[Federal Register Volume 82, Number 223 (Tuesday, November 21, 2017)]
[Notices]
[Pages 55443-55449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25144]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82088; File No. SR-CBOE-2017-068]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Describe Functionality of and Adopt Fees for a New Front-End Order 
Entry and Management Platform

November 15, 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 November 2, 2017, Cboe Exchange, Inc. (the ``Exchange'' or 
``Cboe Options'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the Exchange. The 
Exchange filed the proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 
19b-4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    The Exchange proposes to describe the functionality of and adopt 
fees for the use of the Silexx trading platform (``Silexx'' or the 
``platform'') in connection with the purchase of assets from Silexx 
Financial Systems, LLC (SFS).
    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 purpose of this filing is to describe the functionality and 
adopt fees for the use of Silexx, a new front-end order entry and 
management platform. On the date of this filing, Cboe Silexx, LLC (a 
wholly owned subsidiary of Cboe Options' parent company, Cboe Global 
Markets, Inc.) (``Cboe Silexx'') entered into a definitive asset 
purchase agreement with SFS pursuant to which Cboe Silexx agreed to 
purchase Silexx, a front-end, broker-neutral, multi-asset class order 
entry and management trading platform.
    Silexx is an order entry and management trading platform for listed 
stocks and options that support both simple and complex orders.\5\ The 
platform is a software application that is installed locally on a 
user's desktop. The platform provides users with the capability to send 
option orders to U.S.

[[Page 55444]]

options exchanges and stock orders to U.S. stock exchanges (and other 
trading centers \6\), and allows users to input parameters to control 
the size, timing and other variables of their trades.\7\ Silexx 
includes access to real-time options and stock market data, as well as 
access to certain historical data. The platform provides users with the 
ability to maintain an electronic audit trail and provide detailed 
trade reporting.\8\ Use of Silexx is completely optional.
---------------------------------------------------------------------------

    \5\ The platform also permits users to submit orders for 
commodity futures, commodity options and other non-security products 
to be sent to designated contract markets, futures commission 
merchants, introducing brokers or other applicable destinations of 
the users' choice.
    \6\ A ``trading center,'' as provided under Rule 600(b)(78) of 
Regulation NMS, 17 CFR 242.600(b)(78), means a national securities 
exchange or national securities association that operates a self-
regulatory organization trading facility, an alternative trading 
system, an exchange market-maker, an over-the-counter market-maker, 
or any other broker or dealer that executes orders internally by 
trading as principal or crossing orders as agent.
    \7\ The platform also provides position and risk management 
capabilities. The risk management functionality allows users to, 
among other things, set pre-trade customizable risk controls. Users 
of these risk controls set the parameters for the controls (to the 
extent an executing broker sublicenses the platform to its customers 
(see below), the executing broker may set risk controls on behalf of 
its customers). Users have the option to instead use other third-
party risk control software or technology. The Exchange notes that 
executing broker-dealers (including Trading Permit Holders) must 
ensure that any orders that come from the platform to their systems 
will be subject to all applicable pre-trade risk control 
requirements in accordance with Rule 15c3-5 of the Securities 
Exchange Act of 1934 (the ``Act''). See 17 CFR 240.15c3-5. Please 
note that, in the adopting release for Rule 15c3-5 under the Act, 
the Securities and Exchange Commission (the ``Commission'') 
indicated that a broker-dealer relying on risk management technology 
developed by third parties should perform appropriate due diligence 
to help assure the controls are reasonably designed, effective, and 
otherwise consistent with Rule 15c3-5. Mere reliance on 
representations of the third-party technology developer, even if an 
exchange or other regulated entity, is insufficient to meet this due 
diligence standard.
    \8\ The functionality of the platform that formats users' stock 
and option orders entered into it for users, which then submit those 
orders to broker-dealers or to exchanges (if the user is a broker-
dealer) for execution, is the basis for this rule filing. Certain 
versions of the platform (as further described below) include other 
functionality, including additional risk controls and certain data 
analysis tools for real-time and historical data, including market 
scanners, watchlists and alerts and other advanced analytical tools, 
including time and sales analytics, charting capabilities, alerts, 
position analytics, and ``Greek'' calculations. These data analysis 
tools are not subject to this rule filing.
---------------------------------------------------------------------------

