
[Federal Register Volume 76, Number 44 (Monday, March 7, 2011)]
[Notices]
[Pages 12388-12390]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-5061]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63997; File No. SR-CBOE-2011-014]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Codify a Fee Schedule for the Sale by Market Data 
Express, LLC, of a BBO Data Feed for CBOE Listed Options

March 1, 2011.
    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 17, 2011, Chicago Board Options Exchange, Incorporated 
(``CBOE'' or the ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
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 the 
Substance of the Proposed Rule Change

    This proposal submitted by Chicago Board Options Exchange, 
Incorporated (``CBOE'' or ``Exchange'') is to codify a fee schedule for 
the sale by Market Data Express, LLC (``MDX''), an affiliate of CBOE, 
of a data product that includes CBOE best bid and offer and trade data 
and certain related market data. The text of the proposed rule change 
is available on the Exchange's Web site (http://www.cboe.org/legal), 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, CBOE 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. CBOE 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 purpose of the proposed rule change is to establish fees that 
MDX will charge for the sale of certain market data with respect to the 
trading of options on CBOE's market.
    CBOE currently collects and processes market data with respect to 
options quotes and orders and the prices of trades that are executed on 
the Exchange. This market data includes the ``best bid and offer,'' or 
``BBO'', consisting of all outstanding quotes and standing orders at 
the best available price level on each side of the market, with 
aggregate size (``BBO data,'' sometimes referred to as ``top of book 
data''). Data with respect to executed trades is referred to as ``last 
sale'' data. CBOE formats its BBO data and last sale data according to 
Options Price Reporting Authority (``OPRA'') specifications and sends 
the data to OPRA for redistribution to the public.
    MDX provides to ``Customers'' \3\ a real-time, low latency data 
feed that includes the CBOE BBO data and last sale data. (This data 
feed is sometimes referred to in this filing as the ``BBO Data Feed''). 
The BBO and last sale data contained in the BBO Data Feed is identical 
to the data that CBOE sends to OPRA.\4\ In addition, the BBO Data Feed 
includes certain data that is not included in the data sent to OPRA, 
namely, totals of customer versus non-customer contracts at the BBO, 
All-or-None contingency orders priced better than or equal to the BBO, 
and BBO data and last sale data for complex strategies (e.g., spreads, 
straddles, buy-writes, etc.). The purpose of this proposed rule change 
is to establish the fees MDX will charge for the sale of the BBO Data 
Feed.
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    \3\ A ``Customer'' is any entity that receives the BBO Data Feed 
directly from MDX's system and then distributes it either internally 
or externally to Subscribers. A ``Subscriber'' is a person (other 
than an employee of a Customer) that receives the BBO Data Feed from 
a Customer for its own internal use.
    \4\ The Exchange notes that MDX makes available to Customers the 
BBO data and last sale data that is included in the BBO Data Feed no 
earlier than the time at which the Exchange sends that data to OPRA. 
The Exchange also notes that it also makes the BBO data and last 
sale data that is included in the BBO Data Feed available directly 
to its Trading Permit Holders, and permits them to redistribute the 
data to their customers.
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    MDX would charge Customers a ``direct connect fee'' of $3,500 per 
connection per month. MDX would also charge Customers a ``per user 
fee'' of $25 per month per ``Authorized User'' or ``Device'' for 
receipt of the BBO Data Feed by Subscribers. An ``Authorized User'' is 
defined as an individual user (an individual human being) who is 
uniquely identified (by user ID and confidential password or other 
unambiguous method reasonably acceptable to MDX) and authorized by a 
Customer to access the BBO Data Feed supplied by the Customer. A 
``Device'' is defined as any computer, workstation or other item of 
equipment, fixed or portable, that receives, accesses and/or displays 
data in visual, audible or other form. Either a CBOE Trading Permit 
Holder or a non-CBOE Trading Permit Holder may be a Customer. All 
Customers would be assessed the same fees.
    The proposed fees would be implemented on March 1, 2011.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of Section 6(b) of the Securities Exchange Act of 
1934 (``Act'') \5\ in general, and, in particular, with Section 6(b)(4) 
of the Act \6\ in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among CBOE Trading Permit

[[Page 12389]]

