81 FR 24678 - 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 81, Issue 80 (April 26, 2016)

[Federal Register Volume 81, Number 80 (Tuesday, April 26, 2016)]
[Notices]
[Pages 24678-24680]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-09595]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77659; File No. SR-CBOE-2016-037]


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 20, 2016.
    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 11, 2016, 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 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) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder.\4\ The Commission is publishing this 
notice to

[[Page 24679]]

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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 the Frequent Trader Program. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fees Schedule.\5\ By way of 
background, on April 1, 2016, the Exchange adopted a program that 
offers transaction fee rebates to Customers (origin code ``C'') that 
meet certain volume thresholds in CBOE VIX Volatility Index options 
(``VIX options'') and S&P 500 Index options (``SPX''), weekly S&P 500 
options (``SPXW'') and p.m.-settled SPX Index options (``SPXpm'') 
(collectively referred to as ``SPX options'') provided the Customer 
registers for the program (the ``Frequent Trader Program'' or 
``Program'').\6\
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    \5\ The Exchange initially filed the proposed change on April 4, 
2016 (SR-CBOE-2016-035). On April 11, 2016, the Exchange withdrew 
that filing and replaced it with SR-CBOE-2016-037.
    \6\ See SR-CBOE-2016-023
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    To participate in the Frequent Trader Program, Customers register 
with the Exchange. Once registered, the Customer is provided a unique 
identification number (``FTID'') that can be affixed to each of its 
orders. The FTID allows the Exchange to identify and aggregate all 
electronic and manual trades during both the Regular Trading Hours and 
Extended Trading Hours sessions from that Customer for purposes of 
determining whether the Customer meets any of the various volume 
thresholds. The Customer has to provide its FTID to the Trading Permit 
Holder (``TPH'') submitting that Customer's order to the Exchange 
(executing agent'' or ``executing TPH'') and that executing TPH would 
have to enter the Customer's FTID on each of that Customer's orders.\7\
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    \7\ The Exchange notes that it is the responsibility of the 
Customer to request that the executing TPH affix its FTID to its 
order(s), and that it is voluntarily for the executing TPH to do so.
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    The Exchange notes that there are instances however, in which a 
Customer's FTID was not or could not be, affixed to an order. For 
example, an executing TPH may receive an order with multiple contra 
parties, including parties that are also customers with their own 
unique FTIDs. The executing TPH's front end system however, may only 
allow it to input only one FTID on the order. Thus the other Customers 
to the trade would not have their FTID represented at the time of 
submission. Additionally, an executing TPH's front end system may not 
yet allow for the input of an FTID on an order upon submission 
altogether. The Exchange also notes that it is possible that an 
executing TPH inadvertently enters an incorrect FTID number on an 
order. Accordingly, the Exchange is proposing to provide executing TPHs 
the ability to submit to the exchange a form (the ``Frequent Trader 
Program--Volume Corrections Form'' or ``Form'') that would provide a 
mechanism for executing TPHs to identify transactions to the Exchange 
that should have been, but were not, associated with particular FTIDs. 
More specifically, the executing TPH would identify on the form the 
``correct'' FTID that should be associated with a specific transaction, 
so that such volume is properly counted towards the appropriate 
Customer's aggregated volume for purposes of determining what tier, if 
any, the customer meets. The Exchange notes that transactions 
identified on the Form will only be counted towards the identified 
Customer's volume if that Customer was already registered for the 
Frequent Trader Program prior to the time the transaction occurred 
(e.g., if a customer trades 1,000 contracts the morning of April 1 and 
registers for the Frequent Trader Program the afternoon of April 1, 
that customer cannot have its executing TPH submit a form on its behalf 
for those 1,000 contracts executed prior to registration in the 
Program). The Exchange lastly proposes to provide that the Frequent 
Trader Program--Volume Corrections Form be submitted to the Exchange 
within 3 business days in order to ensure timely processing.
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.\8\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \9\ 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) \10\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ Id.
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    In particular, the Exchange believes providing executing TPHs the 
ability to submit to the exchange a form that identifies transactions 
that should have been, but were not, associated with particular FTIDs, 
removes impediments to and perfects the mechanism of a free and open 
market and a national market system, and protects investors and the 
public interest because there are a number of instances in which a 
Customer's FTID may not be affixed to a particular transaction at the 
time of execution even though the traded contracts, or a portion 
thereof, is actually associated with that Customer. The Exchange notes 
that providing a mechanism to ``correct'' FTIDs post-trade, helps 
ensure that a Customer's total volume at the end of the month 
accurately reflects their real trading volume, including volume from 
transactions that, upon submission of the order, did not reflect their 
FTID. The Exchange believes it's reasonable to provide that the Form be 
submitted within 3 business days in order to ensure timely processing 
and finality. The Exchange also believes it's reasonable, equitable and 
not unfairly

[[Page 24680]]

discriminatory to provide that transactions identified on the Form will 
only be counted towards the identified Customer's volume if that 
Customer was already registered for the Frequent Trader Program because 
the Exchange does not wish to encourage or allow the Frequent Trader 
Program to be applied retroactively. Additionally, by establishing a 
clear process for identifying transactions in order for them to qualify 
for the Frequent Trader Program rebates, the proposed rule change 
eliminates confusion, thereby removing an impediment to and perfecting 
the mechanism of a free and open market system. The establishment of 
this process will also make it easier for CBOE to administer the 
Frequent Trader Program and ensure that it is appropriately assessed 
when it is applicable.

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 because the proposed change 
applies uniformly to all executing TPHs of Customer FTID orders and 
because it provides for a clear process to rectify scenarios in which a 
Customer's FTID was not applied to that Customer's order. The Exchange 
believes that the proposed rule change will not cause an unnecessary 
burden on intermarket competition because it only applies to trading 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

    Because the 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) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \13\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ 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 asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. Consistent 
with the protection of investors and the public interest, waiver of the 
30-day operative delay will facilitate the implementation of the 
Frequent Trader Program and allow executing TPHs to use the Exchange's 
process to claim rebates for their customers. Therefore, the Commission 
hereby waives the operative delay and designates the proposal operative 
upon filing.\15\
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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 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-2016-037 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-2016-037. 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 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-2016-037, and should be 
submitted on or before May 17, 2016.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-09595 Filed 4-25-16; 8:45 am]
 BILLING CODE 8011-01-P