Document ID: SEC-2015-0656-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2015-04-16T04:00Z

[Federal Register Volume 80, Number 73 (Thursday, April 16, 2015)]
[Notices]
[Pages 20526-20529]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-08703]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74709; File No. SR-CBOE-2015-036]

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

April 10, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 31, 2015, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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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 April 
1, 2015. Specifically, the Exchange proposes to amend its fees for the 
Russell 2000 Index (``RUT''). As of April 1, 2015, RUT will be listed 
exclusively on CBOE and C2 Options Exchange Incorporated (``C2''). As 
such, the Exchange proposes to make certain conforming changes to its 
Fees Schedule.
    By way of background, a specific set of proprietary products had 
been 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 these products in various 
sections of the Fees Schedule, the Exchange recently adopted the term 
``Underlying Symbol List A,'' to represent these products.\3\ 
Currently, Underlying Symbol List A is defined in Footnote 34 and 
represents the following proprietary products: OEX, XEO, SPX (including 
SPXw), SPXpm, SRO, VIX, VXST, VOLATILITY INDEXES and binary options The 
Exchange notes that the reason the products in Underlying Symbol List A 
are often collectively included or excluded from certain programs, 
qualification calculations and transactions fees is because the 
Exchange has expended considerable resources developing and maintaining 
its proprietary, exclusively-listed products. Similar to the products 
currently represented by ``Underlying Symbol List A,'' RUT will no 
longer be listed on any other exchange (other than C2). As such, the 
Exchange proposes to exclude or include RUT in the same programs as the 
other products in Underlying Symbol List A (except as otherwise noted 
below), as well as add RUT to the definition of Underlying Symbol List 
A in Footnote 34. Specifically, like the other products in Underlying 
Symbol List A, the Exchange proposes to except RUT from the Liquidity 
Provider Sliding Scale, the Marketing Fee, the Clearing Trading Permit 
Holder Fee Cap (``Fee Cap'') and exemption from fees for facilitation 
orders, and the Order Router Subsidy (ORS) and Complex Order Router 
Subsidy (CORS) Programs. Like all other products in Underlying Symbol 
List A (with the exception of SROs), the Exchange proposes to apply to 
RUT the CBOE Proprietary Products Sliding Scale. Unlike the products in 
Underlying Symbol List A, the Exchange does intend to keep RUT volume 
in the calculation of qualifying volume for the rebate of Floor Broker 
Trading Permit fees.
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    \3\ See Securities Exchange Act Release No. 73832 (December 12, 
2014), 79 FR 243 (December 18, 2014) (SR-CBOE-2014-092).
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    Next, as the Exchange proposes to include RUT in Underlying Symbol 
List A, the reference to RUT in the ``Index Options Rate Table--All 
Index Products Excluding Underlying Symbol List A'' table will be 
deleted and new references to RUT, where applicable, will be added to 
the ``Specified Proprietary Index Options Rate Table--Underlying Symbol 
List A'' table. Additionally, the Exchange will add ``RUT'' to the list 
of products excluded from the Customer section of the Index Options 
Rate Table. The Exchange also proposes to spell out and add a separate 
row for the remaining products of Underlying Symbol List A for Broker-
Dealers, Non-Trading Permit Holder Market-Makers, Professionals/
Voluntary Professionals and Joint Back Offices (``JBOs'') transaction 
fees.
    The Exchange also proposes to amend certain transaction fees for 
RUT options. Currently, Clearing Trading Permit Holder proprietary 
(``F'' origin code) and Non-Trading Permit Holder Affiliate (``L'' 
origin code) RUT transactions are assessed $0.35 per contract for 
electronic transactions and $0.20 per contract for both manual and 
Automated Improvement Mechanism (``AIM'') transactions. The Exchange 
proposes to assess a $0.25 per contract transaction fee for all 
Clearing Trading Permit Holder and Non-Trading Permit Holder Affiliate 
transactions, which is the same fee amount assessed to Clearing Trading 
Permit Holder

[[Page 20527]]

