Document ID: SEC-2014-1580-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2014-09-19T04:00Z

[Federal Register Volume 79, Number 182 (Friday, September 19, 2014)]
[Notices]
[Pages 56415-56418]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-22336]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73100; File No. SR-CBOE-2014-070]

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 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 September 2, 2014, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule

[[Page 56416]]

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 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. The Exchange 
always strives for clarity in its rules and Fees Schedule, so that 
market participants may best understand how rules and fees apply. As 
such, the Exchange proposes a number of changes to clarify its Fees 
Schedule. First, the Exchange proposes to delete all references to 
``SPXQ'' in the Fees Schedule. On July 3, 2014, the options symbol for 
the SPX End-Of-Quarter option series changed from SPXQ to SPXW. The 
SPXW symbol now includes both End-of-Week and End-of-Quarter PM-settled 
options series. Accordingly, the symbol ``SPXQ'' is now obsolete and 
therefore unnecessary to maintain in the Fees Schedule. The Exchange 
proposes to remove all such references to maintain clarity in the Fees 
Schedule and avoid potential confusion.
    Next, the Exchange proposes to make certain amendments to Footnote 
5 of the Fees Schedule. First, the Exchange proposes to reorganize 
Footnote 5 and separate the contents of the footnote into two separate 
footnotes. Specifically, Footnote 5 currently addresses both floor 
brokerage fees and PAR Official fees. The Exchange proposes to address 
floor brokerage fees and PAR Official fees separately by removing the 
language in current Footnote 5 relating to PAR Official fees and 
relocating that language to new Footnote 33. The Exchange believes the 
proposed change would make the Fees Schedule easier to read and reduce 
potential confusion. The Exchange notes that the language relating to 
PAR Official fees that is being relocated to Footnote 33 is the same 
language currently in Footnote 5, with one exception. Particularly, 
Footnote 5 currently provides that ``PAR Official Fees are waived for 
all classes for February 2011 and for all classes except VIX, VXST and 
Volatility Index Options for March 2011.'' The Exchange proposes to 
eliminate this sentence and not carry it over to new Footnote 33 as it 
is no longer applicable. The Exchange believes deletion of outdated 
language further maintains clarity in the Fees Schedule.
    The Exchange also proposes to make a clarifying amendment to 
Footnote 24 of the Fees Schedule. The first sentence of Footnote 24 
provides that the Market-Maker Trading Permit Sliding Scale is 
available for all Market-Maker Trading Permits held by affiliated 
Trading Permit Holders (TPHs) and TPH Organizations that are used for 
appointments in any options classes other than ``SPX, SPXpm, VIX, VXST, 
OEX and XEO.'' The second sentence of Footnote 24 however, states ``Any 
Market-Maker Trading Permits used for these four classes, whether in 
whole or in part, are excluded from this sliding scale and will be 
priced at $5,000/month [sic].'' The Exchange proposes to delete the 
word ``four'' from Footnote 24 as it does not correspond with the six 
classes mentioned in the previous sentence. The Exchange notes that the 
reference to the number of classes excluded from the sliding scale was 
inadvertently not updated when fees for both SPXpm and VXST were 
incorporated into the Fees Schedule. The Exchange believes the removal 
of the inaccurate reference to the excluded classes avoids potential 
confusion as to which classes are excluded for purposes of the Market-
Maker Trading Permit Sliding Scale.
    Next, the Exchange proposes to make certain clarifying changes 
related to the Floor Broker Trading Permit Sliding Scale (``Sliding 
Scale'') table. The Exchange recently amended its Fees Schedule to add 
Footnote 32, which provides ``The Exchange will assess no transaction 
fees or surcharges for subcabinet trades (limit orders with a price of 
at least $0 but less than $1 per options contract, per Exchange Rule 
6.54, Interpretation and Policy .03). Subcabinet trades will also not 
count towards any volume thresholds or volume threshold calculations.'' 
\3\ Footnote 32 was appended to all fee-related programs that provide 
for reduced or limited fees based on achieving certain volume 
thresholds. The Exchange notes that Footnote 25 (which is appended to 
the Sliding Scale table), describes a program that provides rebates to 
Floor Broker Trading Permit Holders for executing certain amounts of 
customer open outcry contracts in multiply-listed options in a month. 
As such, Footnote 32 was also appended to the Sliding Scale table to 
make clear that subcabinet trades would not count towards those volume 
thresholds. The Exchange notes that although Footnote 25, which is 
applicable to the Sliding Scale, references a volume based rebate 
program, the Floor Broker Sliding Scale itself is not based upon volume 
thresholds but rather number of actual Trading Permits held by a 
Trading Permit Holder. The Exchange believes that as such, it may be 
confusing to append a footnote that relates to volume thresholds (as 
well as unrelated transaction fees for subcabinet trades) to a table 
referencing a sliding scale that itself is not based upon volume 
thresholds. The Exchange therefore proposes to eliminate the reference 
to Footnote 32 from the Sliding Scale table and in its place amend 
Footnote 25 to explicitly state that subcabinet trades do not count 
towards the volume thresholds for the rebate program described in 
Footnote 25. The Exchange notes that no substantive changes are being 
made by the proposed rule change. The Exchange is proposing this change 
to merely alleviate potential confusion and make the Fees Schedule 
easier to read.
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    \3\ See Securities Exchange Act Release No. 71423 (January 28, 
2014) 79 FR 6251 (February 3, 2014) (SR-CBOE-2014-008).
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    Finally, the Exchange proposes to increase the Linkage fee for non-
customers orders from $0.55 per contract to $0.65 per contract. The 
purpose of this proposed change is to cover increased costs associated 
with routing orders through Linkage and paying the transaction fees for 
such executions at other exchanges. The Exchange notes that the amount 
of this fee is lower than corresponding non-

