Document ID: SEC-2017-1563-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2017-09-20T04:00Z

[Federal Register Volume 82, Number 181 (Wednesday, September 20, 2017)]
[Notices]
[Pages 44008-44010]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-19966]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81614; File No. SR-CBOE-2017-060]

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

September 14, 2017.
    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 September 1, 2017, 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. Specifically, the 
Exchange proposes to adopt a discount in the form of a cap on 
transaction fees for Market-Maker, Broker-Dealer, Non-Trading Permit 
Holder Market-Maker, Professional/Voluntary Professional and Joint 
Back-Office executions in VIX.
    The text of the proposed rule change is also 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. Specifically, the 
Exchange proposes to adopt a discount in the form of a cap on 
transaction fees for Market-Maker, Broker-Dealer, Non-Trading Permit 
Holder Market-Maker, Professional/Voluntary Professional and Joint 
Back-Office (i.e., ``M'', ``B'', ``N'', ``W'' and ``J'' origin codes) 
executions in VIX (the ``VIX Large Trade Discount''). Particularly, 
regular transaction fees will only be charged for up to 250,000 VIX 
options contracts per order for Market-Makers, Broker-Dealers, Non-
Trading Permit Holder Market-Makers, Professional/Voluntary 
Professionals and Joint Back-Offices.\3\ The Exchange notes that the 
proposed VIX Large Trade Discount is similar to the Customer Large 
Trade Discount (``CLTD'') program which places a cap on the quantity of 
Customer contracts (i.e., ``C'' origin code) that are assessed 
transaction fees in certain options classes, including VIX.\4\ Like the 
CLTD program, the Large Trade Discount will apply both in the Regular 
Trading Hours (``RTH'') Session and the Extended Trading Hours 
(``ETH'') Session, but for an order to be eligible to qualify for the 
discount, the order in its entirety must be executed in either RTH or 
ETH, but not both).\5\ Also

[[Page 44009]]

like the CLTD program, qualification of an order for the fee cap is 
based on the trade date and order ID on each order. For complex orders, 
the total contracts of an order (all legs by underlying symbol) are 
counted for purposes of calculating the fee cap. To qualify for the 
discount, the entire order quantity must be tied to a single order ID 
(unless the order is a complex order with a number of legs that exceeds 
system limitations) either within the CBOE Command system or PULSe or 
in the front end system used to enter and/or transmit the order 
(provided the Exchange is granted access to effectively audit such 
front end system) (the order must be entered in its entirety on one 
system so that the Exchange can clearly identify the total size of the 
order). For an order entered via PULSe or another front end system, or 
a complex order with multiple order IDs, a request must be submitted to 
the Exchange within 3 business days of the transactions and must 
identify all necessary information, including the order ID and related 
trade details. Lastly, as noted above, only regular transaction fees 
are capped. To avoid potential confusion, however the Exchange proposes 
to make clear that floor brokerage fees are not subject to the cap on 
fees.
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    \3\ The discount will be on transaction fees only. Other fees, 
such as the Index License Surcharge, will not be discounted.
    \4\ See CBOE's Fees Schedule, Customer Large Trade Discount 
program.
    \5\ The Exchange notes that the trading sessions has separate 
order books and require separate logins for access, and as there is 
no ``rolling'' of orders by the Exchange between the two sessions, 
in order to be eligible to qualify for the VIX Large Trade Discount, 
an order must be executed in its entirety in either RTH or ETH, but 
not partly in both.
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    The Exchange proposes to adopt the VIX Large Trade Discount in 
order to incentivize the sending of large VIX orders. The greater 
liquidity and trading volume that the proposed cap encourages would 
benefit all market participants trading VIX options.
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.\6\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \7\ 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 facilitating 
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. The Exchange 
also believes the proposed rule change is consistent with Section 
6(b)(4) of the Act,\8\ which provides that Exchange rules may provide 
for the equitable allocation of reasonable dues, fees, and other 
charges among its Trading Permit Holders.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that adopting the VIX Large Trade Discount is 
reasonable because Market-Makers, Broker-Dealers, Non-Trading Permit 
Holder Market-Makers, Professional/Voluntary Professionals and Joint 
Back-Offices participants (i.e., non-Customer, non-Firm market 
participants) will receive a discount for very large trades that they 
would not otherwise receive, which promotes and encourages larger VIX 
executions on the Exchange. This change is equitable and not unfairly 
discriminatory because all non-Customer, non-Firm market participants 
whose large trades qualify for the discount in VIX will receive it. The 
Exchange believes it's equitable and not unfairly discriminatory to 
adopt a cap on transaction fees for VIX and not other products because 
the Exchange desires to encourage VIX trading, which, along with 
bringing greater VIX options trading opportunities to all market 
participants [sic]. The Exchange believes that it is not unfairly 
discriminatory to not apply the proposed cap to Customers, as Customers 
are eligible for a discount on VIX discount under the CLTD program. The 
Exchange believes that it is not unfairly discriminatory to not apply 
the proposed VIX Large Trade Discount program to Firms (i.e., Clearing 
Trading Holder Proprietary, ``F'' and ``L'' origin codes), as Firms are 
eligible for discounts on VIX under the CBOE Clearing Trading Permit 
Holder Proprietary Products Sliding Scales.

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 because, while the cap does not 
apply to Customers and Firms, other incentive programs already exist 
for those market participants with respect to VIX trading. 
Additionally, the proposed change is designed to encourage increased 
VIX options volume, which provides greater trading opportunities for 
all market participants. The Exchange believes that the proposed rule 
change will not cause an unnecessary burden on intermarket competition 
because VIX is only traded 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 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 \9\ and paragraph (f) of Rule 19b-4 \10\ 
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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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-2017-060 on the subject line.

Paper Comments

     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-2017-060. 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

[[Page 44010]]

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-2017-060 and should be 
submitted on or before October 11, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-19966 Filed 9-19-17; 8:45 am]
 BILLING CODE 8011-01-P