    Silexx is designed so that a user may enter orders into the 
platform to send to the executing broker (including Trading Permit 
Holders) of its choice with connectivity to the platform, which broker 
can then send orders to Cboe Options (if the broker-dealer is a Trading 
Permit Holder) or other U.S. exchanges (and trading centers) in 
accordance with the users' instructions.\9\ If a user sends an order 
through the platform to an executing broker, the broker will route that 
order to a market for execution on behalf of the entering user.\10\ The 
executing broker to which a user chooses to route an order is entirely 
within a user's discretion.\11\ Users cannot directly route orders 
through the platform to an exchange or trading center. For users' 
convenience, Cboe Silexx will make available on Cboe Options' Web site 
the list of executing brokers that provide connectivity to the 
platform. The Exchange notes that executing broker's decision to 
connect to Silexx is within that firm's sole discretion.\12\
---------------------------------------------------------------------------

    \9\ Currently, Silexx is not connected directly to Cboe Options, 
and thus orders may not be sent directly from the platform to Cboe 
Options. The Exchange may determine going forward to develop such a 
direct connection, which would only be available to platform users 
that are Trading Permit Holders, and would submit any necessary rule 
changes related to such platform changes.
    \10\ A user may also be an executing broker if the user has 
connectivity to, and is a member of, Cboe Options or other options 
and/or stock exchanges (or trading centers).
    \11\ Currently, there are over 20 executing brokers with 
connections to Silexx to which users may route orders.
    \12\ To the extent a firm sublicenses Silexx to its customers 
(see below), the firm will determine which executing broker to use 
for platforms used by the firm and its customers (if the firm is not 
itself an executing broker). Users enter into separate agreements 
with execution brokers (to which Cboe Options or Cboe Silexx would 
not be a party).
---------------------------------------------------------------------------

    Certain executing brokers may permit Silexx users to designate a 
market to which the broker is to route an order received from the 
platform. Other executing brokers may employ ``smart router'' 
functionality, which generally determines where to route an order based 
on the brokers' pre-set algorithmic logic. Executing brokers may also 
provide users with the ability to either designate a destination market 
(an order-by-order basis or by default) or use the smart router 
functionality. Which executing broker a user chooses to use (and thus 
which type of routing permissions are available to a user) is entirely 
within a user's discretion (as discussed below, addition of such 
features to the platform are subject to a fee).
    The Exchange represents Silexx is merely a new front-end order 
entry and management system that interfaces to the systems of various 
broker-dealers that elect to connect to the platform. The platform is 
not integrated into and currently has no connectivity to Cboe Options' 
trading system (or the trading systems of any other U.S. exchange or 
trading center). Cboe Options currently offers a similar front-end 
order entry system, the PULSe workstation, which permits users to enter 
orders for submission to Cboe Options and other markets. Thus, orders 
submitted through the platform will ultimately come to Cboe Options or 
other exchanges for execution through third-party routing technology. 
There will be no change to, or impact on, the Exchange's market 
structure as a result of offering the platform. As a result, the 
Exchange represents the platform does not require any changes to the 
Exchange's surveillance or communications rules.
    Use of Silexx is completely voluntary. Cboe Silexx will make the 
platform available to users (and in certain cases, their customers, as 
further described below) as a convenience for entering and managing 
orders, but the platform is not an exclusive means for any user to send 
orders to Cboe Options or intermarket. Orders entered into the platform 
that are ultimately routed to Cboe Options for execution will receive 
no preferential treatment as compared to orders electronically sent to 
Cboe Options in any other manner. Orders entered into the platform that 
get routed to Cboe Options will be subject to current trading rules in 
the same manner as all other orders sent to the Exchange, which is the 
same as orders that are sent through the system to the Exchange today. 
The Cboe Options trade engine does not distinguish between orders sent 
from Silexx and orders sent in any other manner.
    Cboe Silexx will begin making the system available to users upon 
the closing of the acquisition of Silexx.\13\ Cboe Silexx will grant 
users licenses to use Silexx. The Exchange notes that a firm or 
individual does not need to be a Trading Permit Holder to license the 
platform, because, as discussed above, a non-Trading Permit Holder may 
route an order through the platform to an executing broker that is a 
Trading Permit Holder, which broker can then route the order to Cboe 
Options (or any other U.S. exchange of which it is a member). 
Additionally, the platform is not currently directly connected to Cboe 
Options (or any other U.S. exchange), and orders submitted into the 
platform for execution must be routed through the connectivity of an 
executing broker.\14\ Cboe Silexx will also provide technical support, 
maintenance and user training for the platform upon the same terms and 
conditions for all users.
---------------------------------------------------------------------------

