Document ID: SEC-2016-1594-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2016-09-07T04:00Z

[Federal Register Volume 81, Number 173 (Wednesday, September 7, 2016)]
[Notices]
[Pages 61727-61729]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-21380]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78741; File No. SR-CBOE-2016-063]

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 31, 2016.
    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 19, 2016, 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to make changes to the Non-Standard Booth 
Rental Fee in the Facility Fees section of the 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 the Fees Schedule. Specifically, the 
Exchange proposes changes to the Non-Standard Booth Rental Fee in the 
Facility Fees section of the Fees Schedule. In general, a ``standard 
booth'' on the Exchange refers to a portion of designated space on the 
trading floor of the Exchange adjacent to particular trading crowds, 
which may be occupied by a Trading Permit Holder (``TPH''), clerks, 
runners, or other support staff for operational and other business-
related activities. The term ``non-standard booth'' generally refers to 
space on the trading floor of the Exchange that is set off from a 
trading crowd, which may be rented by a TPH for whatever support, 
office, back-office, or any other business-related activities for which 
the TPH may choose to use the space.
    Currently, TPHs that rent non-standard booth space on the floor of 
the Exchange pay a monthly fee on a per square foot basis for use of 
the space. The per square foot fee that a TPH pays for non-standard 
booth space is determined based on the size of the booth and length of 
the non-standard booth lease term that the TPH entered

[[Page 61728]]

into with the Exchange. In general, the greater the size of the booth 
and the longer the term of the lease, the less the TPH pays per square 
foot of non-standard booth space. Specifically, non-standard booth 
rental fees are assessed according to the following table: \3\
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    \3\ See Non-Standard Booth Rental Fee in the Facility Fees 
section of the Fees Schedule available at http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf.

----------------------------------------------------------------------------------------------------------------
                                       Booth size           Per sq. ft.        Per sq. ft.        Per sq. ft.
----------------------------------------------------------------------------------------------------------------
Non-Standard Booth Rental Fee..  Extra Large (1,000 sq.  $2.83............  $2.75............  $2.69
                                  ft. or greater).
                                 Large (800-999 sq.      4.12.............  4.00.............  3.91
                                  ft.).
                                 Medium (401-799 sq.     4.89.............  4.74.............  4.65
                                  ft.).
                                 Small (400 sq. ft. or   7.72.............  7.49.............  7.33
                                  less).
                                 Length of Lease.......  1 Year...........  2 Years (97%)....  3 Years (95%)
----------------------------------------------------------------------------------------------------------------

    The Exchange notes that under the current Non-Standard Booth Rental 
Fee table, a TPH that rents more space for less time than another TPH 
may pay a lower total monthly non-standard booth rental fee than the 
TPH that rents less space for more time. For example, under the current 
Non-Standard Booth Rental Fee table, a TPH that rents a 700 square foot 
non-standard booth for three years will pay $4.65 per square foot or a 
total non-standard booth rental fee of $3,255 per month, whereas a TPH 
that rents an 1,000 square foot non-standard booth for one year will 
pay $2.83 per square foot or a total non-standard booth rental fee of 
$2,830 per month. Thus, as demonstrated by the above example, in many 
cases, a TPH may rent a bigger non-standard booth for less than a 
smaller non-standard booth regardless of the lease term. The Exchange 
believes that this regime creates an incentive for TPHs to rent more 
non-standard booth space than they may need.
    The Exchange proposes to amend the Fees Schedule so that TPHs that 
rent more non-standard booth space would pay a higher non-standard 
booth rental fee than those that rent less space. In particular, the 
Exchange proposes to amend the Fees Schedule to include the following 
non-standard booth rental fee table:

------------------------------------------------------------------------
                                                     Square footage fee
   Non-Standard booth rental fee      Base booth      (up to 1,000 sq.
                                      rental fee            ft.)
------------------------------------------------------------------------
                                            $1,250  ....................
                                                    $1.70 (per sq. ft.)
------------------------------------------------------------------------

