Document ID: SEC-2016-0125-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2016-01-22T05:00Z

[Federal Register Volume 81, Number 14 (Friday, January 22, 2016)]
[Notices]
[Pages 3841-3847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01200]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76923; File No. SR-CBOE-2016-002)

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

January 15, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on January 4, 2016, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (``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

[[Page 3842]]

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 make a number of changes to its Fees 
Schedule, effective January 4, 2016.
Market-Maker Affiliate Volume Plan
    The Exchange proposes to adopt the Market-Maker Affiliate Volume 
Plan (``AVP''). Specifically, under AVP, if a Trading Permit Holder 
(``TPH'') Affiliate \3\ of a Market-Maker (including a Designated 
Primary Market-Maker (``DPM'') or Lead Market-Maker (``LMM'')) 
qualifies under the Volume Incentive Program (``VIP''), that Market-
Maker will also qualify for a discount on that Market-Maker's Liquidity 
Provider Sliding Scale (``Sliding Scale'') transaction fees. By way 
background [sic], under VIP, the Exchange credits each Trading Permit 
Holder the per contract amount set forth in the VIP table resulting 
from each public customer (``C'' origin code) order transmitted by that 
TPH (with certain exceptions) which is executed electronically on the 
Exchange in all underlying symbols excluding Underlying Symbol List A, 
DJX, XSP, XSPAM, credit default options, credit default basket options 
and mini-options, provided the TPH meets certain volume thresholds in a 
month.\4\ Currently, VIP consists of four (4) tiers with the following 
thresholds; 0%-0.75%, above 0.75%-1.50%, above 1.50%-3.00% and above 
3%. The Exchange proposes to provide that if a Market-Maker's Affiliate 
reaches Tier 2, Tier 3 or Tier 4 of VIP, that Market-Maker will receive 
a discount on their Sliding Scale Market-Maker transaction fees of 10%, 
15% or 20%, respectively.\5\ Below is a table demonstrating the 
proposed program.
---------------------------------------------------------------------------

    \3\ ``Affiliate'' is defined as having at least 75% common 
ownership between the two entities as reflected on each entity's 
Form BD, Schedule A.
    \4\ Currently, excluded from the VIP credit are options in 
Underlying Symbol List A, DJX, XSP, XSPAM, credit default options, 
credit default basket options, mini-options, QCC trades, public 
customer to public customer electronic complex order executions, and 
executions related to contracts that are routed to one or more 
exchanges in connection with the Options Order Protection and 
Locked/Crossed Market Plan referenced in Rule 6.80 (see CBOE Fees 
Schedule, Volume Incentive Program).
    \5\ The discount will be on transaction fees only (i.e., the 
rates charged pursuant to the Liquidity Provider Sliding Scale). 
Other fees, such as the Index License Surcharge, will not be 
discounted.

------------------------------------------------------------------------
                                                                 AVP
                                                             Transaction
           Tier                      VIP Thresholds              fee
                                                               discount
                                                                 (%)
------------------------------------------------------------------------
1.........................  0.00%-0.75%....................            0
2.........................  Above 0.75%-1.50%..............           10
3.........................  Above 1.50%-3.00%..............           15
4.........................  Above 3.00%....................           20
------------------------------------------------------------------------

