Document ID: SEC-2018-0164-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2018-01-26T05:00Z

[Federal Register Volume 83, Number 18 (Friday, January 26, 2018)]
[Notices]
[Pages 3824-3834]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-01367]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82553; File No. SR-CBOE-2018-007]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Fees Schedule

January 19, 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 January 19, 2018, Cboe Exchange, Inc. (the ``Exchange'' or 
``Cboe Options'') 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 provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's 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 make a number of changes to its Fees 
Schedule.\3\
---------------------------------------------------------------------------

    \3\ The Exchange initially filed the proposed fee changes on 
January 2, 2018 (SR-CBOE-2018-001). On business date January 19, 
2018, the Exchange withdrew that filing and submitted this filing.
---------------------------------------------------------------------------

Liquidity Provider Sliding Scale
    Under the Liquidity Provider Sliding Scale (``LP Sliding Scale''), 
a Liquidity Provider's (Cboe Options Market-Makers, DPMs and LMMs) 
standard per-contract transaction fees for all products except 
Underlying Symbol List A \4\ are reduced based upon the Liquidity 
Provider (``LP'') reaching certain contract volume thresholds in a 
month.\5\ The Exchange proposes to adjust the volume thresholds. 
Specifically, the Exchange proposes to adjust Tiers 2 through 5. Tier 1 
remains unchanged and there are no changes to any of the LP Sliding 
Scale rates. The proposed changes are as follows:
---------------------------------------------------------------------------

    \4\ As of January 19, 2018, Underlying Symbol List A includes 
Underlying Symbol List A consists of OEX, XEO, RUT, RLG, RLV, RUI, 
AWDE, FTEM, FXTM, UKXM, SPX (includes SPXw), VIX, VOLATILITY INDEXES 
and binary options.
    \5\ See Cboe Options Fees Schedule, Liquidity Provider Sliding 
Scale.

----------------------------------------------------------------------------------------------------------------
                                              Percentage thresholds of National Market-Maker
                                            Contract Volume excluding underlying Symbol List A
                  Tier                   --------------------------------------------------------      Rate
                                                    Current                    Proposed
----------------------------------------------------------------------------------------------------------------
1.......................................  0.00%-0.05%...............  No change.................           $0.23
2.......................................  Above 0.05%-0.70%.........  Above 0.05%-0.80%.........            0.17
3.......................................  Above 0.70%-1.40%.........  Above 0.80%-1.50%.........            0.10
4.......................................  Above 1.40%-2.00%.........  Above 1.50%-2.25%.........            0.05
5.......................................  Above 2.00%...............  Above 2.25%...............            0.03
----------------------------------------------------------------------------------------------------------------

[[Page 3825]]

    The purpose of this change is to adjust for the Exchange's market 
share gains, which the Exchange has an interest in maintaining, while 
continuing to offer an incremental incentive for LPs to strive for the 
highest tier level.
LP Sliding Scale Adjustment Table
    The Exchange proposes to amend the LP Sliding Scale Adjustment 
Table which provides that Taker fees be applied to ``Taker'' volume and 
a Maker rebate be applied to ``Maker'' volume in addition to the 
transaction fees assessed under the LP Sliding Scale. The amount of the 
Taker fee (or Maker rebate) is determined by the LP's percentage of 
volume from the previous month that was Maker (``Make Rate'').\6\ The 
Exchange proposes to adjust the Performance Tiers (determined by the 
Make Rate), fees and rebates. Specifically the Exchange proposes to 
amend the volume thresholds for the make rate as follows:
---------------------------------------------------------------------------

    \6\ See Cboe Options Fees Schedule, Liquidity Provider Sliding 
Scale Adjustment Table.

----------------------------------------------------------------------------------------------------------------
                                                         Make rate (% based on prior month)
               Tier                -----------------------------------------------------------------------------
                                                   Current                                Proposed
----------------------------------------------------------------------------------------------------------------
1.................................  0%-50%...............................  No change.
2.................................  Above 50%-75%........................  Above 50%-60%.
3.................................  Above 75%-85%........................  Above 60%-75%.
4.................................  Above 85%-90%........................  Above 75%-90%.
5.................................  Above 90%............................  No change.
----------------------------------------------------------------------------------------------------------------

    The Exchange also proposes to amend the Maker rebates and Taker 
fees as follows:

 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Maker rebate                                                       Taker fee
                       ---------------------------------------------------------------------------------------------------------------------------------
         Tier                      Penny classes                                             Penny classes                     Non-Penny classes
                       -------------------------------------  Non-Penny Classes  -----------------------------------------------------------------------
                            Current           Proposed                                Current          Proposed           Current          Proposed
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.....................         ($0.00)  No change..........  No change..........           $0.04  $0.05.............           $0.08  $0.10.
2.....................          (0.00)  No change..........  No change..........            0.03  $0.04.............            0.06  $0.07.
3.....................          (0.00)  (0.01).............  No change..........            0.02  $0.03.............            0.04  $0.05.
4.....................          (0.00)  (0.02).............  No change..........            0.01  $0.00.............            0.02  $0.04.
5.....................          (0.01)  (0.03).............  No change..........            0.00  No change.........            0.00  No change.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Exchange notes that Taker fees for Penny classes will continue 
to be subject to a cap of 0.50 per contract, which includes the LP 
Sliding Scale transaction fee, Adjustment Table fee and Marketing 
Fee.\7\ The Exchange notes that the proposed changes to the Adjustment 
Table are designed to encourage LPs to provide and post liquidity to 
the Exchange and continue to encourage market participation and price 
improvement.
---------------------------------------------------------------------------

    \7\ For example, if an LP is assessed the Marketing Fee on a 
given transaction (0.25 per contract) for which it was a Taker in a 
Penny class, and that LP falls in Tier 1 of the LP Sliding Scale 
($0.23 per contract) and Performance Tier 1 of the Adjustment Table 
($0.05 per contract), the LP would be assessed $0.50 per contract 
for the transaction, instead of $0.53 per contract.
---------------------------------------------------------------------------

Hybrid Agency Liaison (``HAL'') Step-Up Rebate
    The Exchange currently rebates a Market-Maker $0.05 per contract 
against transaction fees generated from a transaction on the HAL system 
in a penny pilot class, provided that at least 70% of the Market-
Maker's quotes in that class (excluding quotes in LEAPS series) in the 
prior calendar month were on one side of the NBBO. The Exchange no 
longer desires to provide this incentive and therefore proposes to 
eliminate the HAL Step-Up Rebate from the Fees Schedule.
Volume Incentive Program
    Under the Volume Incentive Program (``VIP''), the Exchange credits 
each Trading Permit Holder (``TPH'') the per contract amount set forth 
in the VIP table for Public Customer orders (``C'' origin code) 
transmitted by that TPH (with certain exceptions) which is executed 
electronically on the Exchange, provided the TPH meets certain volume 
thresholds in a month.\8\ The Exchange proposes to make a few 
amendments to VIP. First, the Exchange proposes to amend the volume 
thresholds for Tiers 2, 3 and 4 and also add a Tier 5.\9\ The changes 
are as follows:
---------------------------------------------------------------------------

    \8\ See Cboe Options Fees Schedule, Volume Incentive Program.
    \9\ The Exchange notes that the Tier 5 rates for Simple and 
Complex Non-AIM will be the same as the rates for Tier 4 for Simple 
and Complex Non-AIM.

