[Federal Register Volume 78, Number 83 (Tuesday, April 30, 2013)]
[Notices]
[Pages 25334-25336]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-10077]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69438; File No. SR-CBOE-2013-037]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Fees for the BBO Data Feed for CBOE 
Listed Options

April 23, 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 April 16, 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

    Chicago Board Options Exchange, Incorporated (the ``Exchange'' or 
``CBOE'') proposes to amend the fee schedule of Market Data Express, 
LLC (``MDX''), an affiliate of CBOE, for the BBO Data Feed for CBOE 
listed options (``BBO Data Feed'' or ``Data''). 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 purpose of the proposed rule change is to amend the fees 
charged by MDX for the BBO Data Feed and to make several clarifying 
changes to the MDX fee schedule.\3\ The BBO Data Feed is a real-time, 
low latency data feed that includes CBOE ``BBO data'' and last sale 
data.\4\ The BBO and last sale data contained in the BBO Data Feed is 
identical to the data that CBOE sends to the Options Price Reporting 
Authority (``OPRA'') for redistribution to the public.\5\
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    \3\ The BBO Data Feed and the fees charged by MDX for the BBO 
Data Feed were established in March 2011. See Securities Exchange 
Act Release No. 63997 (March 1, 2011), 76 FR 12388 (March 7, 2011).
    \4\ The BBO Data Feed 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.
    \5\ 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. 
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.
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    The BBO Data Feed also includes certain data that is not included 
in the data sent to OPRA, namely, (i) totals of customer versus non-
customer contracts at the BBO, (ii) All-or-None contingency orders 
priced better than or equal to the BBO, (iii) BBO data and last sale 
data for complex strategies (e.g., spreads, straddles, buy-writes, 
etc.) (``Spread Data''), (iv) BBO data and last sale data for Flexible 
Exchange (``FLEX'') options traded on the CBOE FLEX Hybrid Trading 
System, including BBO data and last sale data for FLEX complex 
strategies (collectively, ``FLEX BBO data''), and (v) expected opening 
price (``EOP'') and expected opening size (``EOS'') information that is 
disseminated prior to the opening of the market and during trading 
rotations (collectively, ``EOP/EOS data'').\6\
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    \6\ The Exchange identified the inclusion of FLEX BBO data and 
EOP/EOS data in the BBO Data Feed in a proposed rule change filed in 
January 2013. See Securities Exchange Act Release No. 68696 (January 
18, 2013), 78 FR 5527 (January 25, 2013). MDX also makes the FLEX 
BBO data available as a separate data feed at no charge to any 
Customer that wishes to subscribe to only that data. EOP/EOS data is 
not offered separate from the BBO Data Feed.
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    MDX currently charges Customers a ``direct connect fee'' of $3,500 
per connection per month and a ``per user fee'' of $25 per month per 
``Authorized User'' or ``Device'' for receipt of the BBO Data Feed by 
Subscribers.\7\ Either a CBOE Trading Permit Holder or a non-CBOE 
Trading Permit Holder may be a Customer. All Customers are assessed the 
same fees.
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    \7\ 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.
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    The Exchange proposes to eliminate both the direct connect fee and 
the per user fee and replace them with a ``data fee'', payable by a 
Customer, of $5,000 per month for internal use and external 
redistribution of the BBO Data Feed. A ``Customer'' is any entity that 
receives the BBO Data Feed directly from MDX's system or through a 
connection to MDX provided by an approved redistributor (i.e., a market 
data vendor or an extranet service provider) and then distributes it 
internally and/or externally. The data fee would entitle a Customer to 
provide the BBO Data Feed to an unlimited number of internal users and 
Devices within the Customer. The data fee would also entitle a Customer 
to distribute externally the BBO Data Feed to other Customers. A 
Customer receiving the BBO Data Feed from another Customer would be 
assessed the data fee by MDX and would be entitled to distribute the 
Data internally and/or externally.\8\ All Customers would have