    The Exchange believes AVP will incentivize the routing of orders to 
CBOE by TPHs that have both Market-Maker and agency operations, as well 
as incent Market-Makers to tighten market widths due to the reduced 
costs the incentives will provide. The Exchange notes that in the 
options industry, many options orders are routed by consolidators, 
which are firms that have both order router and Market-Maker 
operations. The Exchange is aware not only of the importance of 
providing credits on the order routing side in order to encourage the 
submission of orders, but also of the operations costs on the Market-
Maker side. The Exchange believes AVP allows the Exchange to provide 
further relief to the Market-Maker side via the discount. Additionally, 
the Exchange believes AVP will attract more volume and liquidity to the 
Exchange, which will benefit all Exchange participants through 
increased opportunities to trade as well as enhancing price discovery.
Market-Maker Trading Permit Credits
    Currently, Footnote 24 provides that if a Market-Maker or its 
affiliate receive a credit under VIP, that Market-Maker will receive a 
credit on its Market-Maker Trading Permit fees corresponding to the VIP 
tier reached (10% Market-Maker Trading Permit fee credit for reaching 
Tier 2 of the VIP, 20% Market-Maker Trading Permit fee credit for 
reaching Tier 3 of the VIP, and 30% Market-Maker Trading Permit fee 
credit for reaching Tier 4 of the VIP) (``Access Credit''). This credit 
does not apply to Market-Maker Trading Permits used for appointments in 
SPX, SPXpm, VIX, OEX and XEO. The Exchange proposes to make certain 
amendments to Footnote 24.
    First, the Exchange proposes to clarify that a Market-Maker will 
receive an Access Credit if its Affiliate, not the Market-Maker itself, 
reaches certain VIP tiers (i.e., eliminate ``or its'' from ``If a 
Market-Maker or its Affiliate . . .'' [sic] As noted above, VIP credits 
are limited to TPHs executing customer orders. As such, Market-Maker 
orders would not be eligible to count towards the qualifying tiers or 
receive VIP credits. The Exchange believes the proposed change 
clarifies this point and alleviates potential confusion. The Exchange 
notes no substantive changes are being made by this clarification.
    Next, the Exchange proposes to exclude from the Access Credit, 
Market-Maker Trading Permits used for appointments in the Russell 2000 
Index (``RUT''). The Exchange notes that the proposed exclusion is 
similar to the exclusion of other proprietary and exclusive products. 
The Exchange notes the Exchange's proprietary, exclusively-listed 
products are often collectively excluded from certain programs, 
including the Access Credit, because the Exchange has expended 
considerable resources developing and maintaining those products and 
therefore desires not to give a credit related to those products in 
order to recoup those expenditures. Similar to the products currently 
excluded from the Access Credit, RUT is no longer listed on any other 
exchange (other than C2). As such, the Exchange proposes to exclude 
Market-Maker Trading Permits used for RUT appointments from the Access 
Credit.
    The Exchange also proposes to incorporate the description of the 
Access Credit within a single Affiliate Volume Plan table, as both the 
Access Credit and discount on Market-Maker fees under AVP are based 
upon a Market-Maker Affiliate reaching certain tiers within VIP. The 
Exchange believes the proposed table alleviates potential confusion and 
makes the Fees Schedule easier to read.
Floor Broker Trading Permit Rebates
    Footnote 25, which governs rebates on Floor Broker Trading Permits, 
currently provides that any Floor Broker that executes a certain 
average of customer open-outcry contracts per day over the course of a 
calendar month in all underlying symbols excluding Underlying Symbol 
List A (except RUT), DJX, XSP, XSPAM, mini-options and subcabinet 
trades, will receive a rebate on that Floor Broker's Trading Permit 
Holder's Floor Broker Trading Permit Fees. The Exchange notes that 
although RUT had previously been added to ``Underlying Symbol List A'', 
it had continued to include RUT in the calculation of the qualifying 
volume for the rebate of Floor Broker Trading Permit fees. The Exchange 
now seeks to exclude RUT volume from the calculation, similar to the 
exclusion of all other products in Underlying Symbol List A. As 
discussed above, the Exchange's proprietary, exclusively-listed 
products are often collectively excluded from certain programs because 
the Exchange has expended considerable resources developing and