[[Page 3826]]

----------------------------------------------------------------------------------------------------------------
                                     Percentage thresholds of National Customer Volume in all underlying symbols
                                    excluding underlying Symbol List A, DJX, MXEA, MXEF, MNX, NDX, XSP and XSPAM
               Tier                -----------------------------------------------------------------------------
                                                   Current                                Proposed
----------------------------------------------------------------------------------------------------------------
1.................................  0.00%-0.75%..........................  No change.
2.................................  Above 0.75% to 1.80%.................  Above 0.75% to 2.00%.
3.................................  Above 1.80% to 3.00%.................  Above 2.00% to 3.00%.
4.................................  Above 3.00%..........................  Above 3.00% to 4.00%.
5.................................  N/A..................................  Above 4.00%.
----------------------------------------------------------------------------------------------------------------

    The Exchange also proposes to reduce the per contract credits for 
AIM orders. The proposed changes are as follows:

 
----------------------------------------------------------------------------------------------------------------
                                                        Per contract credit for AIM orders
                               ------------------------------------------------------------------------------------
                                                       Simple                                   Complex
                               ------------------------------------------------------------------------------------
                                     Tier             Current           Proposed           Current        Proposed
-------------------------------------------------------------------------------------------------------- ----------
1.............................           $0.00  No change..........           $0.00  No change.
2.............................            0.09  No change..........            0.20  0.19.
3.............................            0.11  0.10...............            0.23  0.22.
4.............................            0.14  0.13...............            0.24  0.23.
5.............................             N/A  0.14...............             N/A  0.24.
----------------------------------------------------------------------------------------------------------------

    The purpose of these changes is to adjust for current volume trends 
while maintaining an incremental incentive for TPH's to strive for the 
highest tier level. The Exchange does not believe it's necessary to 
maintain the existing credits for AIM volume, but still seeks to 
maintain an incremental incentive for TPHs to strive for the highest 
tier level.
    Lastly, the Exchange proposes to provide that a TPH will only 
receive the Complex credit rates for both its Complex AIM and Non-AIM 
volume if at least 40% of that TPH's qualifying VIP volume (in both AIM 
and Non-AIM) in the previous month was comprised of Simple volume. If 
the TPH's previous month's volume does not meet the 40% Simple volume 
threshold, then the TPH's Customer (C) Complex volume will receive 
credits at the Simple rate only (i.e., all volume, both Simple and 
Complex, will receive credits at the applicable Simple rate). The 
proposed 40% requirement will apply beginning in February 2018 (i.e., 
the proposed threshold will not affect January's credits. Rather, 
February 2018 volume will be based on whether a TPH's volume in January 
2018 was comprised of at least 40% Simple volume). Notwithstanding the 
higher credits offered for Complex volume, the Exchange believes the 
proposed change will encourage TPHs to continue to send both Simple and 
Complex volume to the Exchange.
Market-Maker Affiliate Volume Plan
    The Exchange proposes to amend its Market-Maker Affiliate Volume 
Plan (``AVP''). By way of background, under AVP, if a TPH Affiliate 
\10\ or Appointed OFP \11\ of a Market-Maker qualifies under VIP, that 
Market-Maker will also qualify for a discount on that Market-Maker's LP 
Sliding Scale transaction fees and Trading Permit fees. As noted above, 
the Exchange proposes to add an additional tier to VIP. As such, the 
Exchange also proposes to add an additional tier to AVP (Tier 5). 
Particularly, Market-Makers will receive a discount on transaction fees 
and Trading Permit fees of 35% if their Affiliate or Appointed OFP 
reach Tier 5 of VIP. The Exchange also proposes to reduce the discount 
for reaching Tier 3 from 20% to 15%.
---------------------------------------------------------------------------

    \10\ For purposes of AVP, ``Affiliate'' is defined as having at 
least 75% common ownership between the two entities as reflected on 
each entity's Form BD, Schedule A.
    \11\ See Cboe Options Fees Schedule Footnote 23. Particularly, a 
Market-Maker may designate an Order Flow Provider (``OFP'') as its 
``Appointed OFP'' and an OFP may designate a Market-Maker to be its 
``Appointed Market-Maker'' for purposes of qualifying for credits 
under AVP.
---------------------------------------------------------------------------

Electronic Transaction Fees for Clearing Trading Permit Holder 
Proprietary
    The Exchange proposes to increase the transaction fees for 
electronic executions for Clearing Trading Permit Holder Proprietary 
(origin codes ``F'' and ``L'') orders in equity, ETF, ETN and index 
options (excluding Underlying Symbol List A) classes from $0.38 per 
contract to $0.43 per contract in Penny Classes and $0.65 per contract 
to $0.70 per contract in Non-Penny classes.\12\ The Exchange notes that 
this increase is in line with the amounts assessed by others exchanges 
for similar transactions.\13\
---------------------------------------------------------------------------

    \12\ The Exchange notes that it inadvertently did not update the 
Clearing Trading Permit Holder Proprietary transaction fee rates for 
electronic executions for in the Clearing Trading Permit Holder Fee 
Cap table in the Fees Schedule. Currently, the rate is listed as 
$0.35 per contract. The Exchange notes it is now updating the fee to 
the proposed amounts of $0.43 for Penny Classes and $0.70 for Non-
Penny Classes.
    \13\ See e.g., Nasdaq PHLX LLC Pricing Schedule, Section II, 
Multiply Listed Options Fees. See also NYSE American Options Fees 
Schedule, Section I.A, Options Transaction Fees and Credits.
---------------------------------------------------------------------------

Complex Surcharge
    Currently, the Exchange assesses a Complex Surcharge of $0.10 per 
contract per side for non-customer complex order executions that take 
liquidity from the Complex Order Book (``COB'') and auction responses 
in the Complex Order Auction (``COA'') and the Automated Improvement 
Mechanism (``AIM'') in all classes except Underlying Symbol List A.\14\ 
The Exchange proposes to increase the amount of the Complex Surcharge 
from $0.10 per contract to $0.12 per contract.

