
[Federal Register Volume 80, Number 120 (Tuesday, June 23, 2015)]
[Notices]
[Pages 36021-36024]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15338]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75188; File No. SR-CBOE-2015-058]


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

June 17, 2015.
    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 June 9, 2015, 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 proposes to amend its 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'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 certain changes to its Fees 
Schedule.\3\ First, the Exchange proposes to amend its Volume Incentive 
Program (``VIP''). 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 in all underlying symbols excluding 
Underlying Symbol List A,\4\ DJX, MXEA, MXEF, XSP, XSPAM, and mini-
options, provided the TPH meets certain volume thresholds in a 
month.\5\ The Exchange proposes to increase the VIP credit for complex 
orders in Tier 2 from $0.16 per contract to $0.21 per contract, in Tier 
3 from $0.16 per contract to $0.22 per contract and in Tier 4 from 
$0.17 per contract to $0.23 per contract. The purpose of this change is 
to incentivize the sending of complex orders to the Exchange and to 
adjust the incentive tiers accordingly as competition requires while 
maintaining an incremental incentive for TPH's to strive for the 
highest tier level.
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    \3\ The Exchange initially filed the proposed fee changes on 
June 1, 2015 (SR-CBOE-2015-054). On June 9, 2015, the Exchange 
withdrew that filing and submitted this filing.
    \4\ The following products are included in ``Underlying Symbol 
List A'': OEX, XEO, RUT, SPX (including SPXw), SPXpm, SRO, VIX, 
VXST, VOLATILITY INDEXES and binary options.
    \5\ Excluded from the VIP credit are options in Underlying 
Symbol List A, DJX, MXEA, MXEF, XSP, XSPAM, mini-options, QCC 
trades, public customer to public customer electronic complex order 
executions, and executions related to contracts that are routed to 
one or more exchanges in connection with the Options Order 
Protection and Locked/Crossed Market Plan referenced in Rule 6.80 
(see CBOE Fees Schedule, Volume Incentive Program).
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    The Exchange next proposes to amend the Complex Order Book 
(``COB'') Taker Surcharge. By way of background, the COB Taker 
Surcharge (``Surcharge'') is a $0.05 per contract per side surcharge 
for non-customer complex order executions that take liquidity from the 
COB in all underlying classes except Underlying Symbol List A and mini-
options. Additionally, the Surcharge is not assessed on non-customer 
complex order executions in the Complex Order Auction (``COA''), the 
Automated Aim Mechanism (``AIM''), orders originating from a Floor 
Broker PAR, electronic executions against single leg markets, or stock-
option order executions. The

[[Page 36022]]