    \13\ Cboe Silexx intends to close the acquisition on the signing 
date (and date of this rule filing). The proposed rule change will 
be operative on the closing date (subject to Commission approval of 
the requested operative delay waiver).
    \14\ Rule 6.23A provides that only Trading Permit Holders and 
associated persons with authorized access may directly enter orders 
into Cboe Options' trading system.

---------------------------------------------------------------------------

[[Page 55445]]

    The following table sets for the pricing for the various versions 
of the Silexx platform:

----------------------------------------------------------------------------------------------------------------
           Platform version                       Platform description              Fee per month per login ID
----------------------------------------------------------------------------------------------------------------
Silexx Basic..........................  Order-entry and management system that    $200.
                                         provides basic functionality including
                                         real-time data, alerts, trade reports,
                                         views of exchange books, management of
                                         the customer's orders and positions,
                                         simple and complex order tickets, and
                                         basic risk features.
Silexx Pro............................  Same functionality as basic platform      400.
                                         plus additional features including an
                                         algorithmic order ticket, position
                                         analysis, charting, earnings and
                                         dividend information, delta hedging
                                         tools, volatility skews, and additional
                                         risk features.
Silexx Sell-Side......................  Same functionality as Pro platform plus   475.
                                         availability of clearing fields in
                                         order tickets.
Silexx Pro Plus Risk..................  Same functionality as Pro platform plus   600.
                                         access to unlimited customer accounts
                                         and customizable risk views.
Silexx Buy-Side Plus Risk.............  Same functionality as Pro platform plus   300.\15\
                                         functionality package generally used by
                                         buy-side investors and customizable
                                         risk views.
----------------------------------------------------------------------------------------------------------------


 
Additional functionality for platforms          Functionality description                       Fee
----------------------------------------------------------------------------------------------------------------
API...................................  Integrates the platform into users'       $200/month/ login ID.
                                         other applications through the Silexx
                                         application programming interface
                                         (``API'').
Crossing..............................  Availability of crossing order ticket...  300/month/login ID.
Port..................................  Provides access to an executing broker    100/month/login ID.
                                         with connectivity to the Silexx
                                         platform for routing.
Staged Orders, Drop Copies, and Order   Ability to receive staged orders,         250/month/FIX Connection.
 Routing Functionality for FIX           receive ``drop copies'' of order fill
 Connections (sessions).                 messages, and route orders to executing
                                         brokers.
Staged Orders, Drop Copies, and Order   Ability to receive staged orders,         500/month/FIX Connection.
 Routing Functionality for FIX           receive ``drop copies'' of order fill
 Connections (sessions) Using Third-     messages, and route orders to executing
 Party FIX Router.                       brokers through a third-party FIX
                                         router.
Equity Order Reports (paid by the       Daily transmission of equity order        250/month/trading firm.
 trading firm).                          reports.
Domestic Index Data Package...........  Connection to certain domestic index      25/user/month.
                                         market data feeds.
Market Data Feeds (excluding feeds      Connections to other market data feeds..  Actual costs (determined on a
 included in Domestic Index Data                                                   time (per hour) and materials
 Package).                                                                         basis) passed through to
                                                                                   user.\16\
----------------------------------------------------------------------------------------------------------------