[[Page 3827]]

The Exchange notes that it will continue to cap noncustomer complex 
auction responses in COA and AIM in Penny classes at $0.50 per 
contract, which includes the applicable transaction fee, Complex 
Surcharge and Marketing Fee (if applicable).\15\
---------------------------------------------------------------------------

    \14\ See Cboe Options Fees Schedule, Complex Surcharge and 
Footnote 35 for more details regarding the Complex Surcharge.
    \15\ For example, a Market-Maker COA response in a Penny class 
that is subject to the Marketing Fee ($0.25 per contract), the 
Liquidity Provider Sliding Scale Tier 1 rate ($0.23 per contract) 
and Complex Surcharge ($0.12 per contract), would only be charged 
$0.50 per contract, instead of $0.60 per contract.
---------------------------------------------------------------------------

AIM Contra
    The Exchange proposes to increase the AIM Contra Execution Fee for 
Broker-Dealer, Firm, Joint Back-Office, Non-TPH Market-Maker and 
Professional/Voluntary Professional orders from $0.05 to $0.07. The 
Exchange notes that the proposed amount of the fee is in line with the 
amount assessed for similar transactions at another exchange.\16\
---------------------------------------------------------------------------

    \16\ See PHLX Pricing Schedule, Section IV, PIXL Pricing.
---------------------------------------------------------------------------

ORS and CORS
    The Exchange proposes to amend its Order Routing Subsidy (ORS) and 
Complex Order Routing Subsidy (CORS) Programs (collectively 
``Programs''). By way of background, the ORS and CORS Programs allow 
the Exchange to enter into subsidy arrangements with any TPH (each, a 
``Participating TPH'') or Non-TPH broker-dealer (each a ``Participating 
Non-TPH'') that meet certain criteria and provide certain order routing 
functionalities to other TPHs, Non-TPHs and/or use such functionalities 
themselves.\17\ Participants in the ORS Program receive a payment for 
every executed contract for simple orders routed to the Exchange 
through their system and participants in the CORS Program receive a 
payment for every executed contract for complex orders routed to the 
Exchange through their system. Additionally, participants whose total 
aggregate non-customer ORS and CORS volume is greater than 0.40% of the 
total national volume (excluding volume in options classes included in 
Underlying Symbol List A, DJX, MXEA, MXEF, XSP or XSPAM) receive an 
additional payment of $0.07 per contract for all executed contracts 
exceeding that threshold during a calendar month. The Exchange proposes 
to reduce the threshold required to receive the additional $0.07 per 
contract from 0.40% to 0.25%.
---------------------------------------------------------------------------

    \17\ See Cboe Options Fees Schedule, ``Order Router Subsidy 
Program'' and ``Complex Order Router Subsidy Program'' tables for 
more details on the ORS and CORS Programs.
---------------------------------------------------------------------------

Liquidity Provider Sliding Scale for SPX and SPXW
    The Exchange proposes to amend its sliding scale for LP transaction 
fees in SPX and SPXW (``SPX LP Sliding Scale''). Currently, LPs' 
transaction fees in SPX and SPXW are determined by their average 
monthly contracts in SPX and SPXW. The SPX LP Sliding Scale currently 
provides for three tiers. The Exchange proposes to add two additional 
tiers, adjust the volume thresholds, and amend the transaction fees for 
each tier. The SPX LP Sliding Scale will continue to provide 
progressively lower rates if increased volume thresholds in SPX 
(including SPXW) options are attained during a month. The changes to 
the SPX LP Sliding Scale are as follows:

----------------------------------------------------------------------------------------------------------------
                                                  Volume thresholds                            Rate
               Tier                -----------------------------------------------------------------------------
                                           Current                Proposed            Current        Proposed
----------------------------------------------------------------------------------------------------------------
1.................................  0.00%-1.50%..........  0.00%-1.00%..........           $0.25           $0.28
2.................................  Above 1.01%-10.00%...  Above 1.00%-4.00%....            0.23            0.26
3.................................  Above 10.00%.........  Above 4.00%-9.00%....            0.21            0.24
4.................................  N/A..................  Above 9.00%-15.00%...             N/A            0.22
5.................................  N/A..................  Above 15.00%.........             N/A            0.20
----------------------------------------------------------------------------------------------------------------

    The proposed changes to the SPX LP Sliding Scale continue to 
provide incremental incentives for LPs to reach the highest tier level 
and encourage trading of SPX options.
Proprietary Products Sliding Scale
    The Proprietary Products Sliding Scale (``Proprietary Sliding 
Scale'') table provides that Clearing Trading Permit Holder Proprietary 
transaction fees for Clearing Trading Permit Holders and for Non-
Clearing Trading Permit Holder Affiliates (``Non-TPH Affiliates'') 
(collectively, ``Clearing TPHs'') in Underlying Symbol List A are 
reduced provided a Clearing TPH reaches certain average daily volume 
(``ADV'') thresholds in all underlying symbols excluding Underlying 
Symbol List A on the Exchange in a month. The Exchange proposes to 
increase the rates set forth in Tiers B2 and A1. Specifically, the 
Exchange proposes to increase the rate in Tier B2 to $0.18 from $0.12 
and in Tier A1 to $0.04 from $0.02. The purpose of increasing the 
transaction Fee Per Contract rates (and thereby reducing the amount of 
the discount Clearing TPHs may receive on proprietary products) is to 
moderate the discount levels for these products in view of their growth 
and performance. Particularly, the Exchange does not believe it's 
necessary to maintain the existing discounted rates for these tiers, 
but still seeks to maintain an incremental incentive for Clearing TPHs 
to strive for the highest tier level.
VIX Sliding Scale
    The Exchange proposes to amend its Clearing Trading Permit Holder 
Proprietary VIX Sliding Scale (the ``VIX Sliding Scale''). The VIX 
Sliding Scale allows VIX volatility index options (``VIX options'') 
transaction fees for Clearing TPH (including its Non-TPH Affiliates) 
proprietary orders to be reduced provided a Clearing TPH reaches 
certain proprietary VIX options volume thresholds during a month. The 
Exchange wishes to reduce the VIX fees in Tier 2 of the VIX Sliding 
Scale from $0.17 per contract to $0.15 per contract.
Supplemental VIX Discount
    The Exchange proposes to amend its Supplemental VIX Total Firm 
Volume Discount (``Supplemental VIX Discount''). The Supplemental VIX 
Discount allows VIX options transaction fees for Clearing TPHs 
(including its Non-TPH Affiliates) proprietary orders to be discounted 
provided a Clearing TPH reaches certain VIX firm volume percentage 
thresholds during a calendar month. The Exchange wishes to lower the 
volume thresholds in Tiers 1 and 2 as follows in order to reduce VIX 
transaction fees and encourage greater VIX trading activity:

[[Page 3828]]

----------------------------------------------------------------------------------------------------------------
                                                              VIX Firm volume percentage
                Tier                 ---------------------------------------------------------------------------
                                                     Current                              Proposed
----------------------------------------------------------------------------------------------------------------
1...................................  0.00%-10.99%........................  0.00%-7.00%.
2...................................  11.00%-12.99%.......................  7.01%-11.00%.
3...................................  13.00%-14.99%.......................  11.01%-15.00%.
4...................................  Above 14.99%........................  Above 15.00%.
----------------------------------------------------------------------------------------------------------------

SPX Index License Surcharge
    The Exchange proposes to increase the Index License Surcharge Fee 
for SPX (including SPXW) (the ``SPX Surcharge'') from $0.14 per 
contract to $0.16 per contract. The Exchange licenses from S&P Dow 
Jones Indices (``SPDJI'') (the ``SPDJI License'') the right to offer an 
index option product based on the S&P 500 index (that product being SPX 
and other SPX-based index option products). In order to offset the 
costs of the SPDJI License, the Exchange assesses the SPX Surcharge. 
The Exchange therefore proposes to increase the SPX Surcharge from 
$0.14 per contract to $0.16 per contract in order to offset more of the 
costs associated with the SPX license.
Floor Broker Trading Permit Fees
    The Exchange proposes to amend its Floor Broker Trading Permit 
Sliding Scale Program (``FB TP Sliding Scale''). The FB TP Sliding 
Scale allows Floor Brokers to pay reduced rates for their Trading 
Permits if they commit in advance to a specific tier that includes a 
minimum number of eligible Floor Broker Trading Permits for each 
calendar year. The Exchange proposes to amend the Permit thresholds as 
follows:

----------------------------------------------------------------------------------------------------------------
                                                           Number of permits                        Amount  per
                Tiers                ------------------------------------------------------------   month  per
                                                 Current                      Proposed                permit
----------------------------------------------------------------------------------------------------------------
                                      1...........................  No change...................          $9,000
1...................................  2-7.........................  2-5.........................           5,000
2...................................  8 or more...................  6 or more...................           3,000
----------------------------------------------------------------------------------------------------------------

    The purpose of this change is to reduce access costs and thereby 
encourage greater Floor Broker access.
Floor Brokerage Fees Discount
    The Exchange proposes to adopt a new discount for floor brokerage 
fees. Currently, floor brokerage fees for OEX, XEO, RUT, RLG, RLV, RUI, 
AWDE, FTEM, FXTM, UKXM and SPX Index Options are $0.04 per contract 
(crossed orders $0.02) and VIX and volatility index options are $0.03 
per contract (crossed orders $0.015). The Exchange wishes to implement 
a new floor brokerage fees discount for Floor Brokers (``FB 
Discount''). The FB Discount will be based on a Floor Broker's total 
monthly Floor Broker volume and will allow Floor Brokers to reduce 
their floor brokerage fees provided certain volume thresholds are 
attained during a month. The Exchange notes that only volume that is 
assessed transaction fees will be considered qualifying volume to meet 
the volume thresholds (i.e., OEX, XEO, RUT, SPX, SPXw, VIX and 
volatility index options). The Exchange notes that currently 
transaction fees for RLG, RLV, RUI, AWDE, FTEM, FXTM, UKXM are waived 
and as such will not count towards the volume thresholds. The FBD will 
be as follows:

------------------------------------------------------------------------
                                     Total monthly floor   % Discount on
                                      broker contracts       all floor
               Tiers                      traded in       brokerage fees
                                     qualifying classes        \18\
------------------------------------------------------------------------
1.................................  0-250,000...........               0
2.................................  250,001-1,500,000...               3
3.................................  1,500,001-5,000,000.               4
4.................................  5,000,001-7,500,000.               5
5.................................  Above 7,500,000.....               6
------------------------------------------------------------------------

Cboe Command Connectivity Charges
    Next, the Exchange proposes to increase Cboe Command Connectivity 
Fees. First, the Exchange proposes to increase the monthly fee for a 1 
gigabit per second (``Gbps'') Network Access Port from $750 per port to 
$1,500 per port.\19\ The Exchange also proposes to increase the monthly 
fee for a 10 Gbps Network Access Port from $4,000 per port to $5,000 
per port. The Exchange has expended significant resources setting up, 
providing and maintaining this connectivity and the Exchange desires to 
offset such costs. The Exchange notes that such costs are also 
increasing due to network infrastructure upgrades. This fee amount is 
still within the range of, and in some cases less than, similar fees 
assessed by other exchanges.\20\
---------------------------------------------------------------------------

    \18\ Once a volume threshold is attained during the month, the 
corresponding discount percentage will apply to all qualifying 
contracts. For example, if a Floor Broker has 2,000,000 contracts in 
qualifying volume in a given month, all 2,000,000 contracts will 
receive a discount of 4%.
    \19\ The Exchange also proposes to update the example in the 
Notes section to reflect the increased fee for the 1 Gbps Network 
Access Ports.
    \20\ See e.g., Cboe BZX Exchange, Inc., Options Exchange Fees 
Schedule, Options Physical Connection Fees, which lists connectivity 
fees of $2,000 per month for 1 Gbps and $6,000 per month for 10 
Gbps.
---------------------------------------------------------------------------

Linkage
    The Exchange proposes to increase the Linkage fee (in addition to 
the applicable away fees) for Customer orders from $0.10 to $0.15. The 
Fees Schedule currently provides that, in

[[Page 3829]]

addition to the customary Cboe Options execution charges, for each 
customer order that is routed, in whole or in part, to one or more 
exchanges in connection with the Options Order Protection and Locked/
Crossed Market Plan referenced in Rule 6.80, the Exchange shall pass 
through the actual transaction fee assessed by the exchange(s) to which 
the order was routed. The Exchange proposes to assess an additional 
$0.05 per contract for customer orders routed away in addition to the 
applicable pass through fees. The proposed increase will help offset 
costs incurred by the Exchange associated with routing customer orders 
through linkage. Indeed, the Exchange notes that it is, and will still 
be, subsidizing the costs associated with routing customer orders 
through linkage. The Exchange notes that the proposed amount of the fee 
is also in line with the amount assessed at other exchanges.\21\
---------------------------------------------------------------------------