[[Page 3843]]

maintaining these products. Similar to the products currently excluded 
from the calculation of qualifying volume for the Floor Broker Trading 
Permit rebates, RUT is no longer listed on any other exchange (other 
than C2) and the Exchange therefore proposes to exclude it from the 
qualifying calculation.
NDX and MNX Fees
    The Exchange next proposes to increase the Nasdaq-100 Index 
(``NDX'') and mini-NDX Index (``MNX'') Index License Surcharge. 
Currently, the Exchange assesses an Index License Surcharge for NDX and 
MNX of $0.15 per contract for all non-customer orders. The Exchange now 
proposes to increase the NDX and MNX Surcharge from $0.15 to 0.25 per 
contract in order to recoup the increased costs associated with the NDX 
and MNX license. The Exchange will still be subsidizing the costs of 
the NDX and MNX license. Additionally, like other proprietary index 
products, the Exchange proposes to except NDX and MNX from VIP and from 
the Marketing Fee.
VIX License Index Surcharge
    The Exchange proposes to waive through March 2016 the VIX Index 
License Surcharge of $0.10 per contract for Clearing Trading Permit 
Holder Proprietary (``Firm'') (origin codes ``F'' or ``L'') VIX orders 
that have a premium of $0.10 or lower and have series with an 
expiration of less than seven (7) calendar days. Particularly, the 
Exchange is attempting to reduce transaction costs on expiring, low-
priced VIX options in order to encourage Firms to seek to close and/or 
roll over such positions close to expiration at low premium levels, 
including facilitating customers to do so, in order to free up capital 
and encourage additional trading. Currently, Firms are less likely to 
engage in such activity because the transaction fees are often 
equivalent [sic] or even exceed the premium level, making such 
transactions economically unattractive. The Exchange believes that the 
[sic] lowering costs for VIX options trading with a premium of $0.00-
$0.10 and for series with an expiration of less than 7 days will 
encourage the closing, rolling and trading of such options and new 
series, as well. The Exchange proposes to waive the surcharge through 
March 2016, at which time the Exchange will evaluate whether the wavier 
[sic] has in fact prompted Firms to close and roll over positions close 
to expiration at low premium levels.
VIX Customer Transaction Fees
    The Exchange proposes to reduce the amount of VIX customer (origin 
code ``C'') transactions [sic] fees [sic] orders with a premium of 
$0.11 to $0.99 from $0.27 per contract to $0.25 per contract and orders 
with a premium of above $1.00 from $.048 per contract to $0.45 per 
contract. The Exchange believes that the lowered costs for VIX options 
will encourage the trading of such options.
Hybrid 3.0 Surcharge
    The Exchange assesses a Hybrid 3.0 Execution Fee of $0.20 per 
contract for all electronic executions in Hybrid 3.0 classes (with some 
exceptions).\6\ The Exchange proposes to increase this fee to $0.21 per 
contract. The Exchange notes that it continually invests in the Hybrid 
3.0 system and the proposed increase will help the Exchange recoup such 
expenditures.
---------------------------------------------------------------------------

    \6\ See CBOE Fees Schedule. Particularly, all electronic 
executions in Hybrid 3.0 classes shall be assessed the Hybrid 3.0 
Execution Surcharge, except to [sic]: (i) Orders in SPX options in 
the SPX electronic book for those SPX options that are executed 
during opening rotation on the final settlement date of VIX options 
and futures which have the expiration [sic] that contribute to the 
VIX settlement calculation, (ii) executions by market-makers against 
orders in the complex order auction (COA) and Simple Auction Liaison 
(SAL) systems in their appointed classes, (iii) executions by 
market-makers against orders in the electronic book, Hybrid Agency 
Liaison (HAL) and the complex order book in their appointed classes, 
and (iv) orders executed by a floor broker using a PAR terminal.
---------------------------------------------------------------------------