Exchange first proposes to increase the amount of the Surcharge from 
$0.05 per contract to $0.08 per contract. Additionally, the Exchange 
proposes to eliminate the exclusion of non-customer complex order 
executions in the COA and AIM mechanisms from the Surcharge. 
Specifically, the Exchange notes that all complex order auction 
responses executed in COA and AIM will be assessed the Surcharge (i.e., 
initiating orders and AIM Contra orders will not be assessed the 
Surcharge). The Exchange proposes these changes in order to help offset 
the increased rebates given to complex orders under VIP. In light of 
the abovementioned changes, the Exchange also proposes to rename the 
COB Taker Surcharge to ``Complex Taker Fee.'' Particularly, the 
surcharge is no longer limited to COB executions as the Surcharge will 
now include auction responses in COA and AIM. As such, the Exchange 
believes it is appropriate to rename the Surcharge to more accurately 
reflect what transactions are being charged and avoid potential 
confusion. Additionally, the Exchange proposes to change the term 
``Surcharge'' to ``Fee'' to avoid confusion with other surcharges 
currently listed in the Fees Schedule.
    The Exchange next notes that it currently assesses a $0.65 per 
contract fee for electronic executions by Broker-Dealers, non-Trading 
Permit Holders (``non-TPHs'') Market-Makers, Professionals/Voluntary 
Professionals and Joint Back-Offices (``JBOs'') in non-Penny Pilot 
equity, ETF, ETN and index options (excluding Underlying Symbol List A) 
classes. The Exchange proposes increasing this transaction fee from 
$0.65 per contract to $0.75 per contract. The Exchange also proposes to 
increase the Marketing Fee for all non-Penny Pilot option classes from 
$0.65 per contract to $0.70 per contract. The Exchange notes that these 
increases are similar to, and in line with, the amounts assessed by 
another exchange for similar transactions.\6\
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    \6\ See NASDAQ OMX PHLX LLC (``PHLX'') Pricing Schedule, Section 
II, Multiply Listed Options Fees.
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    Lastly, the Exchange proposes to amend language in the Fees 
Schedule relating to the VIX Tier Appointment Surcharge. The VIX Tier 
Appointment is assessed to any Market-Maker that either (a) has a VIX 
Tier Appointment at any time during a calendar month and trades at 
least 100 VIX options contracts electronically while that appointment 
is active; or (b) trades at least 1,000 VIX options contracts in open 
outcry during a calendar month. Additionally, a description of the VIX 
Tier Appointment Fee in the Fees Schedule provides that ``In order for 
a Market-Maker Trading Permit to be used to act as a Market-Maker in 
VIX, the Trading Permit Holder must obtain a VIX Tier Appointment for 
that Market-Maker Trading Permit.'' The Exchange seeks to add 
clarifying language to this sentence in the Fees Schedule. 
Particularly, the Exchange seeks to clarify that Trading Permit Holders 
must obtain a VIX Tier Appointment in order for a Market-Maker Trading 
Permit to be used to act electronically as a Market-Maker in VIX. The 
Exchange notes that Rule 8.3(i) provides that during Regular Trading 
Hours, a Market-Maker has an appointment to trade open outcry in all 
Hybrid classes traded on the Exchange. As VIX is a Hybrid class, a 
Market-Maker does not need an appointment to trade open outcry. 
Accordingly, the Exchange seeks to amend the first sentence of the VIX 
Tier Appointment description to clarify in the Fees Schedule that a VIX 
Tier Appointment is only necessary for acting as a Market-Maker 
electronically.
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.\7\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \8\ 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 facilitation 
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,\9\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that increasing the VIP complex order credits 
is reasonable because it will allow all TPHs transmitting public 
customer complex orders that reach certain volume thresholds to receive 
an increased credit for doing so. The amounts of the credits being 
proposed are also closer to the amounts of credits paid to market 
participants by another exchange for similar transactions.\10\ 
Additionally, the Exchange notes that increasing the credit (and 
providing higher credits for complex orders than for simple orders) is 
reasonable, equitable and not unfairly discriminatory because it is 
intended to incentivize the sending of more complex orders to the 
Exchange. This should provide greater liquidity and trading 
opportunities, including for market participants who send simple orders 
to the Exchange (as simple orders can trade with the legs of complex 
orders). The greater liquidity and trading opportunities should benefit 
not just public customers (whose orders are the only ones that qualify 
for the VIP) but all market participants.
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    \10\ See International Securities Exchange, LLC (``ISE'') 
Schedule of Fees, Section II (which lists complex order fees and 
rebates). For each public customer order transmitted by a market 
participant (with certain exceptions) a rebate of between $0.30 per 
contract and $0.46 per contract in Select Symbols and between $0.63 
per contract and $0.83 per contract is given to that market 
participant, depending on the qualifying thresholds that market 
participant meets.
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    The Exchange believes that the proposed increase to the amount of 
the COB Contra Surcharge from $0.05 per contract per side to $0.08 per 
contract per side is reasonable because the total amount assessed to 
these transactions, including the Surcharge, is still within the range 
of fees paid by other market participants for similar transactions.\11\ 
Further, other exchanges assess higher fees for complex orders than for 
noncomplex ones.\12\ Applying the 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. Specifically, Customer liquidity benefits 
all market participants by providing more trading opportunities, which 
attracts Market-

[[Page 36023]]

