Document ID: SEC-2014-1213-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2014-07-21T04:00Z

[Federal Register Volume 79, Number 139 (Monday, July 21, 2014)]
[Notices]
[Pages 42384-42386]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-17013]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72608; File No. SR-CBOE-2014-055]

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

July 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 July 1, 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 proposes to amend its Fees Schedule, to be effective 
July 1, 2014. First, the Exchange proposes to increase the fees for 
electronic Professional/Voluntary Professional (W) (``Professional'') 
and Joint Back Office (J) (``JBO'') executions in equity, ETF, ETN and 
index options classes (except, SPX, SPXW, SPXpm, SRO, OEX, XEO, VIX, 
VXST and VOLATILITY INDEXES (the ``Special Classes'')) from $0.30 to 
$0.45 for Penny Pilot Classes and $0.60 for Non-Penny Pilot Classes. 
The Exchange notes that the proposed fees are the same amount that are 
currently assessed to Broker-Dealers and non-Trading Permit Holder 
Market Makers. The Exchange also notes that this change is being 
proposed due to competitive reasons and that the increased amount is 
within the range of fees assessed for similar transactions on other 
exchanges.\3\
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    \3\ See PHLX Pricing, Section II, Multiply Listed Options Fees.
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    The Exchange also proposes to amend its Fees Schedule to adopt a 
fee of $200 per report per FBW group \4\ per month for daily reports 
provided to requesting users of the Exchange's aggregation Floor Broker 
Workstation (which are used on the Exchange trading floor to enter 
orders) (``FBW''). The Exchange licenses the FBW software from a third-
party vendor, which vendor operates FBW on behalf of the Exchange. This 
vendor also provides upon request by TPHs on an ad hoc basis reports 
related to their use of FBW. For example, some TPHs request reports 
related to the orders they enter on FBWs. Other TPHs request reports 
related to their market access control settings.\5\ Currently, TPHs 
receive these ad hoc reports at no charge. Recently, however, FBW users 
have requested that they automatically receive reports on a daily 
basis. The

[[Page 42385]]

