80 FR 38489 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend the Fees Schedule

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 128 (July 6, 2015)

[Federal Register Volume 80, Number 128 (Monday, July 6, 2015)]
[Notices]
[Pages 38489-38491]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-16411]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75321; File No. SR-CBOE-2015-059]


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

June 29, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on June 15, 2015, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I, II, and III, below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Fees Schedule. The text of the 
proposed rule change is available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's 
Office of the Secretary, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of

[[Page 38490]]

the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fees Schedule. Specifically, the 
Exchange proposes to amend fees for Qualified Contingent Cross 
(``QCC'') transactions. A QCC order is comprised of an order to buy or 
sell at least 1,000 contracts (or 10,000 mini-option contracts) that is 
identified as being part of a qualified contingent trade, coupled with 
a contra side order to buy or sell an equal number of contracts. 
Currently, the Exchange assesses no fee for Customer (``C'' origin) QCC 
transactions and $0.20 per contract side for Clearing Trading Permit 
Holder Proprietary (``F'' or ``L'' origin code) QCC transactions, as 
well as Broker-Dealer, Non-Trading Permit Holder Market Maker, 
Professional/Voluntary Professional and Joint Back-Office QCC 
transactions. Additionally, Market-Maker QCC transactions are subject 
to the Liquidity Provider Sliding Scale. In lieu of the current QCC 
transaction fees stated above, the Exchange proposes to establish a 
transaction fee for all non-customer QCC orders of $0.15 per contract 
side (customer orders will continue to not be assessed a charge). In 
addition, the Exchange proposes to adopt a $0.10 per contract credit 
for the initiating order side, regardless of origin code. The Exchange 
proposes to explicitly provide in the Fees Schedule that a QCC 
transaction is comprised of an `initiating order' to buy (sell) at 
least 1,000 contracts, coupled with a contra-side order to sell (buy) 
an equal number of contracts and that for complex QCC transactions, the 
1,000 contracts minimum is applied per leg. The `initiating order' is 
considered to be the agency side of a QCC order. The Exchange notes 
that with regard to order entry, the first order submitted into the 
system is marked as the initiating/agency side and the second order is 
marked as the contra side. The credit will be paid to the Trading 
Permit Holder that enters the order into the system. The purpose of 
these changes is to incentivize the sending of QCC orders to the 
Exchange. The Exchange notes that another Exchange similarly provides 
rebates on QCC initiating orders.\3\ The Exchange also notes that no 
changes to transaction fees for QCC mini-option orders are being 
proposed at this time.
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    \3\ See International Securities Exchange, LLC (``ISE'') 
Schedule of Fees, Section IV(A), QCC and Solicitation Rebate, which 
provides for rebates between $0.05 per QCC contract and $0.11 per 
QCC contract for each originating contract side based upon meeting 
certain volume thresholds.
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    Finally, the Exchange proposes to eliminate references to QCC fees 
in the Equity, ETF and ETN options rate tables, and instead establish a 
QCC-specific rate table. No substantive changes, other than those 
mentioned above, are being made by the reorganization and relocation of 
QCC-related transaction fees. Rather, the Exchange believes the 
proposed change will make the Fees Schedule easier to read and 
alleviate potential confusion.
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.\4\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \5\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitation 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Additionally, 
the Exchange believes the proposed rule change is consistent with 
Section 6(b)(4) of the Act,\6\ 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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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 15 U.S.C. 78f(b)(4).
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    In particular, the Exchange believes the proposed transaction fee 
for QCC orders is reasonable because the proposed amount is in line 
with the amount assessed at other Exchanges for similar 
transactions.\7\ Additionally, the proposed fee would be charged to all 
non-customers alike. Assessing QCC rates to all market participants 
except customers is equitable and not unfairly discriminatory because 
Customer order flow enhances liquidity on the Exchange for the benefit 
of all market participants. Specifically, Customer liquidity benefits 
all market participants by providing more trading opportunities, which 
attracts Market-Makers. An increase in the activity of these market 
participants in turn facilitates tighter spreads, which may cause an 
additional corresponding increase in order flow from other market 
participants. By exempting customer orders, the QCC transaction fees 
will not discourage the sending of customer orders.
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    \7\ See e.g., NYSE Arca, Inc. (``Arca'') Options Fees Schedule, 
Qualified Contingent Cross Transaction Fees and NASDAQ OMX PHLX LLC 
(``PHLX'') Pricing Schedule, Section II, Multiply Listed Options 
Fees.
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    The Exchange believes the $0.10 per contract credit for the 
initiating order side of a QCC transaction is reasonable because 
another Exchange also provides a rebate on the initiating order 
side.\8\ Additionally, the proposed credit amount is within the range 
of the rebate amounts at the other Exchange.\9\ The Exchange believes 
the proposed credit is equitable and not unfairly discriminatory 
because it applies to all Trading Permit Holders that enter the 
initiating order, regardless of origin code and because it is intended 
to incentivize the sending of more QCC orders to the Exchange. 
Clarifying in the Fees Schedule that (i) a QCC transaction is comprised 
of an `initiating order' to buy (sell) at least 1,000 contracts, 
coupled with a contra-side order to sell (buy) an equal number of 
contracts, (ii) for complex QCC transactions, the 1,000 contracts 
minimum is applied per leg and (iii) the `initiating order' is 
considered to be the agency side of a QCC order informs market 
participants and alleviates potential confusion. Clarifying that the 
credit will be paid to the Trading Permit Holder that enters the order 
into the system also alleviates confusion. The alleviation of potential 
confusion thereby removes impediments to and perfects the mechanism of 
a free and open market and a national market system, and, in general, 
protecting investors and the public interest.
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    \8\ See ISE Schedule of Fees, Section IV(A), QCC and 
Solicitation Rebate.
    \9\ Id.
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    Finally, the Exchange believes reorganizing and relocating QCC 
related transaction fees (and credits) makes the Fees Schedule easier 
to read and alleviates potential confusion, thereby removing 
impediments to and perfecting the mechanism of a free and open market 
and a national market system, and, in general, protecting investors and 
the public interest.

[[Page 38491]]

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

    The Exchange 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, because the proposes rule 
change applies to all Trading Permit Holders. The Exchange believes 
this proposal will not cause an unnecessary burden on intermarket 
competition because the proposed changes will actually enhance the 
competiveness of the Exchange relative to other exchanges which offer 
comparable fees and rebates for QCC transactions.\10\ 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.
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    \10\ See e.g. , ISE Schedule of Fees, Section IV(A), QCC and 
Solicitation Rebate and PHLX Pricing Schedule, Section II, Multiply 
Listed Options Fees.
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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 \11\ and paragraph (f) of Rule 19b-4 \12\ 
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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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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-2015-059 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-2015-059. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CBOE-2015-059 and should be 
submitted on or before July 27, 2015.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-16411 Filed 7-2-15; 8:45 am]
 BILLING CODE 8011-01-P