    \21\ See e.g., PHLX Pricing Schedule, Section V., Customer 
Routing Fees.
---------------------------------------------------------------------------

Frequent Trader
    The Exchange next proposes to amend its Frequent Trader Program. By 
way of background, the Frequent Trader Program offers transaction fee 
rebates to registered Customers, Professional Customers and Voluntary 
Professionals (origin codes ``C'' and ``W'') (collectively, 
``Customers'') that meet certain volume thresholds in VIX, RUT, and SPX 
(including SPXW) options provided the Customer registers for the 
program. The Exchange proposes to amend the Frequent Trader Program to 
increase the volume thresholds and increase the rebates for RUT 
options. Specifically, the proposed changes will be as follows:

----------------------------------------------------------------------------------------------------------------
                                                                         RUT
                                   -----------------------------------------------------------------------------
               Tier                            Monthly contracts trade                      Fee rebate
                                   -----------------------------------------------------------------------------
                                           Current                Proposed          Current (%)    Proposed (%)
----------------------------------------------------------------------------------------------------------------
1.................................  5,000-9,999..........  10,000-24,999........               3              10
2.................................  10,000-12,999........  25,000-49,999........               6              15
3.................................  13,000 and above.....  50,000 and above.....               9              25
----------------------------------------------------------------------------------------------------------------

    The Exchange believes the proposed changes incentivizes the sending 
of RUT Customer orders to the Exchange while maintaining an incremental 
incentive for Customers to strive for the highest tier level.
VIX License Index Surcharge
    The Exchange proposes to extend the current waiver of 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 seven (7) calendar days or less. The Exchange adopted the 
current waiver to reduce transaction costs on expiring, low-priced VIX 
options, which the Exchange believed would 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. The Exchange had 
proposed to waive the surcharge through December 31, 2017, at which 
time the Exchange had stated that it would evaluate whether the waiver 
has in fact prompted Firms to close and roll over these positions close 
to expiration as intended. The Exchange believes the proposed change 
has in fact continued to encourage Firms to do so and as such, proposes 
to extend the waiver of the surcharge through June 30, 2018, at which 
time the Exchange will again reevaluate whether the waiver has 
continued to prompt Firms to close and roll over positions close to 
expiration at low premium levels. Accordingly, the Exchange proposes to 
delete the reference to the current waiver period of December 31, 2017 
from the Fees Schedule and replace it with June 30, 2018.
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, 2017. The Exchange also waives fees through June 30, 2018 
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 June 30, 2018.
RLG, RLV, RUI, AWDE, FTEM, FXTM and UKXM Transaction Fees
    In order to promote and encourage trading of seven new FTSE Russell 
Index products (i.e., Russell 1000 Growth Index (``RLG''), Russell 1000 
Value Index (``RLV''), Russell 1000 Index (``RUI''), FTSE Developed 
Europe Index (``AWDE''), FTSE Emerging Markets Index (``FTEM''), China 
50 Index ``(FXTM'') and FTSE 100 Index (``UKXM'')), the Exchange waives 
all transaction fees (including the Floor Brokerage Fee, Index License 
Surcharge and CFLEX Surcharge Fee) for each of these products. This 
waiver however, expired December 31, 2017. In order to continue to 
promote trading of these options classes, the Exchange proposes to 
extend the fee waiver through June 30, 2018.
FLEX Asian and Cliquet Flex Trader Incentive Program
    By way of background, a FLEX Trader is entitled to a pro-rata share 
of the monthly compensation pool based on the customer order fees 
collected from customer orders traded against that FLEX Trader's orders 
with origin codes other than ``C'' in FLEX Broad-Based Index Options 
with Asian or Cliquet style settlement (``Exotics'') each month 
(``Incentive Program''). The Fees Schedule provides that the Incentive 
Program is set to expire either by December 31, 2017 or until total 
average daily volume in Exotics exceeds 15,000 contracts for three 
consecutive months, whichever comes first. The Exchange notes that 
total average daily volume in Exotics has not yet exceeded 15,000 
contracts for three consecutive months. In order to continue to 
incentivize FLEX Traders to provide liquidity in FLEX Asian and Cliquet 
options, the Exchange proposes to extend the program to June 30, 2018 
or until total average daily volume in Exotics exceeds 15,000

[[Page 3830]]

contracts for three consecutive months, whichever comes first.
AWDE, FTEM, FXTM, UKXM, RVX DPM Payment
    The Exchange currently offers a compensation plan to the Designated 
Primary Market-Maker(s) (``DPM(s)'') appointed in AWDE, FTEM, FXTM, 
UKXM or RVX to offset the initial DPM costs. Specifically, the Fees 
Schedule provides that DPM(s) appointed for an entire month in AWDE, 
FTEM, FXTM or UKXM classes will receive a payment of $7,500 per class 
per month, and the DPM appointed in RVX will receive a payment of 
$8,500 per month, through December 31, 2017. The Exchange notes that it 
plans on delisting AWDE, FTEM, FXTM and RVX shortly and therefore no 
longer wishes to extend these DPM payments. The Exchange also notes 
however, that it does not intend on delisting UKXM at this time and 
wishes to extend the payment to help offset ongoing costs associated 
with being the DPM in UKXM. The Exchange proposes to reduce the payment 
to $5,000 per month through December 31, 2018.
OHS Order Cancellation Fee
    The Exchange notes that the OHS (Order Handling Service) Order 
Cancellation Fee used to be assessed to an executing Clearing Trading 
Permit Holder (single OHS firm) for each cancelled public customer 
(origin code ``C'') OHS order in excess of the number of public 
customer orders that the executing Clearing Trading Permit Holder 
executed in a month for itself or for a correspondent firm. However, 
this fee has been set at $0.00 for some time now. The Exchange does not 
intend on assessing this fee in the near future and as such, desires to 
remove the fee from the Fees Schedule to avoid any 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.\22\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \23\ 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,\24\ 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.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b).
    \23\ 15 U.S.C. 78f(b)(5).
    \24\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes adjusting the LP Sliding Scale volume 
thresholds is reasonable because it adjusts for the current volume 
trends and the Exchange's market share gains. The Exchange also notes 
that the rates set forth in the LP Sliding Scale are not changing. 
Rather, the rebalance of tiers still allows the Exchange to maintain an 
incremental incentive for LP's to strive for the highest tier level, 
which provides increasingly lower fees. The Exchange believes it is 
equitable and not unfairly discriminatory because the proposed changes 
to the qualifying volume thresholds apply to all LPs uniformly. The 
Exchange also believes the proposed change is equitable and not 
unfairly discriminatory for the reasons discussed below in the Burden 
of Competition section relating to the favorable treatment of LPs.
    The Exchange believes that the proposed amendments to the LP 
Sliding Scale Adjustment Table thresholds are reasonable because the 
amount of LP transaction fees including the proposed changes to Taker 
adjustments per contract are similar and in line with the amount 
assessed for similar transactions at other exchanges and because the 
adjustments are still subject to a $0.50 per contract cap.\25\ The 
proposed changes to the Maker rebates provide LPs additional 
opportunities to qualify for a rebate they would not otherwise receive. 
Additionally the proposed rule change is designed to encourage LPs to 
provide and post liquidity to the Exchange. The Exchange believes that 
the proposed changes are equitable and not unfairly discriminatory 
because they apply to all LPs. The Exchange also notes that it believes 
it's equitable and not unfairly discriminatory to assess additional 
Taker fees to transactions removing liquidity from the market 
(``Takers'') and not Maker volume because the Exchange wants to 
continue to encourage market participation and price improvement.
---------------------------------------------------------------------------