[[Page 56417]]

customer Linkage fees assessed by other exchanges.\4\
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    \4\ See, e.g., NASDAQ OMX PHLX LLC (``PHLX'') Pricing, Non-
Customer Routing Fee of $0.97 per contract.
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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 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 
[sic] 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) \7\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. The Exchange also believes the 
proposed rule change is consistent with Section 6(b)(4) of the Act,\8\ 
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\ Id.
    \8\ 15 U.S.C. 78f(b)(4).
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    In particular, the Exchange believes that the proposed 
clarifications to the Fees Schedule will make the Fees Schedule easier 
to read and alleviate potential confusion. 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.
    The Exchange's proposal to increase the non-customer Linkage fee 
from $0.55 to $0.65 is reasonable because such increase will help 
offset the costs associated with routing orders through Linkage and 
paying the transaction fees for such executions at other exchanges. 
Additionally, the amount of the proposed increase is lower than 
corresponding non-customer Linkage fees assessed by other exchanges.\9\ 
This fee amount will be assessed to all non-customer orders routed via 
Linkage. The Exchange believes that this proposed change is equitable 
and not unfairly discriminatory because Non-Customer (e.g., broker-
dealer proprietary) orders originate from broker-dealers who are by and 
large more sophisticated than public customers and can readily control 
the exchange to which their orders are routed. While there may be some 
sophisticated customers who are capable of directing the exchange to 
which their orders are routed, generally, retail customers submit 
orders to their brokerages but do not or cannot specify the exchange to 
which a customer order is sent. Therefore, non-customer order flow can, 
in most cases, more easily route directly to other markets if desired 
and thus avoid Linkage Fees. Therefore, it is equitable to assess a 
reasonable fee to cover the costs incurred for processing non-customer 
Linkage orders while continuing to exempt such customer orders.
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    \9\ See supra note 2 [sic].
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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. In particular, the increase to 
the non-customer Linkage Fee will apply equally to all non-customers. 
Additionally, although different linkage fees are assessed to different 
market participants (i.e., non-customers vs customers), as described 
above, non-customer order flow can, in most cases, more easily route 
directly to other markets if desired and thus avoid Linkage Fees. 
Therefore, it is equitable to assess a reasonable fee to cover the 
costs incurred for processing non-customer Linkage orders while 
continuing to exempt such customer orders. The Exchange believes that 
the proposal to increase the linkage fee amount assessed to non-
customers will not cause an unnecessary burden on intermarket 
competition because the fee amount is lower than assessed at other 
exchanges.\10\ 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. 
Finally, the proposed changes to alleviate confusion are not intended 
for competitive reasons and only apply to CBOE.
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    \10\ Id.
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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 \11\ and paragraph (f) of Rule 19b-4 \12\ 
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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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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-2014-070 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-2014-070. 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

[[Page 56418]]

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-2014-070, and should be submitted on or before 
October 10, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-22336 Filed 9-18-14; 8:45 am]
BILLING CODE 8011-01-P