[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