[Federal Register Volume 80, Number 87 (Wednesday, May 6, 2015)]
[Notices]
[Pages 26124-26127]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-10505]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74854; File No. SR-CBOE-2015-041]


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

April 30, 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 April 20, 2015, Chicago Board Options Exchange, Incorporated 
(``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

[[Page 26125]]

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
    On, April 8 2015, the Securities and Exchange Commission (the 
``Commission'') approved a proposed rule change that would amend CBOE 
rules to permit the listing and trading of options that overlie the 
MSCI EAFE Index (``MXEA options'') and the MSCI Emerging Markets Index 
(``MXEF options'').\3\ As such, the Exchange proposes to establish fees 
for MXEA and MXEF, effective April 21, 2015.
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    \3\ See Securities Exchange Act Release No. 74681 (April 8, 
2015), 80 FR 71 [sic] (April 14, 2015) (SR-CBOE-2015-023).
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    First, the Exchange proposes to establish transaction fees for MXEA 
and MXEF. Under the proposed fees structure, Customers (``C'' origin 
code) will be assessed no transaction fee for MXEA and MXEF 
transactions. The absence of a Customer transaction fee for MXEA and 
MXEF options will provide greater incentives for Customers to trade 
MXEA and MXEF. The Exchange notes that currently another proprietary 
index option, XSP, is also not assessed a fee for Customer 
transactions.\4\
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    \4\ See CBOE Fees Schedule, Index Options Rate Table--All Index 
Products Excluding Underlying Symbol List A.
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    Next, the Exchange proposes to assess Clearing Trading Permit 
Holder proprietary (``F'' origin code) and Non-Trading Permit Holder 
Affiliate (``L'' origin code) MXEA and MXEF transactions $0.20 per 
contract for manual and Automated Improvement Mechanism (``AIM'') 
Agency/Primary transactions, $0.35 per contract for electronic 
transactions, $0.05 per contract for AIM Contra transactions and $0.25 
per contract for Flex Hybrid Trading Systems (``CFLEX'') AIM Response 
transactions. The Exchange also proposes to count MXEA and MXEF volume 
towards the Clearing Trading Permit Holder Fee Cap (``Fee Cap''). This 
will help these market participants to reach this cap on their fees. 
Additionally, the Exchange recognizes that Clearing Trading Permit 
Holders can be an important source of liquidity when they facilitate 
their own customers' trading activity and, as such, the Exchange 
proposes to apply the waiver of Clearing Trading Permit Holder 
Proprietary transaction fees for facilitation orders executed via 
CFLEX, in open outcry or electronically via AIM. The Exchange notes 
that the proposed transaction fee amounts for Clearing Trading Permit 
Holder proprietary and Non-Trading Permit Holder Affiliate transactions 
are the same for Clearing Trading Permit Holder proprietary and Non-
Trading Permit Holder Affiliate transactions in all other index 
products except for Underlying Symbol List A.\5\
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    \5\ See CBOE Fees Schedule, Index Options Rate Table--All Index 
Products Excluding Underlying Symbol List A. As of April 1, 2015, 
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.
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    Currently, Market-Maker transactions in all products except for 
those listed in Underlying Symbol List A are subject to the Liquidity 
Provider Sliding Scale, which provides for reduced transaction fees for 
Market-Makers that reach certain volume thresholds in all underlying 
symbols excluding Underlying Symbol List A and mini-options. Similarly, 
the Exchange proposes to subject all Market-Maker MXEA and MXEF 
transactions to the Liquidity Provider Sliding Scale.
