Document ID: SEC-2017-0091-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2017-01-24T05:00Z

[Federal Register Volume 82, Number 14 (Tuesday, January 24, 2017)]
[Notices]
[Pages 8252-8255]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-01463]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79808; File No. SR-CBOE-2017-004]

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 17, 2017.
    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 3, 2017, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The text of the proposed rule change is available on the Exchange's 
Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 
at the Exchange's Office of the Secretary, and at the Commission's 
Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fees Schedule. The Exchange is 
adding fees for functionality related to its PULSe workstation. The 
fees herein will be effective on January 3, 2017.
    By way of background, the PULSe workstation is a front-end order 
entry system designed for use with respect to orders that may be sent 
to the trading systems of the Exchange. Exchange Trading Permit Holders 
(``TPHs'') may also make workstations available to their customers, 
which may include TPHs, non-broker dealer public customers and non-TPH 
broker dealers.
Drop Copies
    Financial Information eXchange (``FIX'') language-based 
connectivity, upon request, provides customers (both TPH and non-TPH) 
of TPHs that are brokers and PULSe users (``PULSe brokers'') with the 
ability to receive ``drop-copy'' order fill messages from their PULSe 
brokers. These fill messages allow customers to update positions, risk 
calculations and streamline back-office functions.
    The Exchange is proposing a monthly fee to be assessed on TPHs who 
are either receiving or sending drop copies via a PULSe workstation. 
This fee will allow for the recoupment of costs of maintaining and 
supporting drop copy functionality. Whether the drop copy sender or 
receiver is assessed the fee is dependent upon whether the customer 
receiving the drop copies is a TPH or non-TPH.
    If a customer receiving drop copies is a TPH, that TPH customer 
(the receiving TPH) will be charged a fee of $1000 per month, per PULSe 
broker from whom it receives drop copies via PULSe. For example, if TPH 
customer A receives drop copies from each of PULSe broker A, PULSe 
broker B, and PULSe broker C (all of which are TPHs), TPH A (the 
receiving TPH) will be charged a fee of $3000 per month for receiving 
drop copies via PULSe from PULSe brokers A, B and C (the sending TPHs).
    If a customer receiving drop copies is a non-TPH, the PULSe broker 
(the sending TPH) who sends drop copies via PULSe to that customer will 
be charged a fee of $500 per month. If that PULSe broker sends drop 
copies via PULSe to multiple non-TPH customers, the PULSe broker will 
be charged the fee for each customer. For example, if PULSe broker A 
sends drop copies via its PULSe workstation to each of non-TPH customer 
A, non-TPH customer B and non-TPH customer C, PULSe broker A (the 
sending TPH) will be charged a fee of $1500 per month for drop copies 
it sends via PULSe to non-TPH customers A, B and C (the receiving non-
TPHs).
Non-PULSe-to-PULSe Routing
    Upon request, the Exchange provides customers, both TPH and non-
TPH, of PULSe brokers with the ability to transmit orders 
electronically to PULSe brokers' PULSe workstations using order 
management systems other than PULSe (i.e., non-PULSe-to-PULSe).\3\ 
These customers utilize the existing infrastructure of such systems to 
send orders to their PULSe brokers electronically.
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    \3\ Non-PULSe-to-PULSe routing is an ``add-on'' feature to drop 
copy connectivity. If a TPH or non-TPH customer of a PULSe brokers 
elects to send orders through its third-party order management 
system to its broker's PULSe workstations, it must also elect to 
have the drop copy connectivity.
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    The Exchange is proposing a monthly fee payable by TPH customers 
who request non-PULSe-to-PULSe functionality. This fee will allow for 
the recoupment of costs of maintaining and supporting non-PULSe-to-
PULSe routing functionality. A TPH customer sending orders 
electronically to PULSe brokers through these non-PULSe systems will be 
charged a fee of $500 a month per PULSe broker to which the customer 
sends orders. For example, if TPH customer A transmits orders 
electronically through a non-PULSe order management terminal to PULSe 
workstations of each of PULSe broker A, PULSe broker B, and PULSe 
broker C, TPH customer A (the sending TPH) will be charged a fee of 
$1500 per month for the ability to send orders electronically to the 
PULSe workstations of PULSe brokers A, B and C.\4\ The Exchange does 
not assess any fee, to the PULSe broker or otherwise, for a non-TPH 
customer electing to use non-PULSe-to-PULSe routing functionality.
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    \4\ In Addition, the TPH customer would be charged $3,000/month 
for receiving drop copies from the three PULSe brokers, as discussed 
above.
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FIX Integration Drop Copy Start-Up/Cancellation Fees
    The Exchange is proposing fees for both the start-up and 
cancellation of the FIX integration needed to send and receive drop 
copies from PULSe workstations. The Exchange is proposing a one-time 
fee of $500 to recoup the costs required to connect a new drop copy 
customer to workstations of its PULSe broker(s) and add the drop copy 
functionality for that customer. Additionally, the Exchange is

