Document ID: SEC-2014-1414-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2014-08-21T04:00Z

[Federal Register Volume 79, Number 162 (Thursday, August 21, 2014)]
[Notices]
[Pages 49552-49554]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-19808]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72855; File No. SR-CBOE-2014-064]

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

August 15, 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 August 6, 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, to be effective 
August 6, 2014. The Exchange's Volume Incentive Program (``VIP'') 
credits each Trading Permit Holder (``TPH'') the per contract amount 
resulting from each public customer (``Customer'') (``C'' origin code) 
order transmitted by that TPH which is executed electronically on the 
Exchange in all multiply-listed option classes (excluding RUT, mini-
options, QCC trades 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), 
provided the TPH meets certain percentage thresholds in a month as

[[Page 49553]]

described in the VIP table.\3\ Currently, the Exchange provides a VIP 
credit for Customer to Customer complex orders transmitted and executed 
electronically on the Exchange (such credits are provided on both sides 
of the transaction, at a negative revenue situation for the Exchange). 
The Exchange proposes to exclude from the VIP electronic executions 
that occur when a Customer complex order executes against another 
Customer complex order.\4\ The Exchange believes that electronic 
Customer complex order to Customer complex order transactions are rare 
and no longer believes that offering credits pursuant to the VIP for 
this scenario (and the resulting negative revenue situation) is 
necessary to attract Customer complex orders to the Exchange.
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    \3\ For more information on the VIP, including the amounts of 
the credits provided at the specific tiers, see the VIP table of the 
CBOE Fees Schedule.
    \4\ The Exchange's proposed first sentence of the Notes section 
of the VIP table would therefore read: ``The Exchange shall credit 
each Trading Permit Holder the per contract amount resulting from 
each public customer (``C'' origin code) order transmitted by that 
Trading Permit Holder which is executed electronically on the 
Exchange in all multiply-listed option classes (excluding RUT, mini-
options, QCC trades, executions that occur when an electronically-
delivered Customer Complex Order executes against another 
electronically-delivered Customer Complex Order, 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), provided the Trading Permit 
Holder meets certain percentage thresholds in a month as described 
in the Volume Incentive Program (VIP) table.''
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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.\5\ Specifically, the 
Exchange believes the proposed rule change is consistent with Section 
6(b)(4) of the Act,\6\ 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable to not provide a VIP 
credit for Customer to Customer complex orders transmitted and executed 
electronically on the Exchange because the Exchange does not believe it 
is necessary to provide a credit in the above-mentioned scenario in 
order to attract Customer complex orders to the Exchange for execution. 
Further, the instances of these executions are rare and the Exchange 
believes it is reasonable to not incur negative revenue scenarios for 
complex orders as would be the case with the above-described 
transaction. Indeed, in circumstances in which a Customer complex order 
executes electronically against another Customer complex order, the 
Exchange currently provides a credit on both sides, and since the 
Exchange does not believe offering a credit for such transactions 
serves as a necessary incentive to attract Customer complex orders to 
the Exchange, the Exchange has determined that, at the current time, it 
is not economically desirable to offer a rebate on both sides of such 
transactions. Also, the Exchange does not feel that the Customer rebate 
incentive brings a greater number of Customer orders as a result of 
this incentive and therefore desires to exclude these types of 
transactions from the VIP. Finally, the Exchange believes that the 
proposed exclusion is reasonable because it will merely remove a credit 
on such transactions and not impose a greater fee.
    The Exchange believes that the proposed exclusion is equitable and 
not unfairly discriminatory because the VIP credit only applies to 
customers and therefore the elimination of the credit in the described 
situation puts customers on the same competitive footing as other 
market participants. As such, no market participant would be entitled 
to a credit for these types of transactions. Additionally, another 
exchange also has a similar exclusion for situations in which a 
Customer complex order executes electronically against another Customer 
complex order from its program that is similar to CBOE's VIP.\7\
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    \7\ See NASDAQ OMX PHLX LLC (``PHLX'') Pricing Schedule, Section 
B (``Customer Rebate Program'') and SR-PHLX-2014-52.
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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. 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 the VIP credit only applies to customers 
and therefore the elimination of the credit in the described situation 
puts customers on the same competitive footing as other market 
participants. As such, no market participant would be entitled to a 
credit for these types of transactions. The Exchange does not believe 
that the proposed rule change will impose any burden on intermarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because the proposed change only applies to trading 
on CBOE. Further, the Exchange believes that the VIP will continue to 
encourage Customer order flow to be directed to the Exchange. While 
market participants will be encouraged to transact a greater number of 
Customer orders to qualify for a rebate, the Exchange does not believe 
the current credit incentivizes a greater number of Customer complex 
orders executing electronically against other electronic Customer 
complex orders on CBOE.
    The Exchange operates in a highly competitive market, comprised of 
many options exchanges, in which market participants can easily and 
readily direct order flow to competing venues if they deem fee levels 
at a particular venue to be excessive or rebates to be inadequate. 
Accordingly, the fees that are assessed and the rebates paid by the 
Exchange described in the above proposal are influenced by these robust 
market forces and therefore must remain competitive with fees charged 
and rebates paid by other venues and therefore must continue to be 
reasonable and equitably allocated to those TPHs that opt to direct 
orders to the Exchange rather than competing venues.

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 \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

[[Page 49554]]

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

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2014-064 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2014-064. 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 such filing also will be available 
for inspection and copying at the principal offices 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-2014-064, 
and should be submitted on or before September 11, 2014.

    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. 2014-19808 Filed 8-20-14; 8:45 am]
BILLING CODE 8011-01-P