RUI, RLV and RLG Fees
    On October 20, 2015, the Exchange began trading options on three 
FTSE Russell Indexes (i.e., Russell 1000 Index (``RUI''), Russell 1000 
Value Index (``RLV'') and Russell 1000 Growth Index (``RLG'')). In 
order to promote and encourage trading of RUI, RLV and RLG, the 
Exchange had waived 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. In order to continue to 
promote trading of these new options classes, the Exchange proposes to 
extend the fee waiver of RUI, RLV and RLG through March 31, 2016.
Large Customer Trade Discount
    The Customer Large Trade Discount program (the ``Discount'') 
provides a discount in the form of a cap on the quantity of customer 
(``C'' origin code'' [sic]) contracts that are assessed transactions 
fees in certain options classes. The Discount table in the Fees 
Schedule sets forth the quantity of contracts necessary for a large 
customer trade to qualify for the Discount, which varies by product. 
Currently, under the ``Products'' section in the Discount table, the 
following S&P products for which the Discount is in effect are listed: 
``SPX, SPXw, SPXpm, SRO.'' Customer transaction fees for each of these 
products are currently only charged up to the first 15,000 contracts. 
The Exchange proposes to raise the quantity of SPX, SPXw, SPXpm, and 
SRO contracts necessary for a large customer trade to qualify for the 
Discount from 15,000 contracts per order to 20,000 contracts per order. 
The purpose of the proposed rule change is to moderate the discount 
level for customer (C) orders in the SPX product group in view of its 
mature and established position in the industry. The Exchange 
additionally proposes to raise the quantity of VIX contracts necessary 
for a large customer trade to qualify for the Discount. Specially 
[sic], the Exchange proposes to raise the threshold from 10,000 
contracts per order to 15,000 contracts per order. The purpose of the 
proposed change is to moderate the discount level for customer (C) 
orders in VIX in light of the increased sizes of qualifying Discount 
VIX orders.
RUT Tier Appointment Surcharge
    CBOE Rule 8.3(e) provides that the Exchange may establish one or 
more types of tier appointments. In accordance with CBOE Rule 8.3(e), a 
tier appointment is an appointment to trade one or more options classes 
that must be held by a Market-Maker to be eligible to act as a Market-
Maker in the options class or options classes subject to that 
appointment. CBOE currently maintains a tier appointment for Market-
Maker Trading Permit Holders trading in RUT, as it does for SPX and 
VIX. Currently, the Exchange has a Tier Appointment Surcharge for SPX 
and VIX, but not RUT. The Exchange notes that it has expended 
considerable resources developing and maintaining its proprietary, 
exclusively-listed products. To help recoup costs of the license and 
for further development and maintenance of RUT options, the Exchange is 
now proposing to also establish a RUT Tier Appointment fee. 
Specifically, the Exchange proposes to adopt a RUT Tier Appointment fee 
of $1,000 per month, which will be assessed to any Market-Maker Trading 
Permit Holder that either (a) has a RUT Tier Appointment at any time 
during a calendar month and trades at least 100 RUT options contracts 
electronically while that appointment is active; or (b) trades at least 
1,000 RUT options contracts in open outcry during a calendar month. The 
Exchange notes

[[Page 3844]]