    \25\ See e.g., NYSE Arca Options Fees and Charge, Transaction 
Fee for Electronic Executions--Per Contract.
---------------------------------------------------------------------------

    The Exchange believes it's reasonable to eliminate the HAL Step-Up 
Rebate because it is not required to provide such a rebate. 
Additionally, the Exchange notes that it originally adopted the HAL 
Step-Up rebate to incent Market-Makers to execute orders at Cboe 
Options versus routing orders away via Linkage (as the Exchange had 
been subsidizing most of the costs associated with linkage for 
competitive reasons). However, the Exchange no longer subsidizes most 
of the linkage costs, as routing practices have changed over the years. 
Therefore, the Exchange no longer wishes to offer the rebate. The 
Exchange believes it's equitable and not unfairly discriminatory 
because it applies uniformly to all TPHs.
    The Exchange believes adjusting VIP volume thresholds is reasonable 
because it adjusts for current volume trends and given the Exchange's 
market share gains. The Exchange notes that the rebalance of tiers 
still allows the Exchange to maintain an incremental incentive for TPHs 
to strive for the highest tier level, which provides increasingly 
higher credits. This change is also equitable and not unfairly 
discriminatory because it will be applied to all TPHs uniformly. The 
Exchange believes adding an additional Tier is reasonable because it 
provides a rebate for AIM executions, the amount of which is the same 
as previously offered, albeit at a different threshold. The Exchange 
believes it's reasonable to reduce the credits available for Simple and 
Complex AIM executions because VIP still provides an opportunity for 
TPHs to receive credits for Simple and Complex AIM orders for reaching 
certain qualifying volume thresholds that they would not otherwise 
receive (now just a smaller credit). The Exchange also believes it's 
reasonable, equitable and not unfairly discriminatory to establish 
lower credits for AIM executions than non-AIM executions under VIP 
because AIM transactions are already assessed lower transaction fees 
than non-AIM.\26\ The Exchange believes the proposal to provide that a 
TPH will only receive the Complex credit rates for both its Complex AIM 
and Non-AIM volume if at least 40% of that TPH's qualifying VIP volume 
(in both AIM and Non-AIM) in the previous month was comprised of Simple 
volume is reasonable because TPHs still receive credits they would not 
otherwise receive. The Exchange

[[Page 3831]]

believes the proposed rule changes incentivize the sending of both 
Simple and Complex orders to the Exchange. The greater liquidity and 
trading opportunities of both Simple and Complex orders should benefit 
not just customers (whose orders are the only ones that qualify for the 
VIP) but all market participants. The Exchange believes the proposed 
change is equitable and not unfairly discriminatory because it applies 
to all TPHs that meet the qualifying volume thresholds.
---------------------------------------------------------------------------

    \26\ See Cboe Options Fees Schedule, Equity, ETF, ETN and Index 
Options (excluding Underlying Symbol List A) rate tables.
---------------------------------------------------------------------------

    The Exchange believes that adding an additional tier to AVP is 
reasonable because it provides LPs an additional opportunity to receive 
increased discounts on their transaction fees and Trading Permit fees. 
Additionally, the Exchange notes that the proposed tier is made in 
conjunction with the proposal to add a tier to VIP. Moreover, enhancing 
the incentives under AVP further incentivizes a Market-Maker Affiliate 
to achieve the highest tier on VIP so that the Market-Maker can achieve 
those higher credits, which thereby can result in greater customer 
liquidity. 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). The Exchange believes reducing the 
discount in Tier 2 of AVP from 20% to 15% is reasonable because it 
still provides an opportunity for LPs to receive a discount they would 
not otherwise receive (now just a smaller discount). The Exchange 
believes the proposed changes are equitable and not unfairly 
discriminatory because they apply uniformly to all Market-Makers whose 
Affiliates or Appointed Affiliates meet the VIP tiers. The Exchange 
also notes that any Market-Maker may enter into a relationship with an 
Appointed Affiliate and thus have the opportunity to avail itself of 
AVP discounts. Lastly, the Exchange believes the proposed change is 
equitable and not unfairly discriminatory for the reasons discussed 
below in the Burden of Competition section relating to the favorable 
treatment of LPs.
    Increasing the fee for electronic executions for Clearing Trading 
Permit Holder Proprietary orders in Penny and Non-Penny equity, ETF, 
ETN and index options (excluding Underlying Symbol List A) classes is 
reasonable because the proposed fee amounts are in line with the 
amounts assessed by another exchange for similar transactions.\27\ The 
Exchange believes that this proposed change is also equitable and not 
unfairly discriminatory because the proposed changes will apply equally 
to all Clearing Trading Permit Holders.
---------------------------------------------------------------------------

    \27\ See e.g., PHLX Pricing Schedule, Section II, Multiply 
Listed Options Fees and NYSE Amex Options Fees Schedule, Section 
I.A, Options Transaction Fees and Credits, Rates for Standard 
Options Transactions.
---------------------------------------------------------------------------