    The monthly platform fees for the Silexx platform will allow for 
Cboe Silexx's recoupment of the costs of maintaining, supporting and 
enhancing the platform, as well as for income from the value-added 
services being provided through use of the various versions of the 
platform. The Exchange believes the fee structure represents an 
equitable allocation of reasonable fees because the same monthly log-in 
ID fees apply to all users of each version of the Silexx platform. The 
Exchange believes these fees are reasonable and appropriate as they are 
competitive with similar products available throughout the market and 
are based on Silexx's costs and fee structure currently in place for 
the platform. Users can choose to route orders, including to Cboe 
Options, without the use of the platform. Use of the platform is 
discretionary and not compulsory.
---------------------------------------------------------------------------

    \15\ Proprietary buy-side firms with 25 or more login IDs 
receive a 15% discount on platform-related fees, excluding firms 
with dedicated instances of the platform, which discount incentives 
more buy-side investors to use Silexx.
    \16\ The same reasonable hourly and materials rates will apply 
to all users based on then-current rates in line with industry 
standards, which costs (and any reasonable, standard mark-up) will 
be passed through to users.
---------------------------------------------------------------------------

    The additional functionality will permit users to add features in 
accordance with their use of the Silexx platform. The API functionality 
integrates the platform into users' other applications through the 
Silexx API. The crossing functionality provides users who choose to 
regularly cross orders with access to a crossing order ticket. The port 
fee applies to connections from users to executing brokers, which 
provides users with access to an executing broker with connectivity to 
the Silexx platform for routing. Financial Information eXchange 
(``FIX'') is an industry-standard, non-proprietary API that permits 
market participants to connect to exchanges. FIX connectivity provides 
users with the ability to receive ``drop copy'' order fill messages 
from their executing brokers. These fill messages allows customers to 
update positions, risk calculations, and streamline back-office 
functions. Additionally, FIX connections can be updated to permit the 
platform to receive orders sent from another system and then route 
these orders through the platform for execution (staged orders) as well 
as provide users with the ability to route orders in various ways to 
executing brokers (such as designation of a market to which the broker 
is to route an order received from the platform and use of a broker's 
``smart router'' functionality). Some users have connections to third-
party FIX routers, who currently normalize the format of messages of 
their client. To the extent a FIX router has a connection to the Silexx 
platform, users that also have connections to these routers may elect 
to receive staged

[[Page 55446]]

orders, drop copies, and order routing functionality through a fix 
router. Connectivity of Silexx into the technology of third-party FIX 
routers causes the monthly fee for this functionality to be higher than 
the fee for users who receive this feature directly. Additionally, the 
Silexx platform permits users to elect to receive daily transmission of 
equity order reports related to order users submit through the 
platform. The proposed monthly fee will allow for the recoupment of 
costs of developing, maintaining, and supporting this reporting 
functionality.
    The Exchange is offering each type of additional functionality as a 
convenience. The fees for this additional functionality allow for Cboe 
Silexx's recoupment of the costs of maintaining, supporting and 
enhancing the functionality, as well as for income from the value-added 
services being provided through use of the functionality in connection 
with the platform. The Exchange believes the fee structure represents 
an equitable allocation of reasonable fees because the same fees apply 
to all users of each type of additional functionality. The Exchange 
believes these fees are reasonable and appropriate as they are 
competitive with similar products available throughout the market and 
are based on Silexx's costs and fee structure currently in place for 
these features. Use of each additional functionality is discretionary 
and not compulsory. Except as otherwise set forth above, fees related 
to the Silexx platform will be paid by the user that licenses the 
platform directly from Cboe Silexx. The proposed fees would become 
effective on the closing date of the acquisition.\17\
---------------------------------------------------------------------------

    \17\ The Exchange generally invoices firms for fees in arrears 
on a monthly basis and intends to do so following the closing of the 
acquisition with respect to all fees related to the Silexx platform, 
as proposed in this filing. The Exchange understands certain Silexx 
customers pay fees upfront at the beginning of the month. Therefore, 
to avoid any double-charging of customers, Cboe Silexx will not 
invoice any user for the proposed fees for the month in which the 
closing date falls to the extent the user paid fees for such month 
to Silexx at the beginning of such calendar month.
---------------------------------------------------------------------------

    The Exchange proposes the following additional fees related to 
dedicated instances of the Silexx platform. These fees are all paid by 
the client firm with the dedicated instance.