that the proposed criteria is the same as it is for the VIX Tier 
Appointment fee. Additionally, similar to what's provided in the Fees 
Schedule for the SPX and VIX Tier Appointment fees, the Exchange 
proposes to state, consistent with Rule 8.3(e), that each RUT Tier 
Appointment may only be used with one designated Market-Maker Trading 
Permit. Additionally, the Exchange proposes to state that in order for 
a Market-Maker Trading Permit to be used to act as an electronic 
Market-Maker in RUT, the Trading Permit Holder must obtain a RUT Tier 
Appointment for that Market-Maker Trading Permit.
Extended Trading Hour Fees
    In order to promote and encourage trading during the Extended 
Trading Hours (``ETH'') session, the Exchange currently waives ETH 
Trading Permit and Bandwidth Packet fees for one (1) of each initial 
Trading Permits and one (1) of each initial Bandwidth Packet, per 
affiliated TPH. The Exchange notes that waiver is set to expire 
December 31, 2015. The Exchange also waives fees through December 31, 
2015 for a CMI and FIX login ID if the CMI and/or FIX login ID is 
related to a waived ETH Trading Permit and/or waived Bandwidth packet. 
In order to continue to promote trading during ETH, the Exchange wishes 
to extend these waivers through July 2016.
Floor Broker Workstation
    The Exchange proposes raising the Floor Broker Workstation 
(``FBW'') and FBW2 fee from $400 per month (per login ID) to $450 per 
month (per login ID). The total amount charged by the Exchange's vendor 
that provides the FBW (and FBW2) is more than $450 per month (per login 
ID) for FBW and FBW2 and the Exchange has been subsidizing those costs 
for FBW and FBW2 users. As such, the Exchange proposes increasing the 
FBW fee to $450 per month (per login ID), which still includes a 
subsidy for FBW users (though smaller).
    Additionally, the Exchange notes that for every FBW login a TPH 
has, the FBW2 monthly fee is currently waived through December 2015 on 
a one-to-one basis. The Exchange waived the FBW2 fee on a one-to-one 
basis because it had anticipated new features being launched on FBW2 by 
the end of the year and the Exchange wanted to encourage FBW users to 
begin (or continue) transitioning to FBW2 logins while waiting for the 
new features. Additionally, the Exchange wanted to provide additional 
time to become acclimated to FBW2 while at the same time being able to 
use FBW login IDs. The Exchange notes that certain new features on FBW2 
have still not launched. As such, the Exchange wishes to extend the 
FBW2 monthly fee waiver on a one-to-one basis through March 31, 2016. 
The Exchange therefore proposes to delete now outdated language in the 
Fees Schedule and provide that for every FBW login a TPH has, the FBW2 
fee will be waived for the months of January 2016 through March 2016 on 
a one-to-one basis.
QCC Cleanup
    The Exchange proposes to correct an inadvertent omission to the 
Fees Schedule with respect to a recent change to Qualified Contingent 
Cross (``QCC'') \7\ order fees. On November 16, 2015, the Exchange 
proposed to increase the transaction fee for all non-customer QCC 
orders from $0.15 per contract to $0.17 per contract.\8\ The Exchange 
notes that the QCC transaction fee rate is located in two tables in the 
Fees Schedule (i.e., the QCC Rate Table and the Clearing Trading Permit 
Holder Fee Cap Table (``Fee Cap Table'')). While the Exhibit 5 to SR-
CBOE-2015-105 reflected the QCC fee increase in the QCC Rate Table, the 
Exchange inadvertently omitted to make the corresponding increase to 
the rate listed in the Fee Cap table. Accordingly, the Exchange 
proposes to update the rate listed for QCC orders from $0.15 per 
contract to $0.17 per contract in the Fee Cap Table to avoid potential 
confusion and maintain a clear and consistent Fees Schedule.
---------------------------------------------------------------------------

    \7\ A QCC order is comprised of an order to buy or sell at least 
1,000 contracts (or 10,000 mini-option contracts) that is identified 
as being part of a qualified contingent trade, coupled with a 
contra-side order or orders totaling an equal number of contracts.
    \8\ See Securities Exchange Act Release No. 76498 (November 20, 
2015), 80 FR 228 (November 27, 2015) (SR-CBOE-2015-105).
---------------------------------------------------------------------------

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.\9\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \10\ 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 Section 6(b)(4) of the Act,\11\ 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that adopting the Affiliate Volume Plan is 
reasonable because it will allow qualifying Market-Makers to receive a 
credit on their Market-Maker Sliding Scale transaction fees. The 
Exchange believes that this proposed change is equitable and not 
unfairly discriminatory because Market-Makers are valuable market 
participants that provide liquidity in the marketplace and incur costs 
that other market participants do not incur. For example, Market-Makers 
have a number of obligations, including quoting obligations that other 
market participants do not have. Additionally, the Exchange notes that 
incentivizing a Market-Maker Affiliate to achieve higher tiers on the 
VIP, can result in greater customer liquidity, and the resulting 
increased volume benefits all market participants (including Market-
Makers or their affiliates who do not achieve the higher tiers on the 
VIP; indeed, this increased volume may allow them to reach these 
tiers). Further, other options exchanges also provide credits to 
Market-Makers if a Market-Maker's affiliate adds a certain amount of 
customer liquidity to that exchange.\12\ The Exchange also notes that 
the credits under AVP are available to all Market-Makers who qualify.
---------------------------------------------------------------------------