    The Exchange believes that the proposed increase of the Complex 
Surcharge from $0.10 per contract per side to $0.12 per contract per 
side is reasonable because it helps offset high credits given to 
complex orders under VIP. The Exchange also notes that notwithstanding 
the increase, noncustomer COA and AIM auction responses in Penny 
classes continue to be capped at $0.50 per contract. The Exchange 
believes the proposed change is equitable and not unfairly 
discriminatory because it applies uniformly to all noncustomer orders.
    The Exchange believes increasing the AIM Contra fee is reasonable 
because the proposed amount of the fee is in line with the amount 
assessed for similar transactions at another exchange.\28\ 
Additionally, as noted above AIM transactions are already assessed 
lower transaction fees than non-AIM.\29\ The Exchange believes the 
proposed change is equitable and not unfairly discriminatory because it 
applies equally to applicable TPH transactions.
---------------------------------------------------------------------------

    \28\ See PHLX Pricing Schedule, Section IV, PIXL Pricing.
    \29\ See Cboe Options Fees Schedule, Equity, ETF, ETN and Index 
Options (excluding Underlying Symbol List A) rate tables.
---------------------------------------------------------------------------

    The Exchange believes the proposed amendments to the ORS and CORS 
Programs are reasonable because the proposed changes make it easier for 
Participants to receive additional payments to subsidize the costs 
associated with providing certain order routing functionalities. 
Additionally, the Exchange believes the subsidy helps attract order 
flow to the Exchange, which brings greater liquidity and trading 
opportunity, which benefits all market participants. The Exchange also 
believes the proposed change is equitable and not unfairly 
discriminatory because it applies equally to all participating TPHs and 
Non-TPH broker dealers.
    The Exchange believes adding two additional tiers, adjusting the 
volume thresholds, and amending the transaction fees for each tier of 
the SPX LP Sliding Scale is reasonable because the sliding scale 
continues to provide incremental incentives for LPs to reach the 
highest tier level and encourage trading of SPX options. Additionally, 
the Exchange believes increasing SPX transaction fees for LPs is 
reasonable because the Exchange has expended considerable resources 
developing and maintaining SPX. The Exchange believes that this 
proposed change is equitable and not unfairly discriminatory because it 
applies uniformly to all LPs. The Exchange also believes that this 
proposed change is equitable and not unfairly discriminatory because 
although LPs still pay lower SPX transaction fees than certain other 
market participants, LPs are valuable market participants that provide 
liquidity in the marketplace and incur costs that other market 
participants do not incur.
    The Exchange believes increasing the SPX Surcharge is reasonable 
because it helps offset the costs of the SPDJI License. The Exchange 
notes in particular, that the proposed surcharge still does not offset 
the full cost of the SPDJI License. This increase is equitable and not 
unfairly discriminatory because all non-Customer market participants 
will be assessed the same increased SPX Surcharge. Not applying the SPX 
Surcharge to customer orders is equitable and not unfairly 
discriminatory because this is designed to attract customer SPX orders, 
which increases liquidity and provides greater trading opportunities to 
all market participants.
    The Exchange believes increasing the rates in Tiers B2 and A1 of 
the Proprietary Sliding Scale (and thereby reducing the overall 
discount) is reasonable because it still provides Clearing TPHs 
(including their Non-TPH Affiliates) an opportunity to receive notable 
discounted rates on classes in Underlying Symbol list A for reaching 
certain qualifying volume thresholds that they would not otherwise 
receive (now just a smaller discount). Additionally, the Exchange notes 
that lower fees for executing more contracts is equitable and not 
unfairly discriminatory because it provides market participants with an 
incentive to execute more contracts on the Exchange. This brings 
greater liquidity and trading opportunity, which benefits all market 
participants. The Exchange believes that the proposed change is not 
unfairly discriminatory because it will apply to all Clearing TPHs that 
meet the qualifying volume thresholds. The Exchange also believes 
offering lower fees under the Proprietary Sliding Scale to Clearing 
TPHs and not other market participants is equitable and not unfairly 
discriminatory because Clearing TPHs must take on certain obligations 
and responsibilities, such as clearing and membership with the Options 
Clearing Corporation, as well as significant regulatory burdens and

[[Page 3832]]

financial obligations, that other market participants are not required 
to undertake.
    The Exchange believes decreasing the rate in Tier 2 of the VIX 
Sliding Scale (and thereby increasing the overall discount) is 
reasonable because it provides Clearing TPHs (including their Non-TPH 
Affiliates) an opportunity to receive an additional discounted rates in 
VIX for reaching the qualifying volume threshold in VIX. The Exchange 
notes that lowering the VIX fee is equitable and not unfairly 
discriminatory because it provides Clearing TPHs with an incentive to 
execute more VIX contracts on the Exchange. The Exchange believes that 
the proposed change is not unfairly discriminatory because it will 
apply to all Clearing TPHs that meet the qualifying volume threshold. 
The Exchange also believes offering lower fees under the VIX Sliding 
Scale to Clearing TPHs and not other market participants is equitable 
and not unfairly discriminatory because Clearing TPHs must take on 
certain obligations and responsibilities, such as clearing and 
membership with the Options Clearing Corporation, as well as 
significant regulatory burdens and financial obligations, that other 
market participants are not required to undertake.
    The Exchange believes adjusting the qualifying thresholds under the 
Supplemental VIX Discount allows Clearing TPHs the opportunity to 
obtain a discount on its VIX transaction fees at a quicker rate. The 
proposed rule change is designed to encourage increased Clearing TPH 
proprietary VIX options volume, which provides increased VIX options 
volume and greater trading opportunities for all market participants. 
Similarly, applying higher discount rates for Clearing TPHs who hit the 
higher percentage of total VIX options contract proprietary volume of 
all Clearing TPHs on the VIX Discount is equitable and not unfairly 
discriminatory because this is designed to encourage increased TPH 
proprietary VIX options volume, which provides increased VIX options 
volume and greater trading opportunities for all Clearing TPHs, 
including those who are not able to reach the higher volume 
percentages. The Exchange believes the proposed change is equitable and 
not unfairly discriminatory because it applies uniformly to all 
Clearing TPHs. Additionally, as discussed above (and below in the 
Burden of Competition section), Clearing TPHs have clearing obligations 
that other market participants do not have.
    The Exchange believes the proposal to amend the Trading Permit 
thresholds under the FB TP Sliding Scale are reasonable because it 
reduces Floor Broker access costs. Lower access costs may encourage 
greater Floor Broker access, which thereby brings greater trading 
activity, volume and liquidity, benefitting all market participants. 
The Exchange believes the proposed change is equitable and not unfairly 
discriminatory because it applies to all Floor Brokers.
    Similarly, the Exchange believes the FB Discount is reasonable 
because it provides Floor Brokers the opportunity to receive discounts 
on floor brokerage fees that they otherwise would not receive. 
Discounted floor brokerage rates may encourage the execution of more 
orders in the classes that are currently assessed floor brokerage fees, 
which should increase volume, which would benefit all market 
participants (including Floor Brokers who do not hit the volume 
thresholds). The Exchange believes the proposed changes are equitable 
and not unfairly discriminatory because they apply to qualifying Floor 
Brokers equally. The Exchange believes it's reasonable, equitable and 
not unfairly discriminatory to provide that only volume that is 
assessed transaction fees will be considered qualifying volume to meet 
the volume thresholds because the Exchange is not collecting any floor 
brokerage fees on that volume. Providing that the discounts apply only 
to OEX, XEO, RUT, SPX, SPXw, VIX and volatility index options is 
equitable and not unfairly discriminatory because those products 
currently are assessed floor brokerage fees.\30\
---------------------------------------------------------------------------