----------------------------------------------------------------------------------------------------------------
    Dedicated instance functionality               Functionality description                      Fee
----------------------------------------------------------------------------------------------------------------
Dedicated Instance......................  Deployment of Silexx infrastructure         $20,000/month.
                                           components at a client hosted site.
Market Center Support...................  Access to and support for domestic and      1,000/market center/month.
                                           international market centers and asset
                                           classes.
Dedicated Feed Handler..................  Market data feed handler for third-party    2,000/handler/month.
                                           market data vendors.
Bloomberg Backoffice Integration........  Integrates Bloomberg backoffice files into  1,000/month.
                                           master security database within Silexx.
Pro Plus API............................  Dedicated instances of API functionality..  250/user/month.
CME STP.................................  Connection to CME's straight through        1,500/month.
                                           processing facility.
FIX International Connection (Session)..  FIX connection for multiple asset classes   1,500/month.
                                           and multiple market centers.
Additional Site.........................  Deployment of dedicated instance at a       6,500/month.
                                           secondary site.
----------------------------------------------------------------------------------------------------------------

    A dedicated instance is local installation of the Silexx platform 
within a client's system and hosted infrastructure, essentially 
permitting a more customized experience for firms and their customers. 
A dedicated instance permits the firm to determine which market centers 
it wants its instance to access (and receive support for that access), 
handle data from widely used third-party market-data vendors (e.g. 
Bloomberg), integrate commonly used Bloomberg back office files into a 
master security database, provide API functionality for users, connect 
to the Chicago Mercantile Exchange's straight-through processing 
facility, provide FIX connectivity for multiple asset classes and 
multiple market centers around the world, and add the platform 
functionality to a second hosted site. Additionally, the dedicated 
instance permits firms to elect to receive various market data feeds 
from throughout the industry. The dedicated instance fees for the 
Silexx platform will allow for Cboe Silexx's recoupment of the costs of 
installing, maintaining, supporting and enhancing dedicated instances 
of the platform, as well as for income from the value-added services 
being provided through use of a dedicated instance and each type of 
added functionality. The Exchange believes the fee structure represents 
an equitable allocation of reasonable fees because the same fees apply 
to all client firms with dedicated instances. The Exchange believes 
these fees are reasonable and appropriate as they are competitive with 
similar products available throughout the market and are based on 
Silexx's costs and fee structure currently in place for the platform. 
Use of a dedicated instance is discretionary and not compulsory.
    The Exchange notes that Cboe Silexx may provide additional 
technology products and services and may in the future engage in other 
business activities, which may include the provision of other 
technology products and services to broker-dealers and non-broker-
dealers in addition to the Silexx platform.\18\ In this regard:
---------------------------------------------------------------------------

    \18\ Cboe Silexx is not and, at least initially, will not be 
registered as a broker-dealer under Section 15(a) of the Act. In 
this regard, the Exchange notes the following: (a) Cboe Options and 
Cboe Silexx will be responsible for the marketing of the platform. 
Cboe Silexx will be the party to any agreements with customers for 
the platform. (b) Cboe Options and Cboe Silexx will be responsible 
for providing, supporting and maintaining the technology for the 
platform. Cboe Options will be responsible for ensuring that Cboe 
Silexx's provision of the platform, to the extent it is deemed a 
facility of Cboe Options, meets Cboe Options' self-regulatory 
organization obligations. (c) Unless it registers as a broker-dealer 
under Section 15(a) of the Act, Cboe Silexx will not hold itself out 
as a broker-dealer, provide advice related to securities 
transactions, match orders, make decisions about routing orders, 
facilitate the clearance and settlement of executed trades, prepare 
or send transaction confirmations, screen counterparties for 
creditworthiness, hold funds or securities, open, maintain, 
administer or close brokerage accounts, or provide assistance in 
resolving problems, discrepancies or disputes related to brokerage 
accounts. Should Cboe Silexx seek to register as a broker-dealer in 
the future, the Exchange represents that the broker-dealer would not 
perform any operations without first discussing with the Commission 
staff whether any of the broker-dealer's operations should be 
subject to an Exchange rule filing required under the Act.
---------------------------------------------------------------------------