proprietary and Non-Trading Permit Holder Affiliate transactions for 
all products in Underlying Symbol List A.\4\ Next, the Exchange notes 
that currently, RUT is subject to the Liquidity Provider Sliding Scale, 
which provides for reduced transaction fees for Market-Makers that 
reach certain volume thresholds in all underlying symbols excluding 
Underlying Symbol List A and mini-options. As mentioned above, the 
Liquidity Provider Sliding Scale will no longer apply to RUT as RUT 
will now be exclusively listed on CBOE (and C2) and part of Underlying 
Symbol List A. As such, the Exchange proposes to assess Market-Makers 
$0.20 per contract for all RUT transactions, which is also the same fee 
amount as applies to Market-Makers for all products in Underlying 
Symbol List A.
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    \4\ The $0.25 per contract fee for Clearing Trading Permit 
Holders and Non-Trading Permit Holder Affiliates is subject to the 
applicability of the CBOE Proprietary Products Sliding Scale.
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    The Exchange also proposes to amend the AIM transaction RUT fees 
for Broker-Dealers, Non-Trading Permit Holder Market-Makers, 
Professionals/Voluntary Professionals and Joint Back Offices 
(``JBOs''). Currently, the Exchange assesses these market participants 
$0.20 per contract for AIM Agency/Primary transactions and $0.05 per 
contract for AIM Contra transactions. The Exchange proposes to charge 
all RUT AIM transactions $0.25 per contract. The current fees of $0.65 
per contract for Broker-Dealer, Non-Trading Permit Holder Market-Maker, 
and JBO electronic RUT transactions and $0.25 per contract for manual 
transactions are not changing. Currently, Customer transactions are 
assessed $0.18 per contract for all RUT orders other than AIM Contra 
orders. AIM Contra transactions are currently assessed $0.05 per 
contract. The Exchange proposes to increase the AIM Contra fee to $0.18 
per contract, so that all Customer transactions will be assessed the 
same rate (i.e., $0.18). The Exchange notes that Customer AIM orders 
(both AIM Agency/Primary and Contra) for other Underlying Symbol List A 
products are also charged the same amount(s) as apply to Customer non-
AIM transactions for each respective product.
    The Exchange also proposes to apply to RUT, like the other products 
in Underlying Symbol List A, the Floor Brokerage Fee of $0.04 per 
contract ($0.02 per contract for crossed orders) (the Floor Brokerage 
Fee applies only to Floor Brokers, and only for open outcry trading).
    Currently, the Exchange assesses an Index License Surcharge for RUT 
of $0.30 per contract for all non-customer orders. The Exchange now 
proposes to increase the RUT Surcharge from $0.30 to 0.45 per contract 
in order to recoup the increased costs associated with the RUT license. 
The Exchange will still be subsidizing the costs of the RUT license.
    Footnote 25, which governs rebates on Floor Broker Trading Permits, 
currently 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 all underlying symbols excluding Underlying Symbol 
List A, DJX, XSP, XSPAM, mini-options and subcabinet trades, will 
receive a rebate on that Floor Broker's Trading Permit Holder's Floor 
Broker Trading Permit Fees. The Exchange notes that although RUT is 
being added to ``Underlying Symbol List A'', it wishes to continue to 
include RUT in the calculation of the qualifying volume for the rebate 
of Floor Broker Trading Permit fees. As such, the Exchange seeks to 
explicitly note in Footnote 25 that RUT will be included in the 
calculation, notwithstanding its inclusion in Underlying Symbol List A. 
The Exchange wishes to continue to encourage Floor Brokers to execute 
open-outcry trades in RUT options and believes that continuing to 
include RUT in the qualifying volume will provide such incentive. 
Additionally, the Exchange notes that as discussed above, Floor Brokers 
will now be assessed floor brokerage fees for RUT, which had not been 
assessed to them previously.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') 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 the 
Section 6(b)(5) \6\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitation 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Additionally, 
the Exchange believes the proposed rule change is consistent with 
Section 6(b)(4) of the Act,\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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78f(b)(4).
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    Particularly, the Exchange believes it is reasonable to charge 
different fee amounts to different user types in the manner proposed 
because the proposed fees are consistent with the price differentiation 
that exists today for other proprietary products. The Exchange also 
believes that the proposed fee amounts for RUT orders are reasonable 
because the proposed fee amounts are within the range of amounts 
assessed for the Exchange's other proprietary products.\8\
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    \8\ See CBOE Fees Schedule, Specified Proprietary Index Options 
Rate Table.
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    The Exchange believes that it is equitable and not unfairly 
discriminatory to assess lower fees to Customers as compared to other 
market participants because Customer order flow enhances liquidity on 
the Exchange for the benefit of all market participants. Specifically, 
Customer liquidity benefits all market participants by providing more 
trading opportunities, which attracts Market-Makers. An increase in the 
activity of these market participants in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants. The fees offered to Customers are 
intended to attract more Customer trading volume to the Exchange. 
Moreover, the options industry has a long history of providing 
preferential pricing to Customers, and the Exchange's current Fees 
Schedule currently does so in many places, as do the fees structures of 
many other exchanges. Finally, all fee amounts listed as applying to 
Customers will be applied equally to all Customers (meaning that all 
Customers will be assessed the same amount).
    The Exchange believes that it is equitable and not unfairly 
discriminatory to, assess lower fees to Market-Makers as compared to 
other market participants other than Customers because Market-Makers, 
unlike other market participants, take on a number of obligations, 
including quoting obligations, that other market participants do not 
have. Further, these lower fees offered to Market-Makers are intended 
to incent Market-Makers to quote and trade more on the Exchange, 
thereby providing more trading opportunities for all market