    \12\ See e.g., NYSE Arca, Inc. (``Arca'') Options Fees and 
Charges, specifically the table describing the Market Maker Monthly 
Posting Credit Super Tier, under which transaction volume from a 
Market Maker's affiliates count towards the Market Maker's ability 
to qualify for higher credit tiers.
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to exclude Market-Maker Trading Permits used 
for appointments in RUT from the Access Credit because the Exchange has 
expended considerable resources maintaining RUT as a proprietary and 
exclusively-listed product and therefore desires not to give a credit 
related in order to recoup those expenditures. Additionally, the 
Exchange notes that Trading Permits used for appointments in other 
proprietary and exclusively listed products are excluded from receiving 
credits under the Access Credit program

[[Page 3845]]

as well. Similarly, the Exchange believes it's reasonable to exclude 
RUT from the qualifying calculation for the Floor Broker Trading Permit 
rebates because other Underlying Symbol List A products are also 
excepted from counting towards the qualifying threshold volumes.
    The Exchange believes clarifying in Footnote 24 that only a Market-
Maker Affiliate (as opposed to the Market-Maker itself) can receive an 
Access Credit alleviates potential confusion. The Exchange also 
believes incorporating into a single table both details of the Access 
Credit and credits available to Market-Makers under AVP alleviates 
potential confusion and maintains clarity in the Fees Schedule. The 
alleviation of potential confusion serves 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 believes increasing the NDX and MNX Index License 
Surcharge Fee from $0.15 to $0.25 per contract is reasonable because 
the Exchange still pays more for the NDX and MNX license than the 
amount of the proposed NDX Index License Surcharge Fee (meaning that 
the Exchange will be subsidizing the costs of the NDX and MNX license). 
Additionally, the Exchange notes that another Exchange also assesses 
$0.25 per contract for NDX and MNX transactions.\13\ This increase is 
equitable and not unfairly discriminatory because all non-Customer 
market participants will be assessed the same increased NDX and MNX 
Index License Surcharge. Not applying the NDX and MNX Index License 
Surcharge Fee to customer orders is equitable and not unfairly 
discriminatory because this is designed to attract customer NDX and MNX 
orders, which increases liquidity and provides greater trading 
opportunities to all market participants.
---------------------------------------------------------------------------

    \13\ See NASDAQ OMX PHLX LLC (``PHLX'') Pricing Schedule, 
Section II, Multiply Listed Options Fees, Options Surcharge in MNX 
and NDX.
---------------------------------------------------------------------------