     There will be procedures and internal controls in place 
that are reasonably designed so that Cboe Silexx will not unfairly take 
advantage of confidential information it receives as a result of its 
relationship with Cboe Options in connection with the platform or any 
other business activities.
    The books, records, premises, officers, directors, agents and 
employees of Cboe Silexx, with respect to the products that may be 
deemed facilities of Cboe Options, will be deemed to be those of

[[Page 55447]]

Cboe Options for purposes of and subject to oversight pursuant to the 
Act.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\19\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \20\ 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 the Section 6(b)(5) \21\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. Additionally, the Exchange 
also believes the proposed rule change is consistent with Section 
6(b)(4) of the Act,\22\ 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.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
    \21\ Id.
    \22\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    In particular, the Exchange believes that offering the platform and 
all other functionality to market participants protects investors and 
is in the public interest, because it will allow the Exchange to 
directly offer users an order entry and management system in addition 
to the technology products it currently offers (such as the PULSe 
workstation). The Silexx platform is currently offered and used in the 
marketplace and competes with similar products offered by other 
technology providers as well as other exchanges.\23\ Additionally, 
firms can create their own proprietary front-end order entry software 
and routing technology.
---------------------------------------------------------------------------

    \23\ For example, International Securities Exchange, LLC 
(``ISE'') offers a front-end order entry workstation called PrecISE 
to its customers, which the Exchange believes has similar 
functionality as the system.
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change does not 
discriminate among market participants because use of the platform and 
all other functionality is completely voluntary. Users can choose to 
route orders, including to Cboe Options, without the use of the 
platform. The Exchange is making the platform and all other 
functionality available as a convenience to market participants, who 
will continue to have the option to use any order entry and management 
system available in the marketplace to send orders to the Exchange and 
other exchanges; the platform is merely an alternative that will be 
offered by the Exchange rather than its current owner. The Silexx 
platform is not an exclusive means available to market participants to 
send orders to Cboe Options or other markets. Any orders sent through 
the platform to Cboe Options for execution will receive no preferential 
treatment. Additionally, the platform will be available to all market 
participants, and the Exchange will license the platform to market 
participants pursuant to the same terms and conditions.
    The Exchange believes the platform and additional functionality 
removes impediments to and perfects the mechanism of a free and open 
market and a national market system because users have discretion to 
determine to which broker-dealer they will route orders from the 
platform, and, for certain versions of the platform, what type of 
routing parameters will be available to them (whether it is the ability 
to designate a destination market or use smart router functionality). 
Non-broker-dealer users may separately enter into an agreement with a 
broker-dealer (the Exchange will have no involvement with the entry 
into such agreements), which can provide for routing to U.S. options 
and stock exchanges (and trading centers). Only Trading Permit Holders 
will continue to be permitted to directly route orders received from 
the platform to Cboe Options, and only members of other U.S. exchanges 
will be able to enter orders for execution at those exchanges that they 
receive from the platform. The Exchange also notes that broker-dealers 
must continue to ensure that orders they receive from the platform will 
be subject to applicable pre-trade risk control requirements of the 
broker-dealer that directly submits the orders to an exchange in 
accordance with Rule 15c3-5 under the Act.\24\
---------------------------------------------------------------------------

    \24\ See 17 CFR 240.15c3-5.
---------------------------------------------------------------------------

