Document ID: SEC-2013-0344-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2013-02-15T05:00Z

[Federal Register Volume 78, Number 32 (Friday, February 15, 2013)]
[Notices]
[Pages 11243-11245]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03570]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68901; File No. SR-CBOE-2013-018]

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

February 11, 2013.
    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 February 1, 2013, 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 Exchange is proposing to amend the Fees Schedule. The text of 
the proposed rule change is available on the Exchange's Web site 
(http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the 
Exchange's Office of the Secretary, and at the Commission.

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend its Fee Schedule. Specifically, 
the Exchange is proposing to increase the threshold in which it waives 
customer transaction fees, implement a $0.25 marketing fee for trading 
in SPY and QQQ options, and eliminate the complex order surcharge.
    First, the Exchange is proposing to increase the threshold at which 
the Exchange waives the customer transaction fee in ``ETF, ETN and 
HOLDRs Options.'' Currently, the Exchange waives transaction fees for 
customer orders of 99 contracts or less in transactions in ETFs, ETNs, 
and HOLDRs options. Any order that is 100 contracts or more is charged 
a fee of $0.18. The Exchange is proposing to increase this threshold 
and waive transaction fees for customer orders of 249 contracts or less 
in these options. The Exchange will charge any leg of a complex orders 
in these options that exceeds 249 even if the leg is only partially 
executed below the 249 threshold. For orders 250 contracts and above, 
the Exchange will continue to charge a fee of $0.18. Corresponding 
edits will also be made to Footnote 9 in the Fees Schedule to reflect 
the change. Raising the threshold for which the Exchange will waive 
transaction fees will allow customers who engage in ETF, ETN and HOLDRs 
options trading the opportunity to pay lower fees for larger 
transactions and provide greater incentives for such trading. In 
addition, increasing this threshold will encourage more interaction 
with Exchange customers and encourage the direction of customer ETF, 
ETN and HOLDRs options orders to the Exchange.
    Next, the Exchange is proposing to implement a $0.25 marketing fee 
for electronic trading in SPY and QQQ options. Currently, the Marketing 
Fee assessed on all Penny Pilot Exchange-Traded Fund (``ETF'') options 
is $0.25 per contract, with the exception of SPY and QQQ. The Exchange 
only charges a $0.25 fee per contract in SPY and QQQ options for 
qualifying complex orders that trade via the Exchange Complex Order 
Book against individual leg markets. The Exchange is proposing to amend 
the Fees Schedule to assess this $0.25 fee per contract on all 
qualifying orders whether simple or complex. This change will place SPY 
and QQQ on the same footing regarding the Marketing Fee as other 
options in the Penny Pilot classes. Other exchanges assess their 
marketing fees on SPY and QQQ.\3\ To correspond with this proposed 
change, the Exchange also proposes to eliminate the ``Notes'' section 
of the ``Marketing Fee'' table of the Fees Schedule to reflect this 
change.\4\
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    \3\ See Section II, ``Payment for Order Flow Fees,'' of the 
Nasdaq OMX PHLX (``Phlx'') Fee Schedule.
    \4\ The ``Notes'' section of the ``Marketing Fee'' table reads 
``The marketing fee will not be assessed on electronic transactions 
in SPY and QQQ, except for electronic transactions resulting from 
AIM and complex orders that trade in either COA or COB (excluding 
complex orders that trade against the leg markets, on which the 
marketing fee will not be assessed). The marketing fee will continue 
to be assessed on open outcry transactions in SPY and QQQ.'' Because 
the Exchange proposes to assess the Marketing Fee to SPY and QQQ in 
the same manner as it applies to other Penny Pilot classes the SPY- 
and QQQ-specific specifications set out in the ``Notes'' section are 
no longer relevant and can be deleted.
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    Finally, the Exchange is proposing to eliminate the surcharge on 
complex orders. Currently, the Exchange has a $0.10 surcharge per 
contract for the electronic execution leg of a complex order in 
multiply-listed options that executes against a customer complex order. 
This surcharge is in addition to the other transaction fees. The 
Exchange is proposing to eliminate this surcharge. Eliminating the 
surcharge for complex orders will allow Trading Permit Holders 
(``TPHs'') who engage in complex order trading the opportunity to pay 
lower fees for such transactions and provide greater incentives for 
such trading. In addition, eliminating the $0.10 surcharge will 
encourage more interaction with Exchange customers.
    Thus, the proposed changes are designed to attract greater order 
flow to the Exchange. This would bring greater liquidity to the market, 
which benefits all market participants. The propose changes are to take 
effect on February 1, 2013
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the

[[Page 11244]]

