Document ID: SEC-2013-2125-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc
Posted Date: 2013-12-12T05:00Z

[Federal Register Volume 78, Number 239 (Thursday, December 12, 2013)]
[Notices]
[Pages 75653-75655]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29606]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71007; File No. SR-CBOE-2013-117]

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

December 6, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\

[[Page 75654]]

notice is hereby given that on November 27, 2013, the 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 self-regulatory organization. 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

    Chicago Board Options Exchange, Incorporated (the ``Exchange'' or 
``CBOE'') proposes to amend the Options Regulatory Fee. 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 has reevaluated the current amount of the Options 
Regulatory Fee (``ORF'') in connection with its annual budget review. 
In light of increased regulatory costs, including the hiring of many 
new regulatory employees, and expected volume levels for 2014, the 
Exchange proposes to increase the ORF from $.0074 per contract to 
$.0095 per contract. The proposed fee change would be operative on 
January 1, 2014.
    The ORF is assessed by the Exchange to each Trading Permit Holder 
for all options transactions executed or cleared by the Trading Permit 
Holder that are cleared by The Options Clearing Corporation (``OCC'') 
in the customer range (i.e., transactions that clear in a customer 
account at OCC) regardless of the marketplace of execution. In other 
words, the Exchange imposes the ORF on all customer-range transactions 
executed by a Trading Permit Holder, even if the transactions do not 
take place on the Exchange.\3\ The ORF also is charged for transactions 
that are not executed by a Trading Permit Holder but are ultimately 
cleared by a Trading Permit Holder. In the case where a Trading Permit 
Holder executes a transaction and a different Trading Permit Holder 
clears the transaction, the ORF is assessed to the Trading Permit 
Holder who executed the transaction. In the case where a non-Trading 
Permit Holder executes a transaction and a Trading Permit Holder clears 
the transaction, the ORF is assessed to the Trading Permit Holder who 
clears the transaction. The ORF is collected indirectly from Trading 
Permit Holders through their clearing firms by OCC on behalf of the 
Exchange.
---------------------------------------------------------------------------

    \3\ Exchange rules require each Trading Permit Holder to record 
the appropriate account origin code on all orders at the time of 
entry in order to allow the Exchange to properly prioritize and 
route orders and assess transaction fees pursuant to the rules of 
the Exchange and report resulting transactions to the OCC. CBOE 
order origin codes are defined in CBOE Regulatory Circular RG13-038. 
The Exchange represents that it has surveillances in place to verify 
that Trading Permit Holders mark orders with the correct account 
origin code.
---------------------------------------------------------------------------

    The ORF is designed to recover a material portion of the costs to 
the Exchange of the supervision and regulation of Trading Permit Holder 
customer options business, including performing routine surveillances, 
investigations, examinations, financial monitoring, as well as policy, 
rulemaking, interpretive and enforcement activities. The Exchange 
believes that revenue generated from the ORF, when combined with all of 
the Exchange's other regulatory fees and fines, will cover a material 
portion, but not all, of the Exchange's regulatory costs. The Exchange 
notes that its regulatory responsibilities with respect to Trading 
Permit Holder compliance with options sales practice rules have largely 
been allocated to FINRA under a 17d-2 agreement. The ORF is not 
designed to cover the cost of that options sales practice regulation.
    The Exchange will continue to monitor the amount of revenue 
collected from the ORF to ensure that it, in combination with its other 
regulatory fees and fines, does not exceed the Exchange's total 
regulatory costs. If the Exchange determines regulatory revenues exceed 
regulatory costs, the Exchange will adjust the ORF by submitting a fee 
change filing to the Commission. The Exchange notifies Trading Permit 
Holders of adjustments to the ORF via regulatory circular.
 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.\4\ Specifically, the 
Exchange believes the proposed rule change is consistent with Section 
6(b)(4) of the Act,\5\ which provides that Exchange rules may provide 
for the equitable allocation of reasonable dues, fees, and other 
charges among its Trading Permit Holders and other persons using its 
facilities. Additionally, the Exchange believes the proposed rule 
change is consistent with the Section 6(b)(5) \6\ requirement that the 
rules of an exchange not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
    \6\ Id. [sic]
---------------------------------------------------------------------------

    The Exchange believes the proposed fee change is reasonable because 
it would help the Exchange offset increased regulatory expenses, in 
particular the hiring of many new regulatory employees, but would not 
result in total regulatory revenue exceeding total regulatory costs. 
The Exchange believes the ORF is equitable and not unfairly 
discriminatory in that it is charged to all Trading Permit Holders on 
all their transactions that clear in the customer range at the OCC. 
Moreover, the Exchange believes the ORF ensures fairness by assessing 
higher fees to those Trading Permit Holders that require more Exchange 
regulatory services based on the amount of customer options business 
they conduct. Regulating customer trading activity is much more labor 
intensive and requires greater expenditure of human and technical 
resources than regulating non-customer trading activity, which tends to 
be more automated and less labor-intensive. As a result, the costs 
associated with administering the customer component of the Exchange's 
overall regulatory program are materially higher than the costs 
associated with administering the non-customer component (e.g., Trading 
Permit Holder proprietary transactions) of its regulatory program.\7\
---------------------------------------------------------------------------

    \7\ If the Exchange changes its method of funding regulation or 
if circumstances otherwise change in the future, the Exchange may 
decide to modify the ORF or assess a separate regulatory fee on 
Trading Permit Holder proprietary transactions if the Exchange deems 
it advisable.

---------------------------------------------------------------------------

[[Page 75655]]

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. The proposed rule change is not 
designed to address any competitive issues. Rather, the proposed rule 
change is designed to help the Exchange to adequately fund its 
regulatory activities while seeking to ensure that total regulatory 
revenues do not exceed total regulatory costs.

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 \8\ and paragraph (f) of Rule 19b-4 \9\ 
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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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-2013-117 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-2013-117. 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 such 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 publicly available. All 
submissions should refer to File Number SR-CBOE-2013-117 and should be 
submitted on or before January 2, 2014.
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29606 Filed 12-11-13; 8:45 am]
BILLING CODE 8011-01-P