[[Page 20528]]

participants. Additionally, the proposed fee for Market-Makers will be 
applied equally to all Market-Makers (meaning that all Market-Makers 
will be assessed the same amount). This concept also applies to orders 
from all other origins. It should also be noted that all fee amounts 
described herein are intended to attract greater order flow to the 
Exchange in RUT, which should therefore serve to benefit all Exchange 
market participants. Similarly, it is equitable and not unfairly 
discriminatory to assess lower fees to Clearing Trading Permit Holder 
Proprietary orders than those of other market participants (except 
Customers and Market-Makers) because Clearing Trading Permit Holders 
also have a number of obligations (such as membership with the Options 
Clearing Corporation), significant regulatory burdens, and financial 
obligations, that other market participants do not need to take on. The 
Exchange also notes that the RUT fee amounts for each separate type of 
market participant will be assessed equally to all such market 
participants (i.e. all Broker-Dealer orders will be assessed the same 
amount, all Joint Back-Office orders will be assessed the same amount, 
etc.).
    The Exchange believes the proposed changes to AIM transaction fees 
for Brokers Dealers, Non-Trading Permit Holder Market-Makers, 
Professionals/Voluntary Professionals, JBOs and Customers are 
reasonable because the amounts are still lower than assessed for AIM 
transactions in other proprietary products.\9\ The Exchange believes 
it's equitable and not unfairly discriminatory to assess lower fees for 
AIM executions as compared to electronic executions because AIM is a 
price-improvement mechanism, which the Exchange wishes to encourage and 
support.
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    \9\ Id.
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    Assessing the Floor Brokerage Fee of $0.04 per contract for non-
crossed orders and $0.02 per contract for crossed orders to Floor 
Brokers (and not other market participants) trading RUT orders is 
equitable and not unfairly discriminatory because only Floor Brokers 
are statutorily capable of representing orders in the trading crowd, 
for which they charge a commission. Moreover, this fee is already 
assessed, in the same amounts, to the other products in Underlying 
Symbol List A.
    Increasing the Index License Surcharge Fee from $0.30 to $0.45 per 
contract to RUT transactions is reasonable because the Exchange still 
pays more for the RUT license than the amount of the proposed RUT Index 
License Surcharge Fee (meaning that the Exchange will be subsidizing 
the costs of the RUT license). This increase is equitable and not 
unfairly discriminatory because the increased amount will be assessed 
to all market participants to whom the RUT Surcharge applies. Not 
applying the RUT Index License Surcharge Fee to Customer orders is 
equitable and not unfairly discriminatory because this is designed to 
attract Customer RUT orders, which increases liquidity and provides 
greater trading opportunities to all market participants.
    Excepting RUT from the Liquidity Provider Sliding Scale, the 
Marketing Fee, the Fee Cap, and the exemption from fees for 
facilitation orders is reasonable because other Underlying Symbol List 
A products (i.e., other products that are exclusively-listed) are 
excepted from those same items. This is equitable and not unfairly 
discriminatory for the same reason; it seems equitable to except RUT 
from items on the Fees Schedule from which other proprietary products 
are also excepted.
    Applying to RUT the CBOE Proprietary Products Sliding Scale is 
reasonable because it also applies to other Underlying Symbol List A 
products. This is equitable and not unfairly discriminatory for the 
same reason; it seems equitable to apply to RUT the same items on the 
Fees Schedule that apply to Underlying Symbol List A options classes 
(i.e., proprietary options classes that are not listed on other 
exchanges).
    The Exchange believes it's reasonable, equitable and not unfairly 
discriminatory to continue to include RUT in the calculation of the 
qualifying volume for the Floor Broker Trading Permit Fees rebate 
because the Exchange wishes to support and encourage open-outcry 
trading of RUT, which allows for price improvement and has a number of 
positive impacts on the market system.
    Finally, the Exchange believes the proposed change to relocate the 
RUT fees from the ``Index Options Rate Table- All Index Products 
Excluding Underlying Symbol List A'' to the ``Specified Proprietary 
Index Options Rate Table- Underlying Symbol List A'' and make other 
technical conforming changes to the Fees Schedule makes clear to market 
participants that RUT is now part of Underlying Symbol List A and 
reduces potential confusion as to which Rate Table applies. 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

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition that are not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe that the proposed rule change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because, while different fees 
are assessed to different market participants in some circumstances, 
these different market participants have different obligations and 
different circumstances as discussed above. For example, Market-Makers 
have quoting obligations that other market participants do not have.
    The Exchange does not believe that the proposed rule changes will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because RUT will 
now be exclusively listed on CBOE (and C2). 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 \10\ and paragraph (f) of Rule 19b-4 \11\ 
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 20529]]

change should be approved or disapproved.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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-2015-036 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-2015-036. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CBOE-2015-036 and should be 
submitted on or before May 7, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-08703 Filed 4-15-15; 8:45 am]
BILLING CODE 8011-01-P