FBW vendor has determined that the cost to provide a daily report for a 
TPH (or a TPH's FBW aggregation group, if applicable) is $200 per month 
and will assess to the Exchange a fee in this amount for the provision 
of each daily report (for each FBW aggregation group) to a TPH.\6\ As 
such, the Exchange proposes to charge a fee in the same amount ($200 
per report per month) \7\ to each TPH that requests to receive a daily 
report(s) (for each FBW aggregation group, if applicable). The proposed 
fee essentially passes through to each requesting TPH the cost charged 
to the Exchange for daily reports for that TPH so that the Exchange can 
recoup this cost. Receipt of the daily reports, and thus the proposed 
fee, will be optional for TPHs.
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    \4\ For business purposes, a Trading Permit Holder (``TPH'') 
firm may group FBW users within that firm into an FBW aggregation 
group (for example, a TPH may have an index group and an equity 
group). If a TPH has FBW aggregation groups, the proposed fee will 
be applied to each group. For example, if a TPH has an FBW index 
group and an FBW equity group, and the TPH requests that it receive 
daily market access control reports for both groups, the Exchange 
will charge the TPH $400/month under the proposed fee.
    \5\ FBW includes a market access control window in which TPHs 
can input parameters and settings (which are displayed for each FBW 
aggregation group) with respect to their orders to help them manage 
their trading risk. These risk controls include pre-order controls 
(such as quantity of contracts per order, premium amount per order, 
number of identical orders and frequency of order entry) and 
aggregate controls (such as actual and predictive values for premium 
amount per day, quantity of contracts per day, and the number of 
orders with a status of working). Use of the market access control 
window is voluntary. Pursuant to the CBOE Fees Schedule, the 
Exchange charges TPHs $100/month per login ID (capped at $2,000 per 
month for a TPH) for use of the market access controls window costs.
    \6\ TPHs that want to receive daily reports should request them 
from the Exchange (as they currently do with respect to the ad hoc 
reports).
    \7\ For example, if a TPH requests that it receive a daily 
report for its orders and a daily report for its market access 
control settings, the Exchange will charge the TPH $400 per month 
($200 for the order report and $200 for the market access control 
report).
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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.\8\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \9\ 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. The Exchange 
also believes the proposed rule change is consistent with Section 
6(b)(4) of the Act,\10\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ 15 U.S.C. 78f(b)(4).
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    In particular, the Exchange's proposal to increase the electronic 
Professional and JBO options transaction fee in Penny Pilot Options to 
$0.45 per contract and in Non-Penny Pilot Options to $0.60 is 
reasonable because the Exchange's fees will remain competitive with 
fees at other options markets.\11\ The Exchange believes that this 
proposed change is equitable and not unfairly discriminatory because 
the Exchange will assess Professionals, JBOs, Broker-Dealers and non-
Trading Permit Holder Market Makers the same electronic options 
transaction fees in Penny Pilot options and Non-Penny options. The 
Exchange notes that it does not assess Customers the electronic options 
transaction fees in Penny Pilot and Non-Penny Pilot options 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 Exchange notes that Market Makers are assessed lower 
electronic options transaction fees in Penny Pilot and Non-Penny Pilot 
options as compared to Professionals, JBOs, Broker Dealers and non-
Trading Permit Holder Market Makers because they have obligations to 
the market and regulatory requirements, which normally do not apply to 
other market participants (e.g., obligations to make continuous 
markets). Accordingly, the differentiation between electronic 
transaction fees for Customers, Market Makers and other market 
participants recognizes the differing contributions made to the 
liquidity and trading environment on the Exchange by these market 
participants.
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    \11\ See PHLX Pricing, Section II, Multiply Listed Options Fees.
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    The Exchange believes that the proposed fee of $200 per file per 
month (for each FBW aggregation group, if applicable) for the receipt 
of daily reports is reasonable because this is the cost imposed on the 
Exchange by the third-party vendor for the provision of these reports. 
The proposed fee merely allows the Exchange to recoup this cost by 
passing it through to the requesting TPH. The Exchange will not keep 
any of the fees assessed on TPHs. The Exchange believes that the 
proposed fee is equitable and not unfairly discriminatory because this 
fee is optional and will be assessed uniformly to all TPHs that request 
the daily market access control.

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 different 
electronic transaction fees are assessed to different market 
participants, these different market participants have different 
obligations and different circumstances (as described in the 
``Statutory Basis'' section above). For example, Market Makers have 
quoting obligations that other market participants do not have and 
Customer order flow enhances liquidity on the Exchange for the benefit 
of all market participants as described in above. The Exchange believes 
that the proposal to increase the fee amount assessed to electronic 
Professional and JBO executions in Penny Pilot and Non-Penny Pilot 
options will not cause an unnecessary burden on intermarket competition 
because the fee and fee amount is similar to fees assessed at other 
exchanges.\12\ 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.
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    \12\ See PHLX Pricing, Section II, Multiply Listed Options Fees.
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    Finally, CBOE does not believe that the proposed rule change to 
adopt a FBW Report Fee will impose any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act. 
The proposed fee will be assessed uniformly to all TPHs that use FBW 
and request the daily reports. Receipt of the daily reports (and thus 
the proposed fee) will be optional for TPHs. In addition, the proposed 
fee applies only to users of FBWs located at the Exchange and is not 
intended for competitive reasons. The proposed fee merely allows the 
Exchange to recoup the cost imposed on it by the third-party vendor for 
the provision of these daily reports by passing it through to each 
requesting TPH.

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.

[[Page 42386]]

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 \13\ and paragraph (f) of Rule 19b-4 \14\ 
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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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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-2014-055 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-2014-055. 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-2014-055 and should be 
submitted on or before August 11, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-17013 Filed 7-18-14; 8:45 am]
BILLING CODE 8011-01-P