Document ID: SEC-2017-0168-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2017-02-06T05:00Z

[Federal Register Volume 82, Number 23 (Monday, February 6, 2017)]
[Notices]
[Pages 9406-9413]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02374]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79906; File No. SR-CBOE-2017-008]

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 31, 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 18, 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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[[Page 9407]]

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend its Fees Schedule. The text of the 
proposed rule change is also 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 make a number of changes to its Fees 
Schedule.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
January 3, 2017 (SR-CBOE-2017-001). On January 18, 2017, the 
Exchange withdrew that filing and submitted this filing.
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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 Penny Pilot equity, ETF, ETN 
and index options (excluding Underlying Symbol List A \4\) classes from 
$0.35 per contract to $0.38 per contract and in Non-Penny Pilot equity, 
ETF, ETN and index options (excluding Underlying Symbol List A) classes 
from $0.35 per contract to $0.65 per contract. The Exchange notes that 
this increase is in line with the amounts assessed by others exchanges 
for similar transactions.\5\
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    \4\ As of January 3, 2017, Underlying Symbol List A includes 
Underlying Symbol List A consists of OEX, XEO, RUT, RLG, RLV, RUI, 
AWDE, FTEM, FXTM, UKXM SPX/SPXW, SPXpm, SRO, VIX, Volatility Indexes 
and binary options.
    \5\ See e.g., NASDAQ PHLX LLC (``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.
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Complex Taker Fee
    Currently, the Complex Taker Fee is $0.08 per contract per side for 
non-customer complex order executions that take liquidity from the COB 
and auction responses in the Complex Order Auction (``COA'') and the 
Automated Improvement Mechanism (``AIM'') in all classes except 
Underlying Symbol List A and Mini-Options. Additionally, the Complex 
Taker Fee is not assessed on orders originating from a Floor Broker 
PAR, electronic executions against single leg markets, or stock-option 
order executions. The Exchange proposes to increase the amount of the 
fee from $0.08 per contract to $0.10 per contract. The Exchange also 
proposes to provide that auction responses in COA and AIM for 
noncustomer complex orders in Penny classes will be subject to a cap of 
$0.50 per contract, which includes the applicable transaction fee, 
Complex Surcharge and Marketing Fee (if applicable).\6\ The Exchange 
also wishes to rename the fee from ``Complex Taker Fee'' to ``Complex 
Surcharge''.
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    \6\ 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 ($0.10 per contract), would only be charged 
$0.50 per contract, instead of $0.58 per contract.
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SPX Index License Surcharge
    The Exchange proposes to increase the Index License Surcharge Fee 
for SPX (including SPXW) and SPXpm (the ``SPX Surcharge'') from $0.13 
per contract to $0.14 per contract. The Exchange licenses from Standard 
& Poor's 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 recoup the costs of the SPX license, the 
Exchange assesses the SPX Surcharge. However, the cost of that license 
works out to more than the current SPX Surcharge amount of $0.13 per 
SPX contract traded (or even the proposed SPX Surcharge amount of $0.14 
per contract), so the Exchange ends up subsidizing that SPX license 
cost. The Exchange therefore proposes to increase the SPX Surcharge 
from $0.13 per contract to $0.14 per contract in order to recoup more 
of the costs associated with the SPX license.
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, 2016, 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 encouraged Firms to do so and as such, proposes to extend 
the waiver of the surcharge through June 30, 2017, 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, 2016 from the 
Fees Schedule and replace it with June 30, 2017.
Liquidity Provider Sliding Scale for SPX, SPXW and SPXpm
    The Exchange proposes to adopt a sliding scale for Liquidity 
Provider (origin code ``M'') (``LP'') transaction fees in SPX, SPXW and 
SPXpm (``SPX LP Sliding Scale''). Currently, LPs are assessed $0.20 per 
contract for SPX, SPXW and SPXpm (collectively, ``SPX options'') 
executions. The new SPX LP Sliding Scale will assess LPs increased 
transaction fees in SPX. Of the increased rates however, the SPX LP 
Sliding Scale will provide progressively lower rates if certain volume 
thresholds in SPX options are attained during a month. The SPX LP 
Sliding Scale will be as follows:

