Document ID: SEC-2014-0869-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2014-05-28T04:00Z

[Federal Register Volume 79, Number 102 (Wednesday, May 28, 2014)]
[Notices]
[Pages 30681-30683]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-12225]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72207; File No. SR-CBOE-2014-045]

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

May 21, 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 May 19, 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 is proposing to update the text in its Fees Schedule. 
First, the Exchange proposes to amend Footnote 21 of the Fees Schedule, 
which currently states that ``All electronic executions in Hybrid 3.0 
classes shall be assessed the Hybrid 3.0 Execution Surcharge, except 
that this fee shall not apply to: (i) Orders in SPX options in the SPX 
electronic book that are executed during opening rotation on the final 
settlement date of VIX options and futures . . .'' As currently 
provided, on the CBOE Volatility Index (``VIX'') settlement day, the 
Exchange waives the Hybrid 3.0 Execution Surcharge for orders in S&P 
500 Index (``SPX'') options in the SPX electronic book that are 
executed during opening rotation on the final settlement date of VIX 
options and futures. Currently, this exception encompasses all SPX 
options in the SPX electronic book executed during the opening rotation 
on final settlement date of VIX options and futures regardless of 
whether those options had a bearing on the final settlement value. 
Indeed, certain SPX options in the SPX electronic book that are 
executed during opening rotation on the final settlement date of VIX 
options and futures cannot be used to determine the final settlement 
value of VIX. The Exchange seeks to amend this language to only exclude 
from the Hybrid 3.0 Execution Surcharge those SPX options that are 
executed during opening rotation and which have the expiration that 
contribute to the VIX settlement calculation. This is because the only 
way to participate in the settlement process is electronically; there 
is no open outcry alternative. Therefore, the Exchange does not want to 
assess a surcharge for the only possible method of participation in the 
VIX settlement process. Additionally, since the VIX settlement value is 
based upon SPX options, the Exchange does not believe it would be 
appropriate to charge the surcharge to those SPX options that have the 
expiration that is used in determining the final settlement value on 
the final settlement date of VIX options and futures (as opposed to 
those SPX options that cannot and do not have a bearing on the final 
settlement value). The Exchange notes that as it relates to CBOE Short-
Term Volatility Index (``VXST'') options and futures,

[[Page 30682]]

