Document ID: SEC-2015-1798-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2015-11-03T05:00Z

[Federal Register Volume 80, Number 212 (Tuesday, November 3, 2015)]
[Notices]
[Pages 67805-67808]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27913]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76288; File No. SR-CBOE-2015-096]

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

October 28, 2015.
    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 October 20, 2015, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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, effective October 
20, 2015. Specifically, commencing October 20, 2015, the Exchange will 
list new options on three FTSE Russell Indexes. More specifically, the 
Exchange proposes to establish fees for the Russell 1000 Index 
(``RUI''), Russell 1000 Value Index (``RLV'') and Russell 1000 Growth 
Index (``RLG'').
    By way of background, a specific set of proprietary products are 
commonly included or excluded from a variety of programs, qualification 
calculations and transactions fees. In lieu of listing out these 
products in various sections of the Fees Schedule, the Exchange uses 
the term ``Underlying Symbol List A,'' to represent these products. 
Currently, Underlying Symbol List A is defined in Footnote 34 and 
represents the following proprietary products: OEX, XEO, RUT, SPX 
(including SPXw), SPXpm, SRO, VIX, VXST, VOLATILITY INDEXES and binary 
options. The Exchange notes that the reason the products in Underlying 
Symbol List A are often collectively included or excluded from certain 
programs, qualification calculations and

[[Page 67806]]

transactions fees is because the Exchange has expended considerable 
resources developing and maintaining its proprietary, exclusively-
listed products. Similar to the products currently represented by 
``Underlying Symbol List A,'' RUI, RLV and RLG are not listed on any 
other exchange. As such, the Exchange proposes to exclude or include 
RUI, RLV and RLG in the same programs as the other products in 
Underlying Symbol List A, as well as add RUI, RLV and RLG to the 
definition of Underlying Symbol List A in Footnote 34. Specifically, 
like the other products in Underlying Symbol List A, the Exchange 
proposes to except RUI, RLV and RLG from the Liquidity Provider Sliding 
Scale, the Marketing Fee, the Clearing Trading Permit Holder Fee Cap 
(``Fee Cap'') and exemption from fees for facilitation orders, and the 
Order Router Subsidy (ORS) and Complex Order Router Subsidy (CORS) 
Programs. Like all other products in Underlying Symbol List A (with the 
exception of SROs), the Exchange proposes to apply to RUI, RLV and RLG 
the CBOE Proprietary Products Sliding Scale. Unlike the products in 
Underlying Symbol List A, the Exchange does intend to keep RUI, RLV and 
RLG volume in the calculation of qualifying volume for the rebate of 
Floor Broker Trading Permit fees. The Exchange notes that although RUI, 
RLV and RLG are being added to ``Underlying Symbol List A'', it wishes 
to include RUI, RLV and RLG in the calculation of the qualifying volume 
for the rebate of Floor Broker Trading Permit fees. The Exchange wishes 
to continue to encourage Floor Brokers to execute open-outcry trades in 
these classes and believes that include [sic] them in the qualifying 
volume will provide such incentive. The Exchange finally notes, that 
similarly, RUT is also included in the calculation of the qualifying 
volume of the rebate of Floor Broker Trader Permit Fees, 
notwithstanding its inclusion in Underlying Symbol List A.
    The Exchange next proposes to establish transaction fees for RUI, 
RLV, and RLG. Particularly, the Exchange proposes to assess the same 
fees for RUI, RLV, and RLG as apply to Russell 2000 Index (``RUT'') 
options. Transaction fees for RUI, RLV, and RLG options will be as 
follows (all listed rates are per contract):

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Customer.......................................................    $0.18
Clearing Trading Permit Holder Proprietary.....................      .25
CBOE Market-Maker/DPM..........................................     0.20
Joint Back-Office, Broker-Dealer, Non-Trading Permit Holder         0.65
 Market-Maker, Professional/Voluntary Professional (non-AIM
 Electronic)...................................................
Joint Back-Office, Broker-Dealer, Non-Trading Permit Holder         0.25
 Market-Maker, Professional/Voluntary Professional (Manual and
 AIM)..........................................................
------------------------------------------------------------------------