------------------------------------------------------------------------
            Tier                       Volume thresholds           Rate
------------------------------------------------------------------------
1...........................  0.00%-1.50%.......................   $0.25
2...........................  Greater than 1.50%-10.0%..........    0.23
3...........................  Above 10.0%.......................    0.21
------------------------------------------------------------------------

    The volume thresholds will be based on total Liquidity Provider 
Volume in SPX, SPXW and SPXpm. The purpose of the SPX LP Sliding Scale 
is to provide an incremental incentive for LPs to reach the highest 
tier level and encourage trading of SPX options.

[[Page 9408]]

Volume Incentive Program
    The Exchange proposes to amend its Volume Incentive Program 
(``VIP''). By way of background, under VIP, the Exchange credits each 
Trading Permit Holder (``TPH'') the per contract amount set forth in 
the VIP table resulting from each public customer (``C'' origin code) 
order transmitted by that TPH (with certain exceptions) which is 
executed electronically on the Exchange, provided the TPH meets certain 
volume thresholds in a month.\7\ The Exchange proposes to adopt 
separate pricing for orders executed electronically via AIM. The 
proposed pricing is as follows:
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    \7\ See CBOE Fees Schedule, Volume Incentive Program.

----------------------------------------------------------------------------------------------------------------
                                                                        Per contract credit
                          Percentage thresholds  ---------------------------------------------------------------
          Tier             of national customer               Simple                          Complex
                             multiply- listed    ---------------------------------------------------------------
                              monthly volume          Non-AIM           AIM           Non-AIM           AIM
----------------------------------------------------------------------------------------------------------------
1......................  0.00%-0.75%............           $0.00           $0.00           $0.00           $0.00
2......................  Above 0.75% to 1.80%...            0.10            0.09            0.21            0.20
3......................  Above 1.80% to 3.00%...            0.12            0.11            0.24            0.23
4......................  Above 3.00%............            0.15            0.14            0.25            0.24
----------------------------------------------------------------------------------------------------------------