    The Exchange next proposes to establish transaction fees for 
Broker-Dealers (``B''), Non-Trading Permit Holder Market-Makers 
(``N''), Professionals/Voluntary Professionals (``W'') and Joint Back-
Offices (``JBOs'') (``J''). Specifically, the Exchange proposes to 
assess these market participants $0.25 per contract for manual 
transactions, $0.65 per contract for non-AIM electronic transactions, 
$0.20 per contract for AIM Agency/Primary transactions, and $0.05 per 
contract for AIM Contra transactions. Additionally for MXEA and MXEF 
transactions, the Exchange is proposing to assess Broker-Dealers and 
Non-Trading Permit Holder Market Makers $0.25 per contract for CFLEX 
AIM Response transactions and Professional/Voluntary Professionals and 
JBOs $0.30 per contract for CFLEX AIM Response transactions. The 
Exchange notes that the proposed MXEA and MXEF transaction fees for 
these market participants are also the same amounts assessed for the 
same market participants for other index options other than those in 
Underlying Symbol List A.\6\
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    \6\ Id.
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    The Exchange also proposes to assess an Index License Surcharge 
(``Surcharge'') for MXEA and MXEF of $0.10 per contract for all non-
customer orders. The Exchange proposes to adopt the Index License 
Surcharge for these products in order to recoup some of the costs 
associated with the license for MXEA and MXEF options. Additionally, 
the Exchange proposes to adopt a CFLEX Surcharge Fee of $0.10 per 
contract for all MXEA and MXEF orders executed electronically on CFLEX, 
capped at $250 per trade (i.e., first 2,500 contracts per trade). The 
CFLEX Surcharge Fee assists the Exchange in recouping the cost of 
developing and maintaining the CFLEX system. The Exchange notes that 
the CFLEX Surcharge Fee (and $250 cap) also applies to other 
proprietary index options, including products in Underlying Symbol List 
A, as well as DJX and XSP.\7\ The Exchange also notes that the Complex 
Order Book (``COB'') Taker Surcharge will also apply to MXEA and MXEF, 
as it does for all products other than those in Underlying Symbol list 
A and mini-options.\8\
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    \7\ See CBOE Fees Schedule, Index Options Rate Table--All Index 
Products Excluding Underlying Symbol List A, CFLEX Surcharge Fee 
[sic] and Specified Proprietary Index Options Rate Table--Underlying 
Symbol List A, CFLEX Surcharge Fee.
    \8\ See CBOE Fees Schedule, COB Taker Surcharge, Footnote 35.
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    The Exchange next proposes to count MXEA and MXEF options towards 
the average daily volume thresholds for the CBOE Proprietary Product 
Sliding Scale. The CBOE Proprietary Products Sliding Scale provides 
that Clearing Trading Permit Holder Proprietary transaction fees and 
transaction fees for Non-Clearing Trading Permit Holder Affiliates in 
Underlying Symbol List A \9\ are reduced provided a Clearing Trading 
Permit Holder (``Clearing TPH'') reaches certain average daily volume 
(``ADV'') thresholds in all underlying symbols excluding Underlying 
Symbol List A and mini-options on the Exchange in a month. The Exchange 
notes that other proprietary index products such as DJX and XSP are 
also included towards the qualification thresholds of the CBOE 
Proprietary Products Sliding Scale.
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    \9\ SROs are currently excluded from the CBOE Proprietary 
Products Sliding Scale. See Exchange Fees Schedule, CBOE Proprietary 
Products Sliding Scale.
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    Finally, like other proprietary index products, the Exchange 
proposes to except MXEA and MXEF from the Volume Incentive Program, 
\10\ the Marketing Fee, \11\ and eligibility for payments under the 
Order Router Subsidy (ORS) and Complex Order Router Subsidy (CORS) 
Programs \12\. Additionally, it will be excluded from the calculation 
of qualifying volume for