    The Exchange also proposes to apply to RUI, RLV, and RLG, like RUT, 
the Floor Brokerage Fee of $0.04 per contract ($0.02 per contract for 
crossed orders). The Exchange also proposes to apply to RUI, RLV and 
RLG the CFLEX Surcharge Fee of $0.10 per contract for all RUI, RLV and 
RLG orders executed electronically on CFLEX, capped at $250 per trade 
(i.e., first 2,500 contracts per trade). The CFLEX Surcharge Fee 
assists the Exchange in recouping the cost of developing and 
maintaining the CFLEX system. The Exchange notes that the CFLEX 
Surcharge Fee (and $250 cap) also applies to other proprietary index 
options, including products in Underlying Symbol List A.
    The Exchange currently assesses an Index License Surcharge for RUT 
of $0.45 per contract for all non-customer orders. Because the fees 
associated with the license for RUI, RLV and RLG are lower than the 
license fees for RUT, the Exchange proposes to assess a Surcharge o 
[sic] $0.10 per contract in order to recoup the costs associated with 
the RUI, RLV and RLG license.
    In order to promote and encourage trading of RUI, RLV and RLG, the 
Exchange proposes to waive all transaction fees (including the Floor 
Brokerage Fee, Index License Surcharge and CFLEX Surcharge Fee) for 
RUI, RLV and RLG transactions through December 31, 2015. The Exchange 
proposes to add Footnote 40 to the Fees Schedule to make clear that 
transaction fees will be waived through the end of the year.
    Finally, the Exchange proposes to make other non-substantive 
cleanup changes to the Fees Schedule. First, the Exchange proposes to 
replace the reference to the proprietary products listed in the 
Customer row of the Index Options Rate Table--All Index Products 
Excluding Underlying Symbol List A with the term ``Underlying Symbol 
List A''. The Exchange notes that when it had adopted the term 
``Underlying Symbol List A'', it had inadvertently not included it in 
this particular instance. To maintain consistency throughout the Fees 
Schedule, the Exchange proposes adding ``Underlying Symbol List A'' to 
the Customer row of the Index Options Rate Table--All Index Products 
Excluding Underlying Symbol List A. Next, the Exchange proposes to 
delete the reference to ``RUT'' in the Volume Incentive Program table 
and Footnote 36. The Exchange notes that it also inadvertently failed 
to delete these particular references to RUT when RUT became part of 
Underlying Symbol List A. As Underlying Symbol List A is already 
provided for in both sections (and RUT is included in Underlying Symbol 
List A) it is repetitive and unnecessary to maintain the additional 
references to ``RUT''. The Exchange believes the proposed cleanup 
changes will alleviate potential confusion.
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.\3\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \4\ 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,\5\ 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.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78f(b)(5).
    \5\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    Particularly, the Exchange believes it is reasonable to charge 
different fee amounts to different user types in the manner proposed 
because the proposed fees are consistent with the price differentiation 
that exists today for other index products, including RUT. The Exchange 
also believes that the proposed fee amounts for RUI, RLV and RLG orders 
are reasonable because the proposed fee amounts are the same [sic] 
already assessed for a similar product, RUT, as well as are within the 
range of amounts assessed for the Exchange's other proprietary 
products.\6\
---------------------------------------------------------------------------

    \6\ See CBOE Fees Schedule, Specified Proprietary Index Options 
Rate Table.
---------------------------------------------------------------------------

    The Exchange believes that it is equitable and not unfairly

[[Page 67807]]

discriminatory to assess lower fees to Customers as compared to other 
market participants 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 fees offered to customers are 
intended to attract more customer trading volume to the Exchange. 
Moreover, the options industry has a long history of providing 
preferential pricing to Customers, and the Exchange's current Fees 
Schedule currently does so in many places, as do the fees structures of 
many other exchanges. Finally, all fee amounts listed as applying to 
Customers will be applied equally to all Customers (meaning that all 
Customers will be assessed the same amount).
    The Exchange believes that it is equitable and not unfairly 
discriminatory to, [sic] assess lower fees to Market-Makers as compared 
to other market participants other than Customers because Market-
Makers, unlike other market participants, take on a number of 
obligations, including quoting obligations, that other market 
participants do not have. Further, these lower fees offered to Market-
Makers are intended to incent Market-Makers to quote and trade more on 
the Exchange, thereby providing more trading opportunities for all 
market participants. Additionally, the proposed fee for Market-Makers 
will be applied equally to all Market-Makers (meaning that all Market-
Makers will be assessed the same amount). This concept also applies to 
orders from all other origins. It should also be noted that all fee 
amounts described herein are intended to attract greater order flow to 
the Exchange in RUI, RLV and RLG which should therefore serve to 
benefit all Exchange market participants. Similarly, it is equitable 
and not unfairly discriminatory to assess lower fees to Clearing 
Trading Permit Holder Proprietary orders than those of other market 
participants (except Customers and Market-Makers) because Clearing 
Trading Permit Holders also have a number of obligations (such as 
membership with the Options Clearing Corporation), significant 
regulatory burdens, and financial obligations, that other market 
participants do not need to take on. The Exchange also notes that the 
RUI, RLV and RLG fee amounts for each separate type of market 
participant will be assessed equally to all such market participants 
(i.e. all Broker-Dealer orders will be assessed the same amount, all 
Joint Back-Office orders will be assessed the same amount, etc.).
    The Exchange believes the proposed AIM transaction fees for Brokers 
Dealers, Non-Trading Permit Holder Market-Makers, Professionals/
Voluntary Professionals, JBOs and Customers are reasonable because the 
amounts are still lower than assessed for AIM transactions in other 
proprietary products.\7\ The Exchange believes it's equitable and not 
unfairly discriminatory to assess lower fees for AIM executions as 
compared to electronic executions because AIM is a price-improvement 
mechanism, which the Exchange wishes to encourage and support.
---------------------------------------------------------------------------