    The Exchange notes that AIM transactions are assessed lower 
transaction fees than non-AIM transactions. As such, the Exchange no 
longer wishes to provide the same amount in credits for these 
transactions.\8\
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    \8\ See CBOE Fees Schedule, Equity, ETF, ETN and Index Options 
(excluding Underlying Symbol List A) rate tables.
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    The Exchange also proposes to amend the aggregation timer under 
VIP. The Exchange notes that currently, credits on orders executed 
electronically in AIM are capped at 1,000 contracts per order for 
simple executions and 1,000 contracts per leg for complex executions. 
Additionally, credits on orders executed electronically in HAL are be 
capped at 1,000 contracts per auction quantity. Additionally, multiple 
simple orders from the same affiliated TPH(s) in the same series on the 
same side of the market that are executed in AIM or HAL within a 300 
second period will be aggregated for purposes of determining the order 
quantity subject to the cap. The AIM aggregation timer begins with an 
order entered into AIM and continues for 300 seconds, aggregating any 
other orders entered into AIM in the same series on the same side of 
the market by the same affiliated TPH. The HAL aggregation timer also 
begins at the start of a HAL auction and continues for 300 seconds, 
aggregating any other orders executed in HAL in the same series on the 
same side of the market for the same affiliated TPH. The Exchange had 
adopted the aggregation timer to prevent TPHs from breaking up their 
orders in order to avoid the fee cap. The Exchange believes however, 
that it can accomplish its objective with a shorter timer period. As 
such, the Exchange proposes to reduce the aggregation timer for AIM and 
HAL to 3 seconds.
Permit Fees
    The Exchange proposes to reduce Market-Maker Trading Permit monthly 
costs from $5,500 per permit to $5,000 per permit. Furthermore, for 
those who commit to the Market-Maker Trading Permit Holder Sliding 
Scale, which is available for all Market-Maker Trading Permits held by 
affiliated TPHs and TPH organizations that are used for appointments in 
any options classes other than RUT, SPX, SPXpm, VIX, OEX and XEO, the 
Exchange proposes to reduce the monthly cost from $5,500 per permit to 
$5,000 per permit for the first 10 permits, from $4,000 to $3,700 per 
permit for permits 11-20, and from $2,500 to $1,800 per permit for 
permits 21 and greater. The purpose of this change is to reduce access 
costs and thereby encourage greater Market-Maker access, which thereby 
brings greater trading activity, volume and liquidity, benefitting all 
market participants.
    The Exchange next notes that the ``Notes'' section of the Market-
Maker Trading Permit Sliding Scale table provides that the sliding 
scale is available for Market-Maker Trading Permits used for 
appointments ``in any options classes other than SPX, SPXpm, VIX, OEX, 
and XEO.'' The Exchange notes that last year, the Exchange also 
excepted from the scale RUT appointments.\9\ While the Exchange 
acknowledged this change in Footnote 24, it inadvertently did not add 
``RUT'' to the exclusion list in the Notes section described above. The 
Exchange therefore proposes to correct that error and add the reference 
to ``RUT'' being excluded.
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    \9\ See Securities Exchange Act Release No. 76923 (January 15, 
2016), 81 FR 3841 (January 22, 2016) (SR-CBOE-2016-002).
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    The Exchange also proposes to reduce the Floor Broker Trading 
Permit monthly fee for Tier 1 of the Floor Broker Trading Permit Holder 
Sliding Scale. Specifically, Tier 1 of the Floor Broker Trading Permit 
Holder Sliding Scale is available for TPHs and TPH Organizations that 
commit in advance to that tier each calendar year. The Exchange 
proposes to reduce the monthly cost from $6,000 per Floor Broker 
Trading Permit to $5,000 per Floor Broker Trading Permit for permits 2-
7.
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, 2016. The Exchange also waives fees through December 31, 
2016 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, 2017.
CBOE Command Connectivity Charges
    Next, the Exchange proposes to increase CBOE Command Connectivity 
Fees. First, the Exchange proposes to increase the monthly fee for 10 
gigabit per second (``Gbps'') Network Access Ports from $3,500 per port 
to $4,000 per port. The Exchange has expended significant resources 
setting up, providing and maintaining this connectivity, and the costs 
related to such provision and maintenance has increased. The Exchange 
desires to recoup such increased costs. This fee amount is still within 
the range of, and

[[Page 9409]]

in some cases less than, similar fees assessed by other exchanges.\10\
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    \10\ See e.g., Miami International Securities Exchange LLC 
(``MIAX'') Options Fees Schedule, Section 5(a), which lists 
connectivity fees of $5,500 per month for 10 Gbps.
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    The Exchange also proposes to increase the fees charged for a CMI 
Login ID and FIX Login ID from $500 per month to $750 per month TPHs 
may access CBOE Command via either a CMI Client Application Server or a 
FIX Port, depending on how their systems are configured. As with 
Network Access Ports, the Exchange has expended significant resources 
setting up, providing and maintaining this connectivity, and the costs 
related to such provision and maintenance has increased. The Exchange 
desires to recoup such increased costs. This fee amount is still within 
the range of, and in some cases less than, similar fees assessed by 
other exchanges.\11\
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    \11\ See e.g., International Securities Exchange (``ISE'') 
Schedule of Fees, Section V(C), FIX Session/API Session Fees. See 
also PHLX Pricing Schedule, Section VII(B)., Port Fees.
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Linkage
    The Exchange proposes to increase the Linkage fee (in addition to 
the applicable away fees) for Customer orders from $0.05 to $0.10. The 
Fees Schedule currently provides that, in addition to the customary 
CBOE 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, CBOE 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 $0.10 per contract for customer orders routed 
away in addition to the applicable pass through fees. The purpose of 
these proposed increase is to help recoup costs incurred by the 
Exchange associated with routing customer orders through linkage. The 
Exchange notes that other exchanges also assess an additional fee on 
top of passing through transaction fees for customer orders and that 
the proposed amount of the fee is in line with the amount assessed at 
other exchanges.\12\
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    \12\ See e.g., PHLX Pricing Schedule, Section V., Customer 
Routing Fees. See also, MIAX Options Fees Schedule, Section 1(c), 
Fees and Rebates for Customer Orders Routed to Another Options 
Exchange.
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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'') that meet certain volume 
thresholds in CBOE VIX Volatility Index options (``VIX options''), 
Russell 2000 Index (``RUT'') options, and S&P 500 Index options 
(``SPX''), weekly S&P 500 options (``SPXW'') and p.m.-settled SPX Index 
options (``SPXpm'') (collectively referred to as ``SPX options'') 
provided the Customer registers for the program. The Exchange proposes 
to amend the Frequent Trader Program to (i) increase the volume 
thresholds and (ii) reduce the rebates. Specifically, the proposed 
changes will be as follows:

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                                                 VIX                              SPX, SPXW and SPXpm                              RUT
                              --------------------------------------------------------------------------------------------------------------------------
             Tier                 Monthly contracts                        Monthly contracts
                                        traded          Fee rebate (%)           traded          Fee rebate (%)  Monthly contracts trade  Fee rebate (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1............................  10,000-49,999..........               3  10,000-49,999..........               3  5,000-9,999............               3
2............................  50,000-99,999..........               6  50,000-99,999..........               6  10,000-12,999..........               6
3............................  100,000 and above......               9  100,000 and above......               9  13,000 and above.......               9
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Floor Broker Trading Permit Rebates
    Footnote 25, which governs rebates on Floor Broker Trading Permits, 
currently provides that any Floor Broker that executes a certain 
average of customer open-outcry contracts per day over the course of a 
calendar month in all underlying symbols excluding Underlying Symbol 
List A (except RLG, RLV, RUI, AWDE, FTEM, FXTM and UKXM), DJX, XSP, 
XSPAM, mini-options and subcabinet trades (``Qualifying Symbols''), 
will receive a rebate on that TPH's Floor Broker Trading Permit Fees. 
Specifically, any Floor Broker Trading Permit Holder that executes an 
average of 15,000 customer open-outcry contracts per day over the 
course of a calendar month in Qualifying Symbols will receive a rebate 
of $7,500 on that Floor Broker Trading Permit Holder's Floor Broker 
Trading Permit fees. Additionally, any Floor Broker Trading Permit 
Holder that executes an average of 25,000 customer open-outcry 
contracts per day over the course of a calendar month in Qualifying 
Symbols will receive a rebate of $15,000 on that TPH's Floor Broker 
Trading Permit fees. The Exchange proposes to increase the rebate 
received for executing an average of 15,000 customer open-outcry 
contracts to $9,000 and reduce the rebate received for executing an 
average of 25,000 customer open-outcry contracts to $14,000.
RLG, RLV, RUI, AWDE, FTEM, FXTM and UKXM Transaction Fees
    The Exchange recently began trading options on seven FTSE Russell 
Indexes (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'')). In order to promote 
and encourage trading of these new products, the Exchange currently 
waives all transaction fees (including the Floor Brokerage Fee, Index 
License Surcharge and CFLEX Surcharge Fee) for each of these products. 
This waiver however is set to expire December 31, 2016. In order to 
continue to promote trading of these new options classes, the Exchange 
proposes to extend the fee waiver of through June 30, 2017.
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, 2016 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

[[Page 9410]]