Footnote 21 excepts from the assessment of the Hybrid 3.0 Execution Fee 
SPX options that are executed during opening rotation and which are 
used to determine the final settlement value on the final settlement 
date of VXST options and futures.\3\ The Exchange is seeking to 
similarly amend this language to exclude from the Hybrid 3.0 Execution 
Surcharge only those SPX options that are executed during opening 
rotation and which have the expiration that contribute to the VXST 
settlement calculation. The Exchange believes that because the VXST 
settlement value is also be [sic] based upon SPX options on the 
standard third-Friday expiration, it is not appropriate to assess the 
surcharge to those SPX options that are or can be used in determining 
the final settlement value on the final settlement date of VXST options 
and futures (as opposed to those SPX options that cannot and do not 
have a bearing on the final settlement value). The Exchange believes it 
is reasonable to apply the same fees and fees structure to SPX options 
that have the expiration that is used to determine final settlement 
value on settlement date of both VIX and VXST options and futures.
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    \3\ VXST, because it expires weekly instead of monthly, uses 
SPXW options to determine the 9-day VXST settlement value except for 
the one week a month for which there are not expiring SPXW options. 
That week is the standard third-Friday expiration, and for that 
week, VXST uses SPX options to determine the 9-day VXST settlement 
value.
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    Similarly, the Exchange next proposes to provide that it will waive 
the SPXW Customer Priority Surcharge for orders in SPX Weeklys 
(``SPXW'') options in the SPXW electronic book that are executed during 
opening rotation and which have the expiration that contribute to the 
VXST settlement calculation. Currently, Footnote 31 states that such 
surcharge applies to all customer contracts executed electronically 
``except those contracts executed by a floor broker using a PAR 
terminal and orders in SPXW options in the SPXW electronic book that 
are executed during opening rotation on the final settlement date of 
VXST options and futures in which SPXW options are being used to 
determine the final settlement value.'' The Exchange seeks to amend 
this language and provide that the waiver of the SPXW Customer Priority 
Surcharge is applicable for SPXW options in the SPXW electronic book 
that are executed during opening rotation on the final settlement date 
of VXST options and futures and which have the expiration that 
contribute to the VXST settlement calculation. As explained above, the 
Exchange does not want to assess a surcharge for the only possible 
method of participation in the VXST settlement process, but wants to 
limit this exception to those options which have the expiration that 
contributed to the VXST settlement calculation on the final settlement 
date.
    Lastly, the Exchange wishes to make a clarification regarding the 
option classes included in the Customer Large Trade Discount program. 
This proposed change is solely administrative and clarifying and will 
not amend any current fees. The Customer Large Trade Discount program 
(the ``Discount'') provides a discount in the form of a cap on the 
quantity of customer (``C'' origin code'') contracts that are assessed 
transactions fees in certain options classes. The Discount table in the 
Fees Schedule sets forth the quantity of contracts necessary for a 
large customer trade to qualify for the Discount, which varies by 
product. Currently, under the ``Products'' section in the Discount 
table, the following S&P products for which the Discount is in effect 
are listed: ``SPX, SPXpm, SRO.'' Customer transaction fees for each of 
these products are only charged up to the first 10,000 contracts. 
Currently, SPX Weeklys (``SPXW'') and SPX Quarterlys (``SPXQ'') are not 
separately spelled out in the Discount table, as SPXW and SPXQ fall 
within the universe of SPX transactions. The Exchange is proposing 
however, to clarify and make clear in the text of the Fees Schedule 
that the term ``SPX'' is intended to include SPXW and SPXQ options. The 
Exchange notes that the term ``SPX'' has been interpreted to date to 
include SPXW and SPXQ options for purposes of the Discount program. The 
Exchange believes the proposed rule change will make it clear to all 
market participants that the term ``SPX'' as used in the Discount table 
includes SPXW and SPXQ options. The Exchange believes the proposed 
addition of rule text will provide greater clarity for customers and 
will allow market participants to better understand how fees are 
applied.
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 Section 
6(b)(4) of the Act,\5\ 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)(4).
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    The Exchange believes that the proposed changes to Footnote 21 
related to the Hybrid 3.0 Execution Surcharge and Footnote 31 related 
to the SPXW Customer Priority Surcharge are reasonable because they 
will result in market participants at times not being required to pay 
these surcharges for SPX and/or SPXW transactions in the circumstances 
described. The Exchange believes it is equitable and not unfairly 
discriminatory to exclude from the Hybrid 3.0 Execution Surcharge and 
SPXW Customer Priority Surcharge only those options that are executed 
during opening rotation and which have the expiration that contribute 
to the VIX or VXST settlement calculation because, as discussed above, 
the VIX and VXST settlement values are based upon those SPX or SPXW 
options and the Exchange therefore wants to encourage trading in those 
options at the opening on settlement days. Additionally, the Exchange 
believes the proposed rule change will encourage the trading of SPX and 
SPXW options that have the expiration that contribute to the VIX or 
VXST settlement calculation at the opening on settlement days, which 
will provide additional liquidity and enhance competition in those 
securities, which ultimately benefits all CBOE TPHs and all investors.
    Finally, the Exchange believes the amendment to the Customer Large 
Trade Discount table will promote just and equitable principles of 
trade by clarifying to Trading Permit Holders that SPXW and SPXQ fall 
within the universe of transactions for purposes of the Discount 
program, thereby eliminating potential confusion and removing 
impediments to and perfecting the mechanism of a free and open market 
and a national market system. Providing a clearer representation of 
fees in the Exchange fee schedule will remove any confusion that may 
exist with the current wording in the Fees Schedule. The proposed 
changes are equitable and not unfairly discriminatory because bringing 
clarity to the Exchange Fees Schedule benefits all Trading Permit 
Holders.

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

[[Page 30683]]

change will impose any burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act 
because all of the proposed changes will apply to all market 
participants. CBOE 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 changes only apply to trading on CBOE. To the extent that any 
of the proposed changes makes CBOE a more attractive market for market 
participants on other exchanges, such market participants may elect to 
become market participants on CBOE.

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 \6\ and paragraph (f) of Rule 19b-4 \7\ 
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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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 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-2014-045 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-2014-045. 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 office of the CBOE. 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-2014-045 and should be 
submitted on or before June 18, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-12225 Filed 5-27-14; 8:45 am]
BILLING CODE 8011-01-P