    The monthly log-in ID fees, API fee, crossing fee, and port fee for 
the Silexx platform will allow for Cboe Silexx's recoupment of the 
costs of developing, maintaining, supporting and enhancing the 
platform, the API and crossing functionality, and connections from 
users to executing brokers, as well as for income from the value-added 
services being provided through use of the various versions of the 
platform and these additional services. The Exchange believes the fee 
structure represents an equitable allocation of reasonable fees because 
the same monthly log-in ID fees apply to all users of each version of 
the Silexx platform, and because varying fees for different versions of 
the platform reflect the additional functionality available in the 
versions. The Exchange believes these fees are reasonable and 
appropriate as they are competitive with similar products available 
throughout the market and are substantially similar to Silexx's costs 
and fee structure currently in place for the platform. Use of the 
platform, and other functionality, is discretionary and not compulsory.
    The monthly fees related to FIX connectivity services will allow 
for the recoupment of costs of maintaining and supporting this 
functionality as well as for income from the value-added services being 
provided from use of this functionality. The Exchange believes the fee 
is reasonable because the Exchange incurs costs to monitor, develop, 
and implement upgrades, maintain, and customize the platform to ensure 
availability of this functionality to customers. The Exchange believes 
the fee is equitable and non-discriminatory because the monthly fee is 
assessed to any user electing to use this functionality. Connectivity 
of Silexx into the technology of third-party FIX routers causes the 
monthly fee for this functionality to be higher than the fee for users 
who receive this feature directly. Use of the FIX connectivity services 
by a user is voluntary.
    The proposed monthly fee related to equity order reports will allow 
for the recoupment of costs of developing, maintaining, and supporting 
this reporting functionality. The Exchange believes the monthly fee for 
transmission of equity order reports is reasonable because the Exchange 
incurs costs to monitor, develop, and implement upgrades, maintain, and 
customize the platform to allow sending and receiving of equity order 
reports. The Exchange believes the fee is equitable and not unfairly 
discriminatory as it is assessed to all executing brokers electing to 
receive equity order reports. Receipt of the reports is completely 
voluntary.
    A dedicated instance is local installation of the Silexx pro 
platform within a client's system and hosted Web site benefits 
investors, as it permits a more customized experience for firms and 
their customers. The Exchange

[[Page 55448]]

believes the fees are reasonable because the Exchange incurs costs to 
customize dedicated instances of the platform. The dedicated instance 
fees for the Silexx platform will allow for Cboe Silexx's recoupment of 
the costs of installing, maintaining, supporting and enhancing 
dedicated instances of the platform, as well as for income from the 
value-added services being provided through use of a dedicated instance 
and each type of added functionality. The Exchange believes the fee 
structure represents an equitable allocation of reasonable fees because 
the same fees apply to all client firms with dedicated instances. The 
Exchange believes these fees are reasonable and appropriate as they are 
competitive with similar products available throughout the market and 
are based on Silexx's costs and fee structure currently in place for 
the platform. Use of a dedicated instance is discretionary and not 
compulsory.

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

    Cboe Options does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange will make each 
version of the platform and additional functionality available to 
market participants on the same terms and conditions, and use of the 
platform will be completely voluntary. Users have discretion to 
determine which version of the platform to use, if any, and to which 
executing broker-dealer to route orders through the platform. Market 
participants will continue to have the flexibility to use any order 
entry and management technology they choose. The Exchange will merely 
be directly offering the platform as an alternative to a product that 
the Exchange currently makes available in the market (PULSe). If market 
participants believe that other products available in the marketplace 
are more beneficial than the Silexx platform, they will simply use 
those products instead. Orders sent to the Exchange through the 
platform for execution will receive no preferential treatment. The Cboe 
Options trade engine does not distinguish between orders sent from 
Silexx and orders sent in any other manner. Use of the platform 
provides users with no additional access to the Exchange than is 
available through the use of any other front-end order entry system. 
The Exchange notes that the platform and additional functionality are 
already available and used in the marketplace today. This acquisition 
merely changes the party that will own and license them to users going 
forward.
    The proposed fees related to additional functionality will not 
impose any burden on competition, because the fees relate to optional 
functionality and are assessed equally on users or firms electing to 
use the functionality. Use of such functionality is completely 
voluntary. Access to Silexx functionality, and the proposed Silexx 
fees, are unrelated to trading activity on the Exchange.
    The proposed fees related to dedicated instances of the platform 
will not impose any burden on competition, because the fees relate to 
optional functionality and are assessed equally on firms electing to 
obtain a dedicated instance. Use of a dedicated instance is completely 
voluntary.
    Cboe Options believes that the proposed rule change will relieve 
any burden on, or otherwise promote, competition. Cboe Options will be 
offering a type of product that is widely available throughout the 
industry, including from some exchanges. Market participants can also 
develop their own proprietary products with the same functionality. ISE 
currently offers a similar front-end order entry application. Cboe 
Options believes that the platform will be an addition to its current 
suite of technology products it offers to market participants to enter 
and manage orders for routing to U.S. exchanges. Any market participant 
will be able to use the platform. Cboe Silexx's ownership of Silexx 
will not provide a competitive advantage over competing products as a 
result of its affiliation with Cboe.
    The Exchange notes that when Congress charged the Commission with 
supervising the development of a ``national market system'' for 
securities, a premise of its action was that prices, products and 
services ordinarily would be determined by market forces.\25\ 
Consistent with this purpose, Congress and the Commission have 
repeatedly stated their preference for competition, rather than 
regulatory intervention, to determine prices, products and services in 
the securities markets.\26\ Many exchanges and other market 
participants make technology products, including products similar to 
the Silexx platform, available to the industry. Other market 
participants that offer these products can adjust pricing or add 
functionality to attract users to their products to compete with the 
Exchange-offered products based on all competitive forces in the 
marketplace, as the Exchange expects these other market participants 
currently do. The Exchange believes that other market participants that 
offer these products will continue to remain competitive in the market 
for order-entry, management and routing products, as they currently are 
in this market in which at least two exchanges (including Cboe Options) 
offer similar technology products. For example, Cboe Options currently 
offers PULSe, and ISE currently offers PrecISE. The Exchange believes 
that many investors will continue to elect to use competing products 
available from non-exchange technology providers.
---------------------------------------------------------------------------