[[Page 26126]]

rebates for Floor Broker Trading Permit Holder Trading Permit Fees.\13\
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    \10\ See CBOE Fees Schedule, Volume Incentive Program.
    \11\ See CBOE Fees Schedule, Marketing Fee, Footnote 6.
    \12\ See CBOE Fees Schedule, Order Router Subsidy Program and 
Complex Order Subsidy Program, Footnotes 29 and 30.
    \13\ See CBOE Fees Schedule, Footnote 25.
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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.\14\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \15\ 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 
Section 6(b)(4) of the Act,\16\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ 15 U.S.C. 78f(b)(4).
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    Particularly, the Exchange believes it is reasonable to charge 
different fee amounts to different user types in the manner proposed 
because the proposed fees are consistent with the price differentiation 
that exists today for other index products. The Exchange also believes 
that the proposed fee amounts for MXEA and MXEF orders are reasonable 
because the proposed fee amounts are within the range of amounts 
assessed for the Exchange's other index products, excluding Underlying 
Symbol List A.\17\
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    \17\ See CBOE Fees Schedule, CBOE Fees Schedule, Index Options 
Rate Table--All Index Products Excluding Underlying Symbol List A.
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    The Exchange believes that it is equitable and not unfairly 
discriminatory to assess lower fees to Customers as compared to other 
market participants 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-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. The fees offered to customers are 
intended to attract more customer trading volume to the Exchange. 
Moreover, the options industry has a long history of providing 
preferential pricing to Customers, and the Exchange's current Fees 
Schedule currently does so in many places, as do the fees structures of 
many other exchanges. Finally, all fee amounts listed as applying to 
Customers will be applied equally to all Customers (meaning that all 
Customers will be assessed the same amount).
    The Exchange believes that it is equitable and not unfairly 
discriminatory to offer the Liquidity Provider Sliding Scale to Market-
Makers only because Market-Makers take on obligations, such as quoting 
obligations, which other market participants do not have. Further, the 
lower fees offered to Market-Makers are intended to incent Market-
Makers to quote and trade more on the Exchange, thereby providing more 
trading opportunities for all market participants.
    Similarly, it is equitable and not unfairly discriminatory to 
assess lower fees to Clearing Trading Permit Holder Proprietary orders 
than those of other market participants (except Customers and Market-
Makers) because Clearing Trading Permit Holders also have a number of 
obligations (such as membership with the Options Clearing Corporation), 
significant regulatory burdens, and financial obligations, that other 
market participants do not need to take on. It should also be noted 
that all fee amounts described herein are intended to attract greater 
order flow to the Exchange in MXEA and MXEF, which should therefore 
serve to benefit all Exchange market participants. The Exchange also 
notes that the MXEA and MXEF fee amounts for each separate type of 
market participant will be assessed equally to all such market 
participants (i.e. all Broker-Dealer orders will be assessed the same 
amount, all Joint Back-Office orders will be assessed the same amount, 
etc.).
    The Exchange believes that assessing an Index License Surcharge Fee 
of $0.10 per contract to MXEA and MXEF transactions is reasonable 
because the Surcharge helps recoup some of the costs associated with 
the license for MXEA and MXEF options. Additionally, the Exchange notes 
that the Surcharge amount is the same as, and in some cases lower than, 
the amount assessed as an Index License Surcharge to other index 
products.\18\ The proposed Surcharge is also equitable and not unfairly 
discriminatory because the amount will be assessed to all market 
participants to whom the Surcharge applies. Not applying the MXEA and 
MXEF Index License Surcharge Fee to Customer orders is equitable and 
not unfairly discriminatory because this is designed to attract 
Customer MXEA and MXEF orders, which increases liquidity and provides 
greater trading opportunities to all market participants. Similarly, 
the Exchange believes assessing a CFLEX Surcharge Fee of $0.10 per 
contract for all MXEA and MXEF orders executed electronically on CFLEX 
and capping it at $250 (i.e., first 2,500 contracts per trade) is 
reasonable because it is the same amount currently charged to other 
proprietary index products for the same transactions.\19\ The proposed 
Surcharge is also equitable and not unfairly discriminatory because the 
amount will be assessed to all market participants to whom the CFLEX 
Surcharge applies.
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    \18\ See CBOE Fees Schedule, CBOE Fees Schedule, Index Options 
Rate Table--All Index Products Excluding Underlying Symbol List A, 
Surcharge Fee Index License.
    \19\ See CBOE Fees Schedule, Index Options Rate Table--All Index 
Products Excluding Underlying Symbol List A, CFLEX Surcharge Fee and 
Specified Proprietary Index Options Rate Table--Underlying Symbol 
List A, CFLEX Surcharge Fee.
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    Additionally, the Exchange believes that the proposal to count MXEA 
and MXEF fees towards the Fee Cap is reasonable because it will help 
Clearing Trading Permit Holders to reach this cap on their fees. The 
Exchange believes this is equitable and not unfairly discriminatory 
MXEA and MXEF fees will count towards the Fee Cap in the same manner 
that transaction fees for all other products excluding Underlying 
Symbol List A (except for binary options) count towards the Fee Cap.
    The Exchange believes it's reasonable to apply the waiver of 
Clearing Trading Permit Holder Proprietary transaction fees for 
facilitation orders executed via CFLEX, in open outcry or 
electronically via AIM for MXEA and MXEF because it will exempt such 
orders from being assessed fees. The Exchange believes that this is 
equitable and not unfairly discriminatory because the waiver also 
applies to other products, including other proprietary index products 
(e.g., DJX and XSP). Further, the Exchange recognizes that Clearing 
Trading Permit Holders can be an important source of liquidity when 
they facilitate their own customers' trading activity. Such trades add 
transparency and promote price discovery to the benefit of all market 
participants. Moreover, the exemption

