Document ID: SEC-2018-0613-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2018-04-18T04:00Z

[Federal Register Volume 83, Number 75 (Wednesday, April 18, 2018)]
[Notices]
[Pages 17203-17205]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-08055]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83041; File No. SR-CBOE-2018-027]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to the Select Customer Options Reduction Program

April 12, 2018.
    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 April 2, 2018, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe 
Options'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change a 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 the Select Customer Options 
Reduction program.
    The text of the proposed rule change is also available on the 
Exchange's

[[Page 17204]]

website (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 Select Customer Options 
Reduction program (``SCORe'').\3\ By way of background, SCORe is a 
recently adopted discount program for Retail ,\4\ Non-FLEX Customer 
(``C'' origin code) volume in the following options classes: SPX 
(including SPXW), VIX, RUT, MXEA, MXEF & XSP (``Qualifying Classes''). 
The SCORe program is available to any Trading Permit Holder (``TPH'') 
Originating Clearing Firm or non-TPH Originating Clearing Firm that 
sign up for the program.\5\ The SCORe program currently utilizes two 
measures for participation and discounts: (1) The Qualifying Tiers, 
which determine whether a firm qualifies for the discounts in either 
Tier A or Tier B and (2) the Discount Tiers, which determine the 
Originating Firm's applicable discount tiers and corresponding 
discounts. The Exchange proposes to amend the lower threshold for Tier 
B of the Qualifying Tiers.
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    \3\ The proposed SCORe amendment will be effective April 1, 2018 
(i.e., April discounts will be based on March 2018 volume using the 
proposed threshold change).
    \4\ For purposes of the program ``Retail'' orders will be 
defined as Customer orders for which the original order size (in the 
case of a simple order) or largest leg size (in the case of a 
complex order) is 100 contracts or less.
    \5\ For this program, an ``Originating Clearing Firm'' is 
defined as either (a) the executing clearing Options Clearing 
Corporation (``OCC'') number on any transaction which does not also 
include a Clearing Member Trading Agreement (``CMTA'') OCC clearing 
number or (b) the CMTA in the case of any transaction which does 
include a CMTA OCC clearing number.
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    To determine an Originating Firm's Qualifying Tier, the Originating 
Firm's total Retail volume in the Qualifying Classes is divided by the 
Originating Firm's total Customer volume, Retail and non-Retail, in the 
Qualifying Classes. Currently if an Originating Firm's Retail volume is 
between 35.00% and 69.99%, the Originating Firm will qualify for Tier B 
discounts. If an Originating Firm's Retail volume is at or above 
70.00%, the Originating Firm will qualify for Tier A discounts. The 
Qualifying Tier that is applied in a given month is based on an 
Originating Firm's Retail volume in the prior month (e.g., an 
Originating Firm's volume in January determines which Qualifying Tier 
applies in February). The Exchange proposes to amend the lower 
threshold to qualify for Tier B. Particularly, the Exchange proposes to 
lower the 35.00% threshold to 20.00% such that in order to qualify for 
Tier B discounts, an Originating Firm's Retail volume would need to be 
between 20.00% and 69.99%. The purpose of the proposed change is to 
adjust for current volume trends and make it easier for Originating 
Firms to obtain discounts.
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.\6\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \7\ 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 
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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed amendment to SCORe is reasonable 
because it adjusts for current volume trends and makes it easier for 
Customers orders from Originating Firms that register for the program 
to meet the qualifying threshold and receive the corresponding 
discount. The Exchange notes that SCORe will continue to provide an 
incremental incentive for Originating Firms to strive for the highest 
tier level, which provides increasingly higher discounts. The proposed 
rule change is designed to encourage increased Retail volume in the 
Qualifying Classes, which provides increased volume and greater trading 
opportunities for all market participants. The Exchange believes the 
proposed change is equitable and not unfairly discriminatory because 
the qualifying volume thresholds apply to all registered Originating 
Firms uniformly. The Exchange also notes that the rates set forth in 
the Discount Tiers are not changing.

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 because, while the discounts 
apply only to Customer orders from Originating Firms, the Program is 
designed to encourage increased Customer options volume in the 
Qualifying Classes, which provides greater trading opportunities for 
all market participants. Additionally, there is a history in the 
options markets of providing preferential treatment to Customers 
orders. The Exchange notes that the proposed change applies to all 
Originating Firms uniformly. The Exchange believes that the proposed 
rule change will not cause an unnecessary burden on intermarket 
competition because the Qualifying Classes are products that only trade 
on Cboe Options. To the extent that the proposed changes make the 
Exchange a more attractive marketplace for market participants at other 
exchanges, such market participants are welcome to become Cboe Options 
market participants.

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 17205]]

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 \9\ and paragraph (f) of Rule 19b-4 \10\ 
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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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 [email protected]. Please include 
File Number SR-CBOE-2018-027 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-2018-027. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CBOE-2018-027 and should be submitted on 
or before May 9, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-08055 Filed 4-17-18; 8:45 am]
 BILLING CODE 8011-01-P