Under the Exchange's proposal, a TPH that rents non-standard booth 
space on the floor of the Exchange would pay a base non-standard booth 
rental fee of $1,250 per month in addition to a square footage fee of 
$1.70 per square foot per month based on the size of the TPH's non-
standard booth. Thus, under the proposed non-standard booth rental fee 
change, a TPH that rents more non-standard booth space than another TPH 
would pay more than the TPH with less space (i.e. $1.70 more per each 
additional square foot that the TPH rents). For example, under the 
proposed non-standard booth rental fee, a TPH that rents a 400 square 
foot non-standard booth would pay a total non-standard booth rental fee 
of $1,930 per month (i.e. $1,250 (base fee) + ($1.70 x 400 = $680 
(square footage fee)) = $1930) while a TPH that rents an 1,000 square 
foot non-standard booth would pay $2,950 per month ($1,250 + ($1.70 x 
1,000) = $2,950).\4\ Under the proposed fee change, a TPH or TPH 
organization would be able to rent up to 1,000 square feet of non-
standard booth space on the floor of the Exchange. The 1,000 square 
foot cap would help ensure the availability of sufficient space on the 
floor of the Exchange to accommodate TPHs and TPH organizations that 
wish to rent non-standard booths.\5\
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    \4\ There are currently four TPH organizations that rent non-
standard booths on the floor of the Exchange. Notably, under the 
proposed rule change, non-standard booth rental fees would be 
similar to what they are now under the current Fees Schedule. In no 
case would a TPH's non-standard booth rental fee increase by more 
than $120 per month and in some cases, non-standard booth rental 
fees would decrease under the proposed rule change.
    \5\ No TPH currently rents more than 1,000 feet of non-standard 
booth space on the floor of the Exchange.
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    Notably, under the proposed fee change, effective September 1, 
2016, the Exchange would no longer offer discounts for longer lease 
terms--all lease terms would be for a period of one year.\6\ Thus, the 
separate one year, two year, and three year columns in the Non-Standard 
Booth Rental Fee section of the current Fees Schedule would be deleted 
and the Notes in the proposed Non-Standard Booth Rental Fee table of 
the Fees Schedule would provide that non-standard booths must be leased 
for a term of one year. In addition, the Exchange proposes to make 
other corresponding changes to the Notes section of the Non-Standard 
Booth Rental Fee table in the Fees Schedule reflecting that non-
standard booth rental fees would continue to be assessed on a monthly 
basis and would include both the base booth rental fee plus the 
appropriate square footage fee as determined based on the size of the 
booth.\7\ The current early termination penalty provisions in the Notes 
section of the Non-Standard Booth Rental Fee table would remain 
unchanged, but would include an additional provision providing that 
early termination penalties will not be assessed for early termination 
of leases entered into prior

[[Page 61729]]

to August 1, 2016 that are terminated by mutual agreement of the TPH 
organization and the Exchange.\8\ The Booth Pass-Through Fee would 
remain unchanged.\9\
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    \6\ The Exchange's proposed rule change, however, would not 
apply retroactively. Unexpired leases signed under the terms 
provided in the current Fees Schedule that are currently in force 
would be effective and enforceable until expiration unless 
termination were mutually agreed to between the TPH and the 
Exchange. As stated above, there are currently four TPH 
organizations that rent non-standard booths on the floor of the 
Exchange pursuant to preexisting leases (each of which expires in 
2016). The Exchange believes that several of these TPH organizations 
may wish to terminate their leases by mutual agreement with the 
Exchange because renewal under the proposed rule change would result 
in a beneficial cost savings. The Exchange would agree to terminate 
all such preexisting leases with the appropriate consent of each 
respective TPH.
    \7\ Compare proposed Notes language with the current Notes 
section of the Non-Standard Booth Rental Fees Table in the Fees 
Schedule, which provides that a Trading Permit Holder (``TPH'') 
organization will pay the fees per square foot on a monthly basis 
for use of a non-standard booth. Currently, the fee per square foot 
a TPH organization will pay is determined based on the size of the 
booth and length of the lease the TPH organization enters into with 
the Exchange. The greater the size of the booth and the longer the 
term of the lease will result in a reduced fee per square foot.
    \8\ Under the early termination provisions in Notes to the Non-
Standard Booth Rental Fee in the current Fees Schedule, a TPH 
organization that terminates its lease prior to its expiration date 
will, on the effective date of such termination, pay to the Exchange 
an amount equal to twenty five percent (25%) of the balance of the 
monthly charges remaining in the lease term.
    \9\ Pursuant to the Booth Pass-Through Fee, TPHs bear 
responsibility for all costs associated with any modifications and 
alterations to any trading floor booths leased by the TPH (or TPH 
organization) and must reimburse the Exchange for all costs incurred 
in connection therewith.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\10\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \11\ 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. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \12\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ Id.
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    In particular, the Exchange believes that the proposed rule change 
is proposed rule change is consistent with Section 6(b)(4) of the 
Act,\13\ which requires that Exchange rules provide for the equitable 
allocation of reasonable dues, fees, and other charges among its TPHs 
and other persons using its facilities. The Exchange believes that non-
standard booth rental fees should be designed such that TPHs that rent 
more non-standard booth space on the floor of the Exchange pay more 
than those that rent less non-standard booth space. The Exchange 
believes that the proposed rule change is consistent with the Act in 
that it provides for equitable allocation of reasonable fees among TPHs 
by requiring those that use more resources to pay more than those that 
use less. The Exchange also believes that the proposed rule change 
would simplify the way that non-standard booth rental fees are assessed 
on the Exchange and add clarity to the Fees Schedule. The Exchange 
believes that adding clarity to the Rules is in the best interests of 
investors and the general public.
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    \13\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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. Rather, the Exchange 
believes that the proposed rule change will relieve any burden on, or 
otherwise promote, competition by adopting a simpler fee structure for 
non-standard booth rental on the floor of the Exchange. Under the 
proposed non-standard booth rental fee all TPHs would pay the same base 
rate with those that rent more space paying a higher square footage fee 
than those that rent less space on proportional basis.

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 \14\ and paragraph (f) of Rule 19b-4 \15\ 
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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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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-2016-063 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-2016-063. 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 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-2016-063, and should be 
submitted on or before September 28, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-21380 Filed 9-6-16; 8:45 am]
 BILLING CODE 8011-01-P