81 FR 31277 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule To Amend the Fees Schedule

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 96 (May 18, 2016)

[Federal Register Volume 81, Number 96 (Wednesday, May 18, 2016)]
[Notices]
[Pages 31277-31279]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-11645]



[[Page 31277]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77822; File No. SR-CBOE-2016-043]


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

May 12, 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 May 2, 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, 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 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. 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'').\3\
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    \3\ 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'' [sic] or ``executing TPH'') and that executing TPH 
would have to enter the Customer's FTID on each of that Customer's 
orders.\4\ As there are instances in which a Customer's FTID was not or 
could not be, affixed to an order, the Exchange also provided executing 
TPHs the ability to submit to the exchange [sic] a form (the ``Frequent 
Trader Program--Volume Corrections Form'' or ``Corrections 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 can 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. Currently, the Fees Schedule 
provides that the Corrections Form must be submitted to the Exchange 
within 3 business days in order to ensure timely processing (``3 
business day rule'').
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    \4\ 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 now proposes to provide that for the month of April 
2016, it will not enforce the requirement that the Corrections Form be 
submitted within 3 business days and instead provide that the 
Corrections Form will be accepted through May 4, 2016 (by 5:00 p.m. 
CST), for all transactions, regardless of when in April the 
transaction(s) occurred. Specifically, the Exchange notes that a number 
of executing TPHs were unable to (i) affix FTIDs onto their Customers' 
orders and (ii) complete and submit the Corrections Form within 3 
business days for their Customers registered in the Frequent Trader 
Program. Many TPHs are still familiarizing themselves with this new 
program and its requirements and as such the Exchange desires to give 
them additional time to implement their systems and procedures, 
including their systems and procedures related to completing and 
submitting the Corrections Form. Additionally, the Exchange does not 
wish to penalize the Customers who would miss out on rebates they would 
otherwise be entitled to if the deadline is not extended. Accordingly, 
the Exchange does not wish to enforce the 3 business day rule for April 
2016. The Exchange believes providing additional time to submit 
Corrections Forms will ensure Customers are not unfairly deprived of 
any rebates that they are entitled to under the Frequent Trader Program 
for the month of April.
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.\5\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \6\ 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) \7\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ Id.
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    In particular, the Exchange believes not enforcing the 3 business 
day rule for

[[Page 31278]]

the month of April 2016 provides executing TPHs additional time to 
submit Corrections Forms, which 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 as it avoids penalizing 
Customers who would otherwise miss out on rebates they are entitled to 
under the Frequent Trader Program. Corrections Forms allow the Exchange 
to 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. As noted above, many TPHs are still in the process of 
familiarizing themselves with the new Frequent Trader Program and its 
requirements and do not yet have the systems or procedures in place to 
process the Corrections Forms within the timeframe the Exchange 
initially required. As such, the Exchange does not believe it would be 
fair to the Customers to enforce the 3 business day rule for the first 
month of the Frequent Trader Program (i.e., April 2016). Additionally, 
waiving the 3 business day rule for April 2016 eliminates confusion in 
that it gives the executing TPHs extra time to understand the 
requirements of the Program and implement policies, procedures, and 
system changes needed to properly take advantage of the program, which 
again 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.

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 
FTID(s) were not or could not be applied to Customer's order and where 
Corrections Forms were not submitted in a timely manner in April 2016. 
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 \8\ and Rule 19b-4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6)(iii) requires the 
Exchange to provide 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. The Commission has 
determined to waive the five business day requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \10\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \11\ 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 provide TPHs with additional time (to May 
4) to submit Corrections Forms for participating Customer transactions 
that occurred in April under the new Frequent Trader Program, which 
should help TPHs acclimate to the new process for submitting their 
participating Customer trades to CBOE and thereby ensure that their 
April volume under the program accurately reflects their trading 
volume. Therefore, the Commission hereby waives the operative delay and 
designates the proposal operative upon filing.\12\
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ 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-2016-043 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-2016-043. 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

[[Page 31279]]

information that you wish to make available publicly. All submissions 
should refer to File Number SR-CBOE-2016-043, and should be submitted 
on or before June 8, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-11645 Filed 5-17-16; 8:45 am]
 BILLING CODE 8011-01-P