[[Page 8253]]

proposing a one-time fee of $500 for cancellation of the drop copy 
functionality to recoup the costs required to disconnect the cancelling 
drop copy customer from workstations of its PULSe broker(s) and remove 
the drop copy functionality for that customer. In the case of both 
start-up and cancellation, the fees are charged to the TPH who is 
charged for the drop copy connectivity (in the case of a TPH customer, 
the TPH customer that receives drop copies from PULSe broker; in the 
case of a non-TPH customer, the PULSe broker that sends drop copies to 
the non-TPH customer). If the TPH customer is charged these fees, each 
fee is $500 for each PULSe broker to which the TPH customer requests to 
start or cancel drop copy functionality, as applicable. If the PULSe 
broker is charged these fees, each fee is $500 for each non-TPH 
customer that requests to start or cancel drop copy functionality from 
that PULSe broker.
Routing Intermediary Certification and Inactivity Fees
    Routing intermediaries route orders entered into PULSe to away 
markets and to route orders from non-TPH PULSe workstations to TPHs for 
entry and execution on the Exchange. Routing intermediaries are 
currently charged routing intermediary transactional fees for away 
market routing from any PULSe workstation for which it serves as the 
routing intermediary. The Exchange is proposing a $5000 one-time fee 
for certification of a new PULSe routing intermediary. This fee will 
allow for the recoupment of costs of adding connectivity for the new 
routing intermediary, including connectivity to away-market routing 
technology, and testing necessary to support the new order routing 
features.
    The Exchange is also proposing a routing intermediary inactivity 
fee of up to $5000. The fees currently charged to routing 
intermediaries allow for the recoupment of costs of developing, 
maintaining, and supporting routing intermediary functionality, 
including away-market routing technology. If the Exchange is unable to 
collect sufficient fees in a year from a routing intermediary to cover 
theses costs, the inactivity fee allows for sufficient recoupment of 
these costs for that year. The fee will be charged to a routing 
intermediary each calendar year in which the routing intermediary has 
been charged Away-Market Routing Intermediary and Exchange Routing fees 
in the aggregate of less than $5000. The inactivity fee will be reduced 
by the amount of any of these fees charged to the routing intermediary 
during a calendar year. For example, if a routing intermediary was 
charged an aggregate of $4500 in Away-Market Routing Intermediary and 
Exchange Routing fees in the calendar year 2017, that routing 
intermediary would be assessed a $500 routing intermediary inactivity 
fee. The routing intermediary inactivity fee may first be charged in 
the calendar year following the year in which the routing intermediary 
was charged the routing intermediary certification fee. A TPH that 
withdraws as a routing intermediary will not be charged an inactivity 
fee for the calendar year in which they withdrew.
OATS Reporting Fees
    The Exchange is proposing a $250 per month Order Audit Trail System 
(``OATS'') reporting fee. The fee will be charged to any PULSe customer 
(TPH or non-TPH) who elects to receive daily transmission of OATS 
reports for its orders submitted through PULSe. This fee will allow for 
the recoupment of costs of developing, maintaining and supporting OATS 
reporting functionality.
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.\5\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \6\ 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,\7\ which requires that Exchange rules 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its Trading Permit Holders and other persons using 
its facilities.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that assessing a $1000 per month fee on a TPH 
receiving drop copies from PULSe is reasonable because the Exchange 
incurs costs to monitor, develop and implement upgrade, maintain and 
customize PULSe to ensure the TPH customer receives timely and accurate 
drop copies. The Exchange believes the fee is equitable and not 
unfairly discriminatory because the monthly fee is assessed to any TPH 
electing to receive drop copies from a PULSe broker. Use of the drop 
copy functionality by a TPH customer is voluntary.
    The Exchange believes that assessing a $500 per month fee on a TPH 
sending drop copies from PULSe to a non-TPH customer is reasonable 
because the Exchange incurs costs to monitor, develop and implement 
upgrades, maintain and customize PULSe to ensure a non-TPH customer 
receives timely and accurate drop copies. The Exchange believes the fee 
is equitable and not unfairly discriminatory because the monthly fee is 
assessed equally to any TPH sending drop copies to its non-TPH 
customers. The Exchange believes that assessing a TPH sending drop 
copies to a non-TPH a monthly fee of $500, as opposed to the $1000 per 
month rate assessed to TPH customers receiving drop copies from PULSe, 
is reasonable, equitable, and not unfairly discriminatory. Specially, 
the lower rates are designed to encourage non-TPH market participants 
to interact with the Exchange, which will accordingly attract more 
volume and liquidity to the Exchange and benefit all Exchange 
participants through increased opportunities to trade. Use of the drop 
copy functionality by a non-TPH customer is voluntary.
    The Exchange believes that assessing a $500 per month fee for a TPH 
customer electing to use non-PULSe-to-PULSe routing functionality (in 
addition to receiving drop copies) is reasonable because the Exchange 
incurs costs to monitor, develop and implement upgrades, maintain and 
customize PULSe to ensure a reliable connection between a TPH customer 
and its PULSe broker through which the customer's orders reach the 
PULSe broker in a timely and accurate manner. The Exchange believes the 
fee is equitable and not unfairly discriminatory because the monthly 
fee is assessed equally to any TPH electing to use the non-PULSe-to-
PULSe routing functionality. The Exchange does not assess any fee, to 
the PULSe broker or otherwise, for a non-TPH customer electing to use 
non-PULSe-to-PULSe routing functionality. The Exchange believes not 
assessing a fee for a non-TPH customer electing to use non-PULSe-to-
PULSe routing functionality is reasonable, equitable,