    The Exchange believes that excluding NDX and MNX from VIP is 
reasonable because the VIP is a credit program, and excluding MNX and 
NDX from the VIP does not impose any extra fee for NDX and MNX trades, 
it just prevents them from incurring a credit (or counting towards 
incurring credits). As such, qualifying market participants trading NDX 
and MNX will merely be required to pay regular transaction fees. The 
Exchange believes excepting NDX and MNX from VIP is equitable and not 
unfairly reasonable because other proprietary index products are also 
excepted from VIP. Similarly, the Exchange believes it's reasonable to 
except NDX and MNX [sic] the Marketing Fee because other proprietary 
index products are excepted from those same items. This is equitable 
and not unfairly discriminatory for the same reason; it seems equitable 
to except NDX and MNX from items on the Fees Schedule from which other 
proprietary products are also excepted.
    The Exchange believes it's reasonable to waive the VIX Index 
License Surcharge for Clearing Trading Permit Holder Proprietary VIX 
orders that have a premium of $0.10 or lower and have series with an 
expiration of less than 7 calendar days because the Exchange wants to 
encourage Firms to roll and close over positions close to expiration at 
low premium levels. The Exchange notes that without the waiver, firms 
are less likely to engage in these transactions, as opposed to other 
VIX transactions, due to the associated transaction costs. The Exchange 
believes it's equitable and not unfairly discriminatory to limit the 
waiver to Clearing Trading Permit Holder Proprietary orders because 
they contribute capital to facilitate the execution of VIX customer 
orders with a premium of $0.10 or lower and series with an expiration 
of less than 7 days. Finally, the Exchange believes it's reasonable, 
equitable and not unfairly discriminatory to provide that the surcharge 
will be waived through March 2016, as it gives the Exchange time to 
evaluate if the wavier [sic] is in fact having the desired effect of 
encouraging these transactions and because it applies to all Clearing 
Trading Permit Holders.
    The proposal to reduce VIX customer transactions [sic] is 
reasonable because it allows customers to pay less for these 
transactions than they are currently paying. The proposed change to 
customer VIX options transaction fees is also equitable and not 
unfairly discriminatory because it applies uniformly to all customers 
and because this is designed to attract customer VIX orders, which 
increases liquidity and provides greater trading opportunities to all 
market participants.
    The Exchange believes it's reasonable to increase the Hybrid 3.0 
Surcharge because it is merely an increase of $0.01 per contract, and 
the Exchange uses this fee to cover the costs of operating the Hybrid 
3.0 system. The Exchange believes that this proposed increase is also 
reasonable, equitable and not unfairly discriminatory because it 
applies to all Hybrid 3.0 executions,\14\ and because the increased fee 
will help cover the costs of operating the Hybrid 3.0 system.
---------------------------------------------------------------------------

    \14\ With the exception of those listed in Footnote 21 of the 
Fees Schedule.
---------------------------------------------------------------------------

    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to extend the waiver of all transaction fees for RUI, 
RLV and RLG transasctions [sic], including the Floor Brokerage fee, the 
License Index Surcharge and CFLEX Surcharge Fee, because it promotes 
and encourages trading of these products which are still new and 
applies to all TPHs.
    The Exchange believes that raising the discount threshold for VIX 
and SPX (including SPXw), SPXPM and SROs is reasonable because 
customers will still be receiving a discount for large trades that they 
would not otherwise receive. This change is equitable and not unfairly 
discriminatory because all customers whose large trades qualify for the 
Discount will still receive it. The Exchange believes it's equitable 
and not unfairly discriminatory to raise the threshold higher for the 
SPX product group because the SPX product group has reached a mature 
and established level since its introduction while other products, such 
as VIX, have not.
    The Exchange believes that establishing a RUT Tier Appointment fee 
is reasonable because the Exchange maintains a similar fee for other 
exclusively-listed proprietary products for which there is a tier 
appointment.\15\ The Exchange notes that the proposed Tier Appointment 
fee is less than the Tier Appointment fees assessed for SPX and 
VIX.\16\ The Exchange believes it is equitable and not unfairly 
discriminatory to not assess the fee unless a Market-Maker trades at 
least 100 RUT contracts electronically while that appointment is active 
because those that do not regularly trade RUT will not be assessed the 
fee. Specifically, the RUT Tier Appointment fee is intended to be 
assessed to Market-Makers who act as Market-Makers in RUT, not those 
who submit an occasional order electronically in RUT. More 
specifically, the 100-contract threshold achieves this purpose because 
it is a sufficiently small number of contracts and yet leaves some 
small room for accidental or minor RUT trades. Because Market-Maker 
Trading Permit Holders have an appointment to trade in open outcry in 
all options classes traded on the Hybrid Trading System (including RUT) 
pursuant to Exchange Rule 8.3(c)(ii), the Exchange