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, 2017 or until total average daily volume 
in Exotics exceeds 15,000 contracts for three consecutive months, 
whichever comes first.
AWDE, FTEM, FXTM and UKXM DPM Payment
    The Exchange currently offers a compensation plan to the Designated 
Primary Market-Maker(s) (``DPM(s)'') appointed in AWDE, FTEM, FXTM or 
UKXM to offset the initial DPM costs. Specifically, the Fees Schedule 
provides that DPM(s) appointed for an entire month in these classes 
will receive a payment of $7,500 per class per month through December 
31, 2016. The Exchange notes that DPMs appointed in these products 
still have ongoing costs, which the Exchange desires to continue to 
help offset. As such, the Exchange proposes to extend the DPM payment 
plan through June 30, 2017.
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.\13\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \14\ 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,\15\ 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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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ 15 U.S.C. 78f(b)(4).
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    Increasing the fee for electronic executions for Clearing Trading 
Permit Holder Proprietary orders in Penny and Non-Penny Pilot equity, 
ETF, ETN and index options (excluding Underlying Symbol List A) classes 
is reasonable because the proposed fee amount is in line with the 
amounts assessed by another exchange for similar transactions.\16\ 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. The Exchange notes that it does 
not assess Customers the electronic options transaction fees in Penny 
and Non-Penny Pilot options because Customer order flow enhances 
liquidity on the Exchange for the benefit of all market participants. 
Specifically, Customer liquidity benefits all market participants by 
providing more trading opportunities, which attracts Market-Makers. An 
increase in the activity of these market participants in turn 
facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants. 
The Exchange notes that Market-Makers are assessed lower electronic 
options transaction fees in Penny and Non-Penny Pilot options as 
compared to Clearing Trading Permit Holders, as well as Professionals, 
JBOs, Broker Dealers and non-Trading Permit Holder Market-Makers 
because they have obligations to the market and regulatory 
requirements, which normally do not apply to other market participants 
(e.g., obligations to make continuous markets). Professionals, JBOs, 
Broker Dealers and non-Trading Permit Holder Market-Makers are assessed 
higher fees as compared to the proposed fees for Clearing Trading 
Permit Holder Proprietary orders because Clearing Trading Permit 
Holders also have obligations, which normally do not apply to other 
market participants (e.g., must have higher capital requirements, clear 
trades for other market participants, must be members of OCC). 
Accordingly, the differentiation between electronic transaction fees 
for Customers, Market-Makers, Clearing Trading Permit Holders and other 
market participants recognizes the differing obligations and 
contributions made to the liquidity and trading environment on the 
Exchange by these market participants. The Exchange also believes it's 
equitable and not unfairly discriminatory to assess higher fees for 
Non-Penny option classes than Penny option classes because Penny 
classes and Non-Penny classes offer different pricing, liquidity, 
spread and trading incentives. The spreads in Penny classes are tighter 
than those in Non-Penny classes (which trade in $0.05 increments). The 
wider spreads in non-Penny option classes allow for greater profit 
potential.
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    \16\ 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.
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    The Exchange believes that the proposed increase of the Complex 
Taker Fee from $0.08 per contract per side to $0.10 per contract per 
side is reasonable because it helps offset the increased credits given 
to complex orders under VIP. Indeed, the Exchange notes that VIP 
credits for complex orders have increased since the Complex Taker Fee 
was increased to $0.08 per contract.\17\ The Exchange believes capping 
noncustomer COA and AIM auction responses in Penny classes is 
reasonable because those market participants would be paying lower 
fees. Applying the Complex Surcharge to all market participants except 
customers is equitable and not unfairly discriminatory because customer 
order flow enhances liquidity on the Exchange for the benefit of all 
market participants. As noted above, customer liquidity benefits all 
market participants by providing more trading opportunities, which 
attracts Market-Makers. An increase in the activity of these market 
participants in turn facilitates tighter spreads, which may cause an 
additional corresponding increase in order flow from other market 
participants. By exempting customer orders, the fee will not discourage 
the sending of customer orders, and therefore there should still be 
plenty of customer orders for other market participants to trade with. 
The Exchange also believes capping auction responses in COA and AIM at 
$0.50 per contract is reasonable, equitable and not unfairly 
discriminatory because the Exchange does not want to discourage the use 
of these price improvement mechanisms. The Exchange lastly believes 
renaming the fee to Complex Surcharge may alleviate confusion, which 
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.
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    \17\ See Securities Exchange Act Release No. 75188 (June 17, 
2015), 80 FR 36021 (June 23, 2015) (SR-CBOE-2015-058) and See CBOE 
Fees Schedule, Volume Incentive Program.
---------------------------------------------------------------------------

