Document ID: SEC-2014-0201-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2014-02-03T05:00Z

[Federal Register Volume 79, Number 22 (Monday, February 3, 2014)]
[Notices]
[Pages 6251-6253]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-02139]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71423; File No. SR-CBOE-2014-008]

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

January 28, 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 January 17, 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.

[[Page 6252]]

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 regarding 
subcabinet trades. Subcabinet trades are 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). These trades are often executed 
in order to close out positions prior to expiration and therefore 
remove the risks or capital costs associated with open positions.
    The Exchange hereby proposes to explicitly state that the Exchange 
will assess no transaction fees or surcharges for subcabinet trades. 
This is because the Exchange believes that enabling market participants 
to close out positions at no cost allows those market participants to 
reduce risk associated with near-worthless positions and free up 
capital for other trading purposes. This serves to increase volume and 
profit opportunity in CBOE's non-subcabinet options series and across 
all CBOE products, which benefits both the Exchange and all of the 
Exchange's market participants. The Exchange desires to make clear that 
it will assess the Sales Value Fee for subcabinet trades, as the Sales 
Value Fee is assessed on transactions when the Exchange must pay some 
outside party (pursuant to Section 31 of the Exchange Act, or to 
another exchange) in relation to such transactions.
    The Exchange has a number of fee-related programs that provide for 
reduced or limited fees based on achieving certain volume 
thresholds.\3\ As the Exchange proposes to state that it will not 
assess fees for subcabinet trades, the Exchange also proposes to state 
that subcabinet trades will also not count towards any volume 
thresholds or volume threshold calculations.\4\ The Exchange has 
determined that it is not economically viable to count transactions for 
which fees are not assessed towards the volume thresholds of programs 
that offer lowered fees based on reaching those volume thresholds.
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    \3\ For these purposes, these programs are the Liquidity 
Provider Sliding Scale, the CBOE Proprietary Products Sliding Scale, 
and the Customer Large Trade Discount, (see the tables bearing those 
names on the Exchange Fees Schedule for more details on those 
programs) as well as the program, described in Footnote 25 of the 
Fees Schedule, 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 (together, the 
``Exchange Fee Programs'').
    \4\ The Exchange will append the footnote number 32, which 
includes this statement, to the tables on the Fees Schedule that 
apply to the Exchange Fee Programs.
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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.\5\ Specifically, the Exchange believes the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\6\ 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. The Exchange believes that it is 
reasonable to not assess fees for subcabinet trades because market 
participants executing such trades will not have to pay a fee for such 
transactions. The Exchange believes that it is equitable and not 
unfairly discriminatory to not assess fees or surcharges for subcabinet 
trades because subcabinets are of such minimal economic value that 
assessing almost any fee would render such transactions not 
economically viable for the market participants holding the positions, 
thereby causing the inefficiency of positions being left open merely 
because it is more expensive to close them. The Exchange believes that 
enabling market participants to close out positions at no cost allows 
those market participants to reduce risk associated with near-worthless 
positions and free up capital for other trading purposes. This serves 
to increase volume and profit opportunity in CBOE's non-subcabinet 
options series and across all CBOE products, which benefits both the 
Exchange and all of the Exchange's market participants. Also, all 
market participants will be able to avoid being assessed fees for 
subcabinet trades.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78(b)(4).
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    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to exclude volume from subcabinet trades 
towards the Exchange Fee Programs because such trades are not assessed 
fees. It does not make economic sense (nor is it economically viable) 
to count transactions towards programs that provide lower fees when 
such transactions are not assessed fees, and it seems fair to exclude 
subcabinet trades from such programs when subcabinet trades are not 
being assessed fees. Similarly, the Exchange believes that it is 
reasonable, equitable and not unfairly discriminatory to assess the 
Sales Value Fee for subcabinet trades, as the Sales Value Fee is 
assessed on transactions when the Exchange must pay some outside party 
(pursuant to Section 31 of the Exchange Act, or to another exchange) in 
relation to such transactions. In this circumstance, the Exchange 
believes that it would not be economically viable to pay fees to those 
outside parties when no fee is being assessed by the Exchange for such 
transactions.

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 change will impose any burden on intramarket competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act because all market participants are able to avoid being 
assessed fees for subcabinet trades, and because the exclusion of 
subcabinet trades from counting towards the Exchange Fee Programs 
applies to all market participants to whom such programs apply. 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 change only 
affects trading on CBOE. Indeed, explicitly stating that subcabinet 
trades will not be assessed fees may encourage other exchanges to do 
the same, causing greater competition. To the extent that the proposed 
rule change makes CBOE a more attractive trading venue for market 
participants on other exchanges, such market participants may elect to 
become CBOE market participants.

[[Page 6253]]

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 \7\ and paragraph (f) of Rule 19b-4 \8\ 
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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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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-2014-008 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2014-008. 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-2014-008 and should be 
submitted on or before February 24, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-02139 Filed 1-31-14; 8:45 am]
BILLING CODE 8011-01-P