listed options classes'' and ``single-listed 
option classes'' and replacing those terms with more explicit 
references to which option classes are or are not included or excluded 
in a program alleviates potential confusion. The Exchange believes the 
proposed rule changes also eliminates uncertainty as to which options 
classes will or will not be used in calculating certain volume, which 
will reduce confusion and make it easier for TPHs to calculate and 
anticipate what volume thresholds they will meet and consequently which

[[Page 75602]]

rates will be applicable to them. The Exchange believes that defining 
and then using the term ``Underlying Symbol List A'' to represent a 
commonly referred to set of proprietary products in lieu of listing out 
these products in various sections of the Fees Schedule simplifies the 
Fees Schedule and makes it easier to read. The alleviation of potential 
confusion will remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, 
protect investors and the public interest.

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. CBOE 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 the proposed changes apply to all Trading Permit 
Holders. The Exchange believes that the proposal to cease charging the 
Trade Processing Services fee for unmatched trade data will not cause 
an unnecessary burden on intermarket competition because other 
exchanges already do not charge a similar fee. 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 \8\ and paragraph (f) of Rule 19b-4 \9\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <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#a5d7d0c9c088c6cac8c8c0cbd1d6e5d6c0c68bc2cad3"><span class="__cf_email__" data-cfemail="4c3e392029612f2321212922383f0c3f292f622b233a">[email protected]</span></a>. Please include 
File Number SR-CBOE-2014-092 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-2014-092. 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-2014-092 and should be 
submitted on or before January 8, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29619 Filed 12-17-14; 8:45 am]
BILLING CODE 8011-01-P


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