    The Exchange believes increasing the SPX Surcharge is reasonable 
because the Exchange still pays more for the SPX license than the 
amount of the proposed SPX Surcharge (meaning that the

[[Page 9411]]

Exchange is, and will still be, subsidizing the costs of the SPX 
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 Fee 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 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 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 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. Finally, the 
Exchange believes it's reasonable, equitable and not unfairly 
discriminatory to provide that the surcharge will be waived through 
June 2017, 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 increasing SPX transaction fees for Liquidity 
Providers 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 although Liquidity Providers still pay lower SPX transaction 
fees than certain other market participants, Liquidity Providers are 
valuable market participants that provide liquidity in the marketplace 
and incur costs that other market participants do not incur. For 
example, Liquidity Providers have a number of obligations, including 
quoting obligations that other market participants do not have. The 
Exchange also believes establishing a Sliding Scale for LPs in SPX 
options is reasonable because it will allow LPs who engage in SPX 
options trading the opportunity to pay progressively lower fees for 
such transactions as increased volume thresholds are met. Specifically, 
the SPX LP Sliding Scale allows the Exchange to provide an incremental 
incentive for Liquidity Providers to strive for the highest tier level, 
which provides increasingly lower fees.
    The Exchange believes the proposed reduced credits for AIM 
executions under VIP is reasonable because it still provides TPHs an 
opportunity to receive notable credits 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 transactions 
and the Exchange no longer wishes to provide the same amount of credits 
for these transactions.\18\ Additionally, the Exchange believes the 
proposed change is equitable and not unfairly discriminatory because it 
applies to all TPHs that meet the qualifying volume thresholds.
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    \18\ See CBOE Fees Schedule, Equity, ETF, ETN and Index Options 
(excluding Underlying Symbol List A) rate tables.
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    The Exchange also believes it's reasonable, equitable and not 
unfairly discriminatory to provide that multiple simple orders from the 
same TPH in the same series on the same side of the market that are 
received within three (3) seconds (instead of three hundred (300) 
seconds) will be aggregated for purposes of determining the order 
quantity subject to the AIM and HAL cap because the Exchange believes 
this amount of time is still sufficient to prevent TPHs from breaking 
up their orders in order to avoid the fee cap and it would apply to all 
TPHs.
    The lowered costs for Market-Maker Trading Permits is reasonable 
because the fees will be lower than previously, and the reduced access 
costs may encourage greater Market-Maker 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 Market-
Makers.
    The Exchange believes adding ``RUT'' to the Notes section of the 
Market-Maker Trading Permits Sliding Scale will alleviate confusion as 
to what Trading Permits the sliding scale does and does not apply to. 
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.
    The lowered costs for Floor Broker Trading Permits in Tier 1 of the 
Floor Broker Trading Permits Sliding Scale is reasonable because the 
fee for that tier will be lower than previously, and the reduced 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.
    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, 2017 is 
reasonable, equitable and not unfairly discriminatory, because it 
promotes and encourages trading during the ETH session and applies to 
all ETH TPHs. The Exchange believes it's also reasonable, equitable and 
not unfairly discriminatory to waive fees for Login IDs related to 
waived Trading Permits and/or Bandwidth Packets in order to promote and 
encourage ongoing participation in ETH and also applies to all ETH 
TPHs.
    The proposed change to increase the 10 Gbps Network Access Port fee 
is reasonable because the fees are within the same range as those 
assessed on other exchanges,\19\ and because such increase will assist 
in recouping ongoing expenditures made by the Exchange. This proposed 
change is equitable and not unfairly discriminatory because the 
proposed change will apply to all TPHs. The proposed change to increase 
the fees assessed for CMI Login IDs and FIX Login IDs is also 
reasonable because the Exchange desires to recoup increasing costs 
associated with maintaining connectivity to the Exchange. The Exchange 
believes it's equitable and not unfairly discriminatory because all 
TPHs will be assessed the same amount for Login ID fees.
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    \19\ See supra Note 10.
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    The Exchange's proposal to increase the Linkage fee from $0.05 per 
contract to $0.10 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.\20\ The 
Exchange