    \30\ As previously noted, transaction fees for RLG, RLV, RUI, 
AWDE, FTEM, FXTM, UKXM are currently waived.
---------------------------------------------------------------------------

    The proposed change to increase the 1 Gbps and 10 Gbps Network 
Access Port fees is reasonable because the fees are within the same 
range as those assessed on other exchanges,\31\ and because such 
increase will assist in recouping ongoing expenditures made by the 
Exchange. Additionally, as noted above, such expenditures are 
increasing due to network infrastructure upgrades. This proposed change 
is equitable and not unfairly discriminatory because the proposed 
change will apply to all TPHs.
---------------------------------------------------------------------------

    \31\ See e.g., Cboe BZX Exchange, Inc., Options Exchange Fees 
Schedule, Options Physical Connection Fees, which lists connectivity 
fees of $2,000 per month for 1 Gbps and $6,000 per month for 10 
Gbps.
---------------------------------------------------------------------------

    The Exchange's proposal to increase the Linkage fee from $0.10 per 
contract to $0.15 per contract (in addition to applicable transaction 
fees) for customer orders is reasonable because the increase will help 
offset the costs associated with routing orders through Linkage. 
Additionally, the proposed amount is reasonable as it is in line with 
amounts charged by other Exchanges for similar transactions.\32\ The 
Exchange believes it's equitable and not unfairly discriminatory 
because the proposed change will apply to all customer orders that are 
linked away.
---------------------------------------------------------------------------

    \32\ See e.g., PHLX Pricing Schedule, Section V., Customer 
Routing Fees.
---------------------------------------------------------------------------

    The Exchange believes it's reasonable to increase the Frequent 
Trader rebates for RUT because it provides Customers an opportunity to 
receive increased rebates for reaching certain qualifying volume 
thresholds that they would not otherwise receive. The proposed rule 
change is designed to encourage greater Customer RUT options trading, 
which, along with bringing greater RUT options trading opportunities to 
all market participants, would bring in more fees to the Exchange, and 
such fees can be used to recoup the Exchange's costs and expenditures 
from maintaining RUT options. The Exchange believes it's also 
reasonable to increase the qualifying volume thresholds for RUT as it 
still allows the Exchange to maintain an incremental incentive for 
Customers to strive for the highest tier level and because the Exchange 
has increased the rebates for each of the tiers. The Exchange believes 
it's equitable and not unfairly discriminatory to establish higher 
rebates under the Frequent Trader Program for RUT as compared to SPX 
and VIX options because the Exchange would like to encourage more RUT 
trading. The Exchange believes that the proposed change is not unfairly 
discriminatory because it will apply to all Frequent Trader Customers 
and because any Customer may avail itself of the Frequent Trader 
Program provided it registers with the Exchange and its executing TPH 
participates. The Exchange believes it's reasonable to continue 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 7 calendar days or less because, the 
fee is being waived in its entirety and the Exchange wants to continue 
encouraging 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

[[Page 3833]]

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 7 
calendar days or less. Additionally, encouraging firms to roll and 
close over these positions would free up capital that the firm can then 
use to benefit others. Finally, the Exchange believes it's reasonable, 
equitable and not unfairly discriminatory to provide that the surcharge 
will be waived through June 30, 2018, as it gives the Exchange 
additional time to evaluate if the waiver is continuing to have the 
desired effect of encouraging these transactions.
    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 June 30, 2018 is 
reasonable, equitable and not unfairly discriminatory, because those 
respective fees are being waived in their entirety, which 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.
    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to extend the waiver of all transaction fees for RLG, 
RLV, RUI, AWDE, FTEM, FXTM and UKXM transactions, including the Floor 
Brokerage fee, the License Index Surcharge and CFLEX Surcharge Fee, 
because the respective fees are being waived in their entirety, which 
promotes and encourages trading of these products which are still 
relatively new and applies to all TPHs.
    The Exchange believes extending the FLEX Asian and Cliquet Flex 
Trading Incentive Program is reasonable, equitable and not unfairly 
discriminatory because the Exchange believes the amount of the current 
incentives provided to FLEX Traders should encourage the Flex Traders 
to trade FLEX Asian and Cliquet options, which should result in a more 
robust price discovery process that will result in better execution 
prices for customers. In addition, the proposed change applies equally 
to all FLEX Traders.
    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to extend the compensation plan to the DPM 
appointed in UKXM to continue to offset its ongoing DPM costs and 
continue to incentivize the DPM to continue to serve as a DPM in this 
products. The Exchange believes it's reasonable to reduce the payment 
to $5,000 because the DPM is still receiving a payment it would not 
otherwise receive. The Exchange believes it's reasonable, equitable and 
not unfairly discriminatory to eliminate (i.e., not extend) the DPM 
payments for AWDE, FTEM, FXTM, UKXM, and RVX because the Exchange 
either does not trade or plans to delist these classes shortly.
    Finally, the Exchange believes eliminating the OHS Cancellation Fee 
from the Fees Schedule will eliminate unnecessary language and 
alleviate confusion as the fee is currently set to $0.00. The 
alleviation of confusion removes impediments to and perfects the 
mechanism of a free and open market and a national market system, and, 
in general, protects 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. 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 also 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 Options 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 the 
Exchange. To the extent that the proposed changes make Cboe Options 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.

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 \33\ and paragraph (f) of Rule 19b-4 \34\ 
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.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78s(b)(3)(A).
    \34\ 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 [email protected]. Please include 
File Number SR-CBOE-2018-007 on the subject line.

[[Page 3834]]

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-2018-007. 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-2018-007, and should be submitted 
on or before February 16, 2018.
---------------------------------------------------------------------------

    \35\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-01367 Filed 1-25-18; 8:45 am]
 BILLING CODE 8011-01-P