[[Page 26127]]

from fees for MXEA and MXEF facilitation orders executed in AIM, open 
outcry, or as a CFLEX transaction will apply to all such orders.
    The Exchange believes it's reasonable to count MXEA and MXEF volume 
towards the average daily volume thresholds for the CBOE Proprietary 
Product Sliding Scale because other proprietary index products such as 
DJX and XSP are also included towards the qualification thresholds of 
the CBOE Proprietary Products Sliding Scale.\20\ The Exchange believes 
the proposed inclusion of MXEA and MXEF in the qualifying volume is 
equitable and not unfairly discriminatory because it will apply to all 
Clearing Trading Permit Holder Proprietary MXEA and MXEF orders
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    \20\ See CBOE Fees Schedule, CBOE Proprietary Products Sliding 
Scale.
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    Finally, excepting MXEA and MXEF from the Marketing Fee, VIP, and 
the ORS and CORS Programs is reasonable because other proprietary index 
products (e.g., DJX and XSP) are also excepted from these fees and 
programs.\21\ It seems equitable to except MXEA and MXEF from items on 
the Fees Schedule from which other proprietary index products are also 
excepted. Similarly, the Exchange believes it's reasonable to exclude 
MXEA and MXEF from the calculation of the qualifying volume for the 
Floor Broker Trading Permit Fees rebate because other proprietary index 
products such as DJX and XSP are also excluded.\22\ The Exchange also 
believes the proposed exclusion of MXEA and MXEF from the qualifying 
calculation is equitable and not unfairly discriminatory because the 
exclusion will apply to all MXEA and MXEF orders.
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    \21\ See CBOE Fees Schedule, Volume Incentive Program, Marketing 
Fee, Footnote 6 and Order Router Subsidy Program and Complex Order 
Subsidy Program, Footnotes 29 and 30.
    \22\ See CBOE Fees Schedule, Footnote 25.
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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 
are assessed to different market participants in some circumstances, 
these different market participants have different obligations and 
different circumstances as discussed above. For example, Market-Makers 
have quoting obligations that other market participants do not have.
    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 MXEA and 
MXEF will be exclusively listed 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.

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 \23\ and paragraph (f) of Rule 19b-4 \24\ 
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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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 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 [email protected]. Please include 
File Number SR-CBOE-2015-041 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-2015-041. 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; 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-2015-041 and should be 
submitted on or before May 27, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-10505 Filed 5-5-15; 8:45 am]
 BILLING CODE 8011-01-P