[[Page 9412]]

believes it's equitable and not unfairly discriminatory because the 
proposed change will apply to all customer orders that are linked away.
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    \20\ See supra Note 12.
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    The Exchange believes it is reasonable to increase the volume 
thresholds in Frequent Trader because it adjusts for current volume 
trends. The Exchange notes that the rebalance of tiers still allows the 
Exchange to maintain an incremental incentive for Customers to strive 
for the highest tier level. The Exchange believes the proposed change 
is also equitable and not unfairly discriminatory because it applies to 
all Customers. The Exchange believes it's reasonable to reduce the 
Frequent Trader rebates because it still provides Customers an 
opportunity to receive notable discounted rates for reaching certain 
qualifying volume thresholds that they would not otherwise receive (now 
just a smaller discount). The Exchange believes that the proposed 
change is not unfairly discriminatory because it will apply to all 
Customers that meet the qualifying volume thresholds.
    The Exchange believes that increasing the first tier of the Floor 
Broker Access Rebate (i.e., the rebate received when executing 15,000 
contracts or more per day) is reasonable because it allows the 
qualifying Floor Brokers to pay even lower Floor Broker Trading Permit 
fees than before. The Exchange believes that it is reasonable to reduce 
the second tier rebate of the Floor Broker Access (i.e., the rebate 
received when executing 25,000 contracts or more per day), because 
qualifying Floor Brokers are still paying lower Floor Broker Trading 
Permit fees than they otherwise would have. The Exchange notes that the 
purpose of both rebates incentives is to encourage the execution of 
orders via open outcry, which should increase volume, which would 
benefit all market participants (including Floor Brokers who do not hit 
the either contracts-per-day thresholds) trading via open outcry (and 
indeed, this increased volume could make it possible for some Floor 
Brokers to hit the contracts-per-day 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 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 it promotes and encourages trading of these products which are 
still 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 providing FLEX Traders with incentives to trade 
FLEX Asian and Cliquet options 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.
    Finally, the Exchange believes that it is reasonable, equitable and 
not unfairly discriminatory to extend the compensation plan to the 
DPM(s) appointed in AWDE, FTEM, FXTM or UKXM to continue to offset 
their ongoing DPM costs.

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

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition that are not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe that the proposed rule change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because, while different fees 
and rebates are assessed to different market participants in some 
circumstances, these different market participants have different 
obligations and different circumstances (as described in the 
``Statutory Basis'' section above). For example, Clearing TPHs have 
clearing obligations that other market participants do not have. 
Market-Makers have quoting obligations that other market participants 
do not have. There is a history in the options markets of providing 
preferential treatment to customers, as they often do not have as 
sophisticated trading operations and systems as other market 
participants, which often makes other market participants prefer to 
trade with customers. Further, the Exchange fees and rebates, both 
current and those proposed to be changed, are intended to encourage 
market participants to bring increased volume to the Exchange (which 
benefits all market participants), while still covering Exchange costs 
(including those associated with the upgrading and maintenance of 
Exchange systems).
    The Exchange does not believe that the proposed rule changes will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
proposed changes are intended to promote competition and better improve 
the Exchange's competitive position and make CBOE a more attractive 
marketplace in order to encourage market participants to bring 
increased volume to the Exchange (while still covering costs as 
necessary). Further, the proposed changes only affect trading on CBOE. 
To the extent that the proposed changes make CBOE a more attractive 
marketplace for market participants at other exchanges, such market 
participants are welcome to become CBOE market participants.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \21\ and paragraph (f) of Rule 19b-4 \22\ 
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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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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-2017-008 on the subject line.

Paper Comments

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

[[Page 9413]]

All submissions should refer to File Number SR-CBOE-2017-008. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CBOE-2017-008, and should be 
submitted on or before February 27, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02374 Filed 2-3-17; 8:45 am]
 BILLING CODE 8011-01-P