    \7\ Id.
---------------------------------------------------------------------------

    Assessing the Floor Brokerage Fee of $0.04 per contract for non-
crossed orders and $0.02 per contract for crossed orders to Floor 
Brokers (and not other market participants) trading RUI, RLV and RLG 
orders is equitable and not unfairly discriminatory because only Floor 
Brokers are statutorily capable of representing orders in the trading 
crowd, for which they charge a commission. Moreover, this fee is 
already assessed, in the same amounts, to the other products in 
Underlying Symbol List A, including RUT.
    The Exchange believes that assessing an Index License Surcharge Fee 
of $0.10 per contract to RUI, RLV and RLG transactions is reasonable 
because the Surcharge helps recoup some of the costs associated with 
the license for RUI, RLV and RLG options. Additionally, the Exchange 
notes that the Surcharge amount is the same as, and in some cases lower 
than, the amount assessed as an Index License Surcharge to other index 
products. The proposed Surcharge is also equitable and not unfairly 
discriminatory because the amount will be assessed to all market 
participants to whom the Surcharge applies. Not applying the RUI, RLV 
and RLG Index License Surcharge Fee to Customer orders is equitable and 
not unfairly discriminatory because this is designed to attract 
Customer RUI, RLV and RLG orders, which increases liquidity and 
provides greater trading opportunities to all market participants. 
Additionally, it is equitable and not unfairly discriminatory to assess 
a lower License Index Surcharge amount to RUI, RLV and RLG transactions 
as compared to RUT transactions because the costs of the license 
associated with RUT is greater.
    Similarly, the Exchange believes assessing a CFLEX Surcharge Fee of 
$0.10 per contract for all RUI, RLV and RLG orders executed 
electronically on CFLEX and capping it at $250 (i.e., first 2,500 
contracts per trade) is reasonable because it is the same amount 
currently charged to other proprietary index products for the same 
transactions.\8\ The proposed Surcharge is also equitable and not 
unfairly discriminatory because the amount will be assessed to all 
market participants to whom the CFLEX Surcharge applies.
---------------------------------------------------------------------------

    \8\ See CBOE Fees Schedule, Index Options Rate Table--All Index 
Products Excluding Underlying Symbol List A, CFLEX Surcharge Fee and 
Specified Proprietary Index Options Rate Table--Underlying Symbol 
List A, CFLEX Surcharge Fee.
---------------------------------------------------------------------------

    Excepting RUI, RLV and RLG from the Liquidity Provider Sliding 
Scale, the Marketing Fee, the Fee Cap, and the exemption from fees for 
facilitation orders is reasonable because other Underlying Symbol List 
A products (i.e., other products that are exclusively-listed) are 
excepted from those same items. This is equitable and not unfairly 
discriminatory for the same reason; it seems equitable to except RUI, 
RLV and RLG from items on the Fees Schedule from which other 
proprietary products are also excepted.
    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to waive all transaction fees, including the Floor 
Brokerage fee, the License Index Surcharge and CFLEX Surcharge Fee 
because it promotes and encourages trading of these new products and 
applies to all Trading Permit Holders (``TPHs'').
    Applying to [sic] RUI, RLV and RLG to the CBOE Proprietary Products 
Sliding Scale is reasonable because it also applies to other Underlying 
Symbol List A products. This is equitable and not unfairly 
discriminatory for the same reason; it seems equitable to apply to RUI, 
RLV and RLG the same items on the Fees Schedule that apply to 
Underlying Symbol List A options classes (i.e., proprietary options 
classes that are not listed on other exchanges).
    The Exchange believes it's reasonable, equitable and not unfairly 
discriminatory to continue to include RUI, RLV and RLG in the 
calculation of the qualifying volume for the Floor Broker Trading 
Permit Fees rebate because the Exchange wishes to support and encourage 
open-outcry trading of RUI, RLV and RLG, which allows for price 
improvement and has a number of positive impacts on the market system.
    Finally, the Exchange notes that it always strives for clarity in 
its rules and

[[Page 67808]]

Fees Schedule, so that market participants may best understand how 
rules and fees apply. The Exchange believes that the proposed 
clarifications and removal of repetitive language in 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.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition that are not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange 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, while different fees 
are assessed to different market participants in some circumstances, 
these different market participants have different obligations and 
different circumstances as discussed above. For example, Market-Makers 
have quoting obligations that other market participants do not have. 
The Exchange does not believe that the proposed rule change to waive 
all transaction fees through December 2015 will impose any burden on 
intramarket competition because it applies to all TPHs and encourages 
trading in these new products.
    The Exchange does not believe that the proposed rule changes will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because RUI, RLV 
and RLG will be exclusively listed on CBOE. 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.

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 \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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2015-096 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-2015-096. 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-2015-096 and should be 
submitted on or before November 24, 2015.
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-27913 Filed 11-2-15; 8:45 am]
 BILLING CODE 8011-01-P