[[Page 25335]]

the same rights to utilize the Data (i.e., distribute the Data 
internally and/or externally) as long as the Customer has entered into 
an agreement with MDX for the Data and pays the data fee. Either a CBOE 
Trading Permit Holder or a non-CBOE Trading Permit Holder may be a 
Customer.
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    \8\ A Customer may choose to receive the Data from another 
Customer rather than directly from MDX's system because it does not 
want to or is not equipped to manage the technology necessary to 
establish a direct connection to MDX. In addition, a Customer is not 
subject to the MDX Port Fee if it does not establish a port 
connection to an MDX server.
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    The Exchange also proposes to make several clarifying changes to 
the MDX fee schedule. MDX charges Customers a monthly fee of $500 for 
each port connection to MDX to receive the BBO Data Feed (``Port 
Fee'').\9\ The Exchange proposes to move the Port Fee into a new 
section of the MDX fee schedule called Systems Fees. The Exchange 
proposes to add a description of the Port Fee to the Definitions 
section of the MDX fee schedule. The Exchange proposes to reflect on 
the MDX fee schedule that there are no data fees for the FLEX BBO data 
feed. The Exchange proposes to clarify that MDX will not charge the 
data fee or the Port Fee for any calendar month in which a Customer 
commences receipt of Data after the 15th day of the month or 
discontinues receipt of the Data before the 15th day of the month. The 
Exchange also proposes to include in the MDX fee schedule provisions 
relating to invoicing and late payments. Lastly, the Exchange proposes 
to remove the definition of per user fee from the MDX fee schedule 
consistent with the elimination of that fee.
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    \9\ See Securities Exchange Act Release No. 66486 (February 28, 
2012), 77 FR 13166 (March 5, 2012).
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    The proposed fee change is to take effect on May 1, 2013.
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'') \10\ in general, and, in particular, with Section 
6(b)(4) of the Act \11\ in that it provides for the equitable 
allocation of reasonable dues, fees and other charges among users and 
recipients of the Data, and with Section 6(b)(5) \12\ of the Act in 
that it is not designed to permit unfair discrimination between them. 
The Exchange believes the proposed data fee is equitable and not 
unfairly discriminatory because it would apply equally to all 
Customers. All Customers would have the same rights to utilize the Data 
(i.e., distribute the Data internally and/or externally) as long as the 
Customer has entered into an agreement with MDX for the Data and pays 
the data fee.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed fee is reasonable because it 
compares favorably to fees that other markets charge for similar 
products. For example, the Exchange believes NASDAQ OMX PHLX charges 
Internal Distributors a monthly fee of $4,000 per organization and 
External Distributors a monthly fee of $5,000 per organization 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. The International Securities Exchange offers a ``Top Quote 
Feed'', which includes top-of-book data, and a separate ``Spread 
Feed'', which like the BBO Data Feed includes order and quote data for 
complex strategies. The Exchange believes ISE charges distributors of 
its Top Quote Feed a base monthly fee of $3,000 and distributors of its 
Spread Feed a base monthly fee of $3,000. The Exchange notes that the 
BBO Data Feed also competes with products offered by the NYSE entitled 
NYSE ArcaBook for Amex Options and NYSE ArcaBook for Arca Options that 
include top-of-book and last sale data similar to the data in the BBO 
Data Feed. As noted above, the BBO Data Feed also includes FLEX BBO and 
EOP/EOS data as well as other data.
    For the reasons cited above, the Exchange believes the proposed fee 
for the BBO Data Feed is equitable, reasonable and not unfairly 
discriminatory. In addition, the Exchange believes that no substantial 
countervailing basis exists to support a finding that the proposed 
terms and fee for the BBO Data Feed fails 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 the purposes of the Act. To the contrary, the market for 
options orders and executions is already highly competitive and the 
Exchange's proposal is itself pro-competitive as described below.
    The Exchange believes 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 ten options exchanges (including CBOE's affiliate, C2 
Options Exchange) for order flow.\13\
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    \13\ 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 is 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, ISE and NYSE 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.
    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

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

[[Page 25336]]

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)(ii) of the Act.\14\ 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 shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 [email protected]. Please include 
File Number SR-CBOE-2013-037 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-2013-037. 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 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 publicly available. All 
submissions should refer to File Number SR-CBOE-2013-037 and should be 
submitted on or before May 21, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-10077 Filed 4-29-13; 8:45 am]
BILLING CODE 8011-01-P