``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 Section 6(b)(4) of the Act,\6\ which provides that 
Exchange rules may provide for the equitable allocation of reasonable 
dues, fees, and other charges among its Trading Permit Holders and 
other persons using its facilities.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
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    In particular, the proposed change to increase the threshold at 
which the Exchange waives the transaction fee for customer orders is 
reasonable because it will allow customers who engage in such trading 
to trade larger orders without any electronic transaction fee. It is 
equitable and not unfairly discriminatory because, while customers are 
assessed different, and often lower, fee rates than other market 
participants, this is a common practice within the options marketplace, 
and customers often do not have the sophisticated trading algorithms 
and systems that other market participants often possess. Further, to 
the extent that any change in intramarket competition may result from 
the proposed change to the threshold for waiving options customer 
transaction fees, such possible change is justifiable and offset 
because the changes to such fees are designed to attract greater 
customer order flow to the Exchange. This would bring greater liquidity 
to the market, which benefits all market participants. Further, the 
proposed change will be applied to all customers equally.
    Next, the proposed change to assess a $0.25 marketing fee for all 
SPY and QQQ options contracts is reasonable because it puts trading in 
SPY and QQQ options on the same footing regarding the Marketing Fee as 
other options in the Penny Pilot Classes. It is equitable and not 
unfairly discriminatory because it is applied to all TPHs equally and 
puts TPHs trading SPY and QQQ on the same footing, with regards to the 
Marketing Fee, as other Penny Pilot classes. Moreover, other exchanges 
assess their marketing fees on SPY and QQQ transactions.\7\
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    \7\ See Section II, ``Payment for Order Flow Fees,'' of the Phlx 
Fee Schedule.
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    Finally, the proposed change to eliminate the complex order 
surcharge is reasonable because it will allow TPHs who engage in 
complex order trading the opportunity to pay lower fees for such 
transactions. It is equitable and not unfairly discriminatory because 
it is applied to all TPHs equally and will no longer place non-customer 
market participants on a different footing, with regards to the complex 
order surcharge, from customers.

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

    CBOE does not believe that the proposed rule changes will impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
that the proposed changes to increase the threshold for waiving the 
electronic customer transaction fee will cause any unnecessary burden 
on intramarket competition because, while customers are assessed 
different, and often lower, fee rates than other market participants, 
this is a common practice within the options marketplace, and customers 
often do not have the sophisticated trading algorithms and systems that 
other market participants often possess. Further, to the extent that 
any change in intramarket competition may result from the proposed 
change to the threshold for waiving options customer transaction fees, 
such possible change is justifiable and offset because the changes to 
such fees are designed to attract greater customer order flow to the 
Exchange. This would bring greater liquidity to the market, which 
benefits all market participants. The Exchange does not believe that 
the proposed change will cause any unnecessary burden on intermarket 
competition because the changes are minimal. Further, to the extent 
that this change makes trading on CBOE more attractive to customers or 
other market participants on other exchanges, they can always elect to 
send orders to CBOE.
    The Exchange does not believe the proposed changes to assess a 
$0.25 fee in SPY and QQQ options will cause any unnecessary burden on 
intramarket competition because it merely puts these options classes on 
the same footing regarding the Marketing Fee as other options in the 
Penny Pilot Classes and will be assessed to the same market 
participants as other classes to which the Marketing Fee is assessed. 
The Exchange does not believe that the proposed change will cause any 
unnecessary burden on intermarket competition because the fee is 
similar to fees assessed at other exchanges assess their marketing fees 
on these classes.\8\
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    \8\ See Section II, ``Payment for Order Flow Fees,'' of the Phlx 
Fee Schedule.
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    Finally, the Exchange does not believe the proposed changes to 
eliminate the complex order surcharge will cause any unnecessary burden 
on intramarket competition because the change is minimal and applies to 
a specific set of orders. Further, it puts non-customer market 
participants on the same footing, with regards to the complex order 
surcharge, as customers. Moreover, to the extent that any change in 
intramarket competition may result from the proposed change, such 
possible change is justifiable and offset because the changes to such 
fees are designed to attract greater customer order flow to the 
Exchange. This would bring greater liquidity to the market, which 
benefits all market participants. The Exchange does not believe that 
the proposed change will cause any unnecessary burden on intermarket 
competition because the changes are very minimal and specific to 
certain order types. Further, to the extent that this change makes 
trading on CBOE more attractive to market participants on other 
exchanges, they can always elect to send orders to CBOE.
    The Exchange also notes that it operates in a highly-competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive. The proposed rule changes reflects a competitive pricing 
structure designed to incent market participants to direct their order 
flow to the Exchange, and the Exchange believes that such structure 
will help the Exchange remain competitive with those fees and rebates 
assessed by other venues.

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 \9\ and paragraph (f) of Rule 19b-4\10\ 
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.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f).

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[[Page 11245]]

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2013-018 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2013-018. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at CBOE's principal office. 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-2013-018, and should be 
submitted on or before March 8, 2013

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03570 Filed 2-14-13; 8:45 am]
BILLING CODE 8011-01-P