[[Page 3846]]

believes it is also equitable and not unfairly discriminatory to not 
assess the Tier Appointment fee unless a Market-Maker trades at least 
1,000 RUT options contracts in open outcry during a calendar month. The 
Exchange believes this requirement again allows for minimum open outcry 
activity in RUT without having to pay an additional fee. This proposed 
change is also equitable and not unfairly discriminatory because it 
will be assessed uniformly to all Market-Makers that meet either of the 
above criteria and because it allows the Exchange to recoup 
expenditures related to the maintenance of a proprietary and 
exclusively listed product.
---------------------------------------------------------------------------

    \15\ See CBOE Fees Schedule, SPX and VIX Tier Appointment Fees.
    \16\ Id.
---------------------------------------------------------------------------

    The Exchange believes extending the waiver of ETH Trading Permit 
and Bandwidth Packet fees for one of each type of Trading Permit and 
Bandwidth Packet, per affiliated TPH through July 31, 2016 is 
reasonable, equitable and not unfairly discriminatory, because it 
promotes and encourages trading during the ETH session and applies to 
all ETH TPHs. The Exchange believes it's also reasonable, equitable and 
not unfairly discriminatory to waive fees for Login IDs related to 
waived Trading Permits and/or Bandwidth Packets in order to promote and 
encourage ongoing participation in ETH and also applies to all ETH 
TPHs.
    Increasing the FBW and FBW2 fee from $400 per month (per login ID) 
to $450 per month (per login ID) is reasonable because the total amount 
charged by the Exchange's vendor that provides the FBW (and FBW2) is 
more than $450 per month (per login ID) for FBW and FBW2 and the 
Exchange simply wants to reduce the extent to which the Exchange 
subsidizes such costs. This change is equitable and not unfairly 
discriminatory because all market participants who desire to use the 
FBW and FBW2 will be assessed the same fee.
    The Exchange believes it is reasonable to extend the waiver of FBW2 
fees for each FBW login a TPH has through March 2016 because it 
encourages users to use and become familiar with the updated FBW2 login 
IDs while waiting for certain features to be implemented on FBW2. The 
Exchange believes the proposed changes are equitable and not unfairly 
discriminatory because it applies to all users of FBW2.
    The Exchange believes that correcting an inadvertent failure to 
update the QCC rate change in the Fee Cap table (in addition to the QCC 
Rate Table, where it is currently provided for) will alleviate 
potential confusion and maintain clarity in the Fees Schedule, which 
serves 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.

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 
and rebates are assessed to different market participants in some 
circumstances, these different market participants have different 
obligations and different circumstances (as described in the 
``Statutory Basis'' section above). For example, Clearing TPHs have 
clearing obligations that other market participants do not have. 
Market-Makers have quoting obligations that other market participants 
do not have. There is a history in the options markets of providing 
preferential treatment to customers, as they often do not have as 
sophisticated trading operations and systems as other market 
participants, which often makes other market participants prefer to 
trade with customers. Further, the Exchange fees and rebates, both 
current and those proposed to be changed, are intended to encourage 
market participants to bring increased volume to the Exchange (which 
benefits all market participants), while still covering Exchange costs 
(including those associated with the upgrading and maintenance of 
Exchange systems).
    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 the 
proposed changes are intended to promote competition and better improve 
the Exchange's competitive position and make CBOE a more attractive 
marketplace in order to encourage market participants to bring 
increased volume to the Exchange (while still covering costs as 
necessary). Further, the proposed changes only affect trading 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 \17\ and paragraph (f) of Rule 19b-4 \18\ 
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.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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-2016-002 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-2016-002. 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 3847]]

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-2016-002 and should be submitted on or before 
February 12, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-01200 Filed 1-21-16; 8:45 am]
 BILLING CODE 8011-01-P