[[Page 8254]]

and not unfairly discriminatory in that it is designed to encourage 
non-TPH market participants to interact with the Exchange, which will 
accordingly attract more volume and liquidity to the Exchange and 
benefit all Exchange participants through increased opportunities to 
trade. Use of non-PULSe-to-PULSe routing functionality is voluntary.
    The Exchange believes that assessing a TPH sending drop copies to a 
non-TPH a monthly $500, as opposed to the $1000 per month rate assessed 
to TPH customers receiving drop copies from PULSe, is reasonable, 
equitable, and not unfairly discriminatory. The lower rates are 
designed to encourage non-TPH market participants to interact with the 
Exchange, which will accordingly attract more volume and liquidity to 
the Exchange and benefit all Exchange participants through increased 
opportunities to trade.
    The Exchange believes that assessing a $500 one-time fee for FIX 
integration necessary to receive or send drop copies from PULSe is 
reasonable because the Exchange incurs costs in the setup of a new FIX 
connection to allow the receiving and sending of drop copies via PULSe. 
The Exchange believes the fee is equitable and not unfairly 
discriminatory as it is assessed equally to any TPH electing to receive 
drop copies from PULSe brokers or to any TPH electing to send drop 
copies to a non-TPH customer.
    The Exchange believes that assessing a $500 one-time fee for the 
cancellation of a FIX connection necessary to receive or send drop 
copies from PULSe is reasonable because the Exchange incurs costs in 
the shutting down of a FIX connection. The Exchange believes the fee is 
equitable and not unfairly discriminatory as it is assessed equally to 
any TPH electing to cancel a FIX connection to a PULSe broker or to a 
PULSe broker electing to cancel a connection to a non-TPH customer.
    The Exchange believes that assessing a $5000 one-time fee for the 
certification of a new PULSe routing intermediary is reasonable because 
the Exchange incurs costs to develop connectivity for the routing 
intermediary and test the routing functionality to Exchange and away 
marketplaces. The Exchange believes the fee is equitable and not 
unfairly discriminatory as it is assessed to every TPH who elects to 
become a routing intermediary on PULSe. Becoming a routing intermediary 
is voluntary.
    The Exchange believes that assessing a routing intermediary 
inactivity fee of up to $5000 in years in which a routing intermediary 
pays less than that amount in fees is reasonable because the Exchange 
incurs costs to maintain, monitor, upgrade and test routing 
intermediary connections. The fees are assessed to cover those Exchange 
costs in the event the costs are not recovered via routing intermediary 
transaction fees. The Exchange believes the fee is equitable and not 
unfairly discriminatory as it will be assessed to any routing 
intermediary and only to the extent the TPH's routing intermediary 
transaction fees are less than $5000 in a calendar year.
    The Exchange believes that assessing a $250 a month fee for the 
daily transmission of OATS reports from PULSe is reasonable because the 
Exchange incurs costs to monitor, develop and implement upgrades, 
maintain and customize PULSe to allow sending and receiving of OATS 
reports. The Exchange believes the fee is equitable and not unfairly 
discriminatory as it is assessed to all customers electing to receive 
daily OATS reports.

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

    The Exchange does not believe that the proposed rule changes will 
impose any burdens 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 the proposed PULSe-
related fees relate to optional reports and/or functionality and are 
assessed equally on PULSe users or TPH electing to use the 
functionality and/or receive the reports. The Exchange does not believe 
that the proposed change will cause any unnecessary burden on 
intermarket competition because the proposed relate to use of an 
Exchange-provided order entry system. To the extent that any proposed 
change makes the Exchange a more attractive marketplace for market 
participants at other exchanges, such market participants are welcome 
to become Exchange 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 \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.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2017-004 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2017-004. 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

[[Page 8255]]

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-2017-004 and should be submitted on or before 
February 14, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-01463 Filed 1-23-17; 8:45 am]
 BILLING CODE 8011-01-P