Holders and other persons using its facilities, and with Section 
6(b)(5) \7\ of the Act in that there will be no unfair discrimination 
between customers, issuers, brokers, or dealers in the distribution of 
the data. In addition, the Exchange believes that the proposed rule 
change is consistent with the requirements of Section 6(b)(8) \8\ of 
the Act in that it does not impose any burden on competition not 
necessary or appropriate in furtherance of the purposes of the Act. The 
fees charged would be the same for all market participants, and 
therefore do not unreasonably discriminate among market participants.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(b)(8).
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    The Exchange believes that the proposed market data fees are 
consistent with the requirements of the Act for several reasons. First, 
they compare favorably to fees that other markets charge for similar 
products. The proposed direct connect fee of $3,500 per connection per 
month and per user fee of $25 per month compares favorably to the fees 
NASDAQ OMX PHLX and ISE charge for similar market data products. NASDAQ 
OMX PHLX charges Internal Distributors a monthly fee of $4,000 per 
organization, External Distributors a monthly fee of $5,000 per 
organization and monthly subscriber fees of $20 per Professional 
Subscriber and $1 per Non-Professional Subscriber for its ``TOPO Plus 
Orders'' data feed, which like the BBO Data Feed includes top-of-book 
data (including orders, quotes and trades) and other market data.\9\ 
ISE charges distributors of its ISE Depth of Market Feed a monthly fee 
of $5,000 plus $50 per month per controlled device for Professionals 
and $5 per month per controlled device for Non-Professionals.\10\
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    \9\ See, NASDAQ OMX PHLX LLC Fee Schedule, Section X, 
Proprietary Data Feed Fees.
    \10\ See, ISE Schedule of Fees, Market Data Fees. The Exchange 
believes that ISE does not market a separate data product that 
includes only its top of book prices, but top of book prices are an 
important element of the ISE Depth of Market Feed.
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    The Exchange also believes that the proposed fees for the BBO Data 
Feed are consistent with the requirements of the Act because 
competition provides an effective constraint on the market data fees 
that the Exchange, through MDX, has the ability and the incentive to 
charge. CBOE has a compelling need to attract order flow from market 
participants in order to maintain its share of trading volume. This 
compelling need to attract order flow imposes significant pressure on 
CBOE to act reasonably in setting its fees for market data, 
particularly given that the market participants that will pay such fees 
often will be the same market participants from whom CBOE must attract 
order flow. These market participants include broker-dealers that 
control the handling of a large volume of customer and proprietary 
order flow. Given the portability of order flow from one exchange to 
another, any exchange that sought to charge unreasonably high data fees 
would risk alienating many of the same customers on whose orders it 
depends for competitive survival. CBOE currently competes with eight 
options exchanges (including CBOE's affiliate, C2 Options Exchange) for 
order flow.\11\
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    \11\ The Commission has previously made a finding that the 
options industry is subject to significant competitive forces. See 
e.g., Securities Exchange Act Release No. 59949 (May 20, 2009), 74 
FR 25593 (May 28, 2009) (SR-ISE-2009-97) (order approving ISE's 
proposal to establish fees for a real-time depth of market data 
offering).
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    CBOE is constrained in pricing the BBO Data Feed by the 
availability to market participants of alternatives to purchasing the 
BBO Data Feed. CBOE must consider the extent to which market 
participants would choose one or more alternatives instead of 
purchasing the exchange's data. For example, the BBO data and last sale 
data available in the BBO Data Feed are included in the OPRA data feed. 
The OPRA data is widely distributed and relatively inexpensive, thus 
constraining CBOE's ability to price the BBO Data Feed. In this 
respect, the OPRA data feed, which includes the exchange's transaction 
information, is a significant alternative to the BBO Data Feed product.
    Further, other options exchanges can and have produced their own 
top-of-book products, and thus are sources of potential competition for 
MDX. As noted above, NASDAQ OMX PHLX and ISE offer market data products 
that compete with the BBO Data Feed. In addition, the Exchange believes 
other options exchanges may currently offer top-of-book market data 
products for a fee or for free.
    For the reasons cited above, the Exchange believes that the BBO 
Data Feed offering, including the proposed fees, is equitable, fair, 
reasonable and not unreasonably discriminatory. In addition, the 
Exchange believes that no substantial countervailing basis exists to 
support a finding that the proposed terms and fees for the BBO Data 
Feed fail to meet the requirements of the Act.

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

    CBOE does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of purposes of the Act. The Exchange believes that the BBO 
Data Feed offered by MDX will help attract new users and new order flow 
to the Exchange, thereby improving the Exchange's ability to compete in 
the market for options order flow and executions.

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

    No written comments were solicited or received with respect to 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 \12\ and subparagraph (f)(2) of Rule 19b-4 \13\ 
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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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(2). [sic]
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2011-014 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-2011-014. This file 
number should be included on the subject line if e-mail 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

[[Page 12390]]

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 on official business 
days between the hours of 10 a.m. and 3 p.m. Copies of such filing also 
will be available for inspection and copying at the principal offices 
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-2011-014, and should be submitted on or before March 28, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-5061 Filed 3-4-11; 8:45 am]
BILLING CODE 8011-01-P