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 Surcharge 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 believes it's reasonable, equitable and not unfairly 
discriminatory to assess the Surcharge to complex order auction 
responses executed in COA and AIM (and not on initiating orders or AIM 
contra orders) because auction responses in COA and AIM, like other 
non-customer complex order executions that take liquidity from the COB 
and are assessed the Surcharge, remove liquidity from the market and 
because the proposed change applies uniformly to all TPHs. The Exchange 
believes renaming the surcharge from ``COB Taker Surcharge'' to 
``Complex Taker Fee'' alleviates potential confusion as to what 
transactions the surcharge applies to and therefore prevents potential 
confusion, thereby removing impediments to and perfecting the mechanism 
of a free and open market and a national market system, and, in 
general, protecting investors and the public interest.
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    \11\ See e.g., NYSE Arca, Inc. (``Arca'') Options Fees Schedule, 
page 7 (Electronic Complex Order Executions) which provides that for 
complex order-to-complex order transactions, non-customers are 
assessed $0.50 in penny pilot options and $0.85 in non-penny pilot 
options. Depending upon the type of market participant a CBOE TPH 
is, non-customer CBOE TPHs would be assessed between $0.11 and $0.73 
(which includes the proposed COB Contra Surcharge increase) for such 
transactions (see CBOE Fees Schedule).
    \12\ See ISE Schedule of Fees, Section I (which lists regular 
Maker rebates and fees and Taker fees for Select Symbols) as 
compared to Section II (which lists complex order fees and rebates 
for Select Symbols). Market participants are assessed higher fees 
for executing complex orders.
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    Increasing the fee for electronic executions by broker-dealers, 
non-TPHs, Market-Makers, Professionals/Voluntary Professionals and JBOs 
in non-Penny Pilot equity, ETF, ETN and Index options (excluding 
Underlying Symbol List A) classes is reasonable because the proposed 
fee amount is similar to the amount assessed by another exchange for 
similar transactions.\13\ The Exchange believes that the proposed 
increase is also equitable and not unfairly discriminatory because the 
Exchange will assess broker-dealers, non-TPH Market-Makers, 
Professionals/Voluntary Professionals and JBOs the same electronic 
options transaction fees in Non-Penny Pilot options classes. The 
Exchange notes that it does not assess Customers the electronic options 
transaction fees in Non-Penny Pilot options because Customer order flow 
enhances liquidity on the Exchange for the benefit of all market 
participants, as discussed above. The Exchange notes that Market-Makers 
are assessed lower electronic options transaction fees in Non-Penny 
Pilot options as compared to 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). Further, Market-Makers will pay a $0.70 per contract 
Marketing Fee for many non-Penny Pilot transactions, which broker-
dealers, non-Trading Permit Holder Market-Makers, Professionals/
Voluntary Professionals and JBOs do not pay.\14\ Clearing Trading 
Permit Holder Proprietary orders are assessed lower options transaction 
fees in Non-Penny Pilot options because they 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 the Options Clearing Corporation). 
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. Assessing higher fees for 
transactions in electronic, non-Penny Pilot classes is equitable and 
not unfairly discriminatory because in non-Penny Pilot classes the 
spreads are naturally larger than in Penny Pilot classes, and these 
wider spreads allow for greater profit potential. Limiting this fee 
increase to electronic transactions is equitable and not unfairly 
discriminatory because electronic trading requires constant system 
development and maintenance.
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    \13\ See PHLX Pricing Schedule, Section II, Multiply Listed 
Options Fees.
    \14\ See CBOE Fees Schedule, Marketing Fee.
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    Increasing the Marketing Fee for all non-Penny Pilot options 
classes is reasonable, equitable and not unfairly discriminatory 
because the proposed fee amount is in line with the amount assessed by 
another exchange for similar transactions and because it applies to all 
Market-Makers.\15\ Additionally, assessing higher fees for transactions 
in non-Penny Pilot classes is equitable and not unfairly discriminatory 
because in non-Penny Pilot classes the spreads are naturally larger 
than in Penny Pilot classes, and these wider spreads allow for greater 
profit potential.
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    \15\ See PHLX Pricing Schedule, Section II, Multiply Listed 
Options Fees.
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    Finally, the Exchange believes clarifying its Fees Schedule with 
regards to when a VIX Tier Appointment is necessary (i.e., acting as a 
Market-Maker electronically versus on-floor) maintains clarity in the 
rules and eliminates potential confusion. The alleviation of potential 
confusion will remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, 
protect investors and the public interest.

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

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition that are not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe that the proposed rule change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because, while different fees 
and rebates are assessed to different market participants in some 
circumstances, these different market participants have different 
obligations and different circumstances (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. 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.

[[Page 36024]]

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 \16\ and paragraph (f) of Rule 19b-4 \17\ 
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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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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-2015-058 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.

All submissions should refer to File Number SR-CBOE-2015-058. 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 will also 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-2015-058 and should be 
submitted on or before July 14, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-15338 Filed 6-22-15; 8:45 am]
 BILLING CODE 8011-01-P