    \25\ See, e.g., H.R. Rep. No. 94-229, at 92 (1975) (Conf. Rep.) 
(stating Congress's intent that the ``national market system evolve 
through the interplay of competitive forces as unnecessary 
regulatory restrictions are removed'').
    \26\ See S. Rep. No. 94-75, 94th Cong., 1st Sess. 8 (1975) 
(``The objective [in enacting the 1975 amendments to the Exchange 
Act] would be to enhance competition and to allow economic forces, 
interacting within a fair regulatory field, to arrive at appropriate 
variations in practices and services.''); Order Approving Proposed 
Rule Change Relating to NYSE Arca Data, Securities Exchange Act 
Release No. 59039 (December 2, 2008), 73 FR 74770 (Dec. 9, 2008) at 
74781 (``The Exchange Act and its legislative history strongly 
support the Commission's reliance on competition, whenever possible, 
in meeting its regulatory responsibilities for overseeing the SROs 
and the national market system. Indeed, competition among multiple 
markets and market participants trading the same products is the 
hallmark of the national market system.'') (SR-NYSEArca-2006-21); 
Regulation NMS, 70 FR at 37499 (observing that NMS regulation ``has 
been remarkably successful in promoting market competition in [the] 
forms that are most important to investors and listed companies'').
---------------------------------------------------------------------------

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

    Because the foregoing proposed rule change does not (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \27\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\28\
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \28\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.

---------------------------------------------------------------------------

[[Page 55449]]

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of its filing. However, 
Rule 19b-4(f)(6)(iii) \29\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay so that the proposed rule 
change will become operative upon filing. The Exchange states that such 
waiver will enable continuous access to the platform by users and a 
seamless transition of ownership of Silexx. The Commission believes 
that waiver of the 30-day operative delay is consistent with the 
protection of investors and the public interest because the proposal 
does not raise any novel issues and waiver will allow current users of 
Silexx to continue to use the platform without interruption. Therefore, 
the Commission hereby waives the operative delay and designates the 
proposed rule change operative upon filing.\30\
---------------------------------------------------------------------------

    \29\ 17 CFR 240.19b-4(f)(6)(iii).
    \30\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such 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 shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

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 [email protected]. Please include 
File Number SR-CBOE-2017-068 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-2017-068. 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. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CBOE-2017-068, and should be 
submitted on or before December 12, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
---------------------------------------------------------------------------

    \31\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-25144 Filed 11-20-17; 8:45 am]
BILLING CODE 8011-01-P


