81 FR 46125 - 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 136 (July 15, 2016)

[Federal Register Volume 81, Number 136 (Friday, July 15, 2016)]
[Notices]
[Pages 46125-46126]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-16717]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78276; File No. SR-CBOE-2016-041]


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

July 11, 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 June 28, 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, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
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 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, effective July 1, 
2016. Specifically, the Exchange proposes to adopt a program that 
offers a monthly subsidy to Trading Permit Holders (``TPHs'') with 
executing agent operations \3\ during the Extended Trading Hours 
(``ETH'') trading session.
---------------------------------------------------------------------------

    \3\ An executing agent operation is one that accepts orders from 
customers (who may be public or broker-dealer customers, and 
including customers for which the agent does not hold accounts) and 
submits the orders for execution (either directly to the Exchange or 
through another TPH).
---------------------------------------------------------------------------

    To participate in the ETH Executing Agent Subsidy Program, a TPH 
must be a designated ETH executing agent. To become a designated ETH 
executing agent, a TPH must submit a form to the Exchange.\4\ The TPH 
must include on or with the form information demonstrating it maintains 
an ETH executing agent operation: (1) Physically staffed throughout 
each entire ETH trading session \5\ and (2) willing to accept and 
execute orders on behalf of customers, including customers for which 
the agent does not hold accounts. The designation will be effective the 
first business day of the following calendar month, subject to the 
Exchange's confirmation the TPH's ETH executing agent operations 
satisfies [sic] these two conditions, and will remain in effect until 
the Exchange receives an email from the TPH terminating its designation 
or the Exchange determines the TPH's ETH executing agent operation no 
longer satisfies these two conditions.
---------------------------------------------------------------------------

    \4\ The ETH Executing Agent Subsidy Registration Form may be 
submitted to [email protected]. A TPH must submit the form to 
the Exchange no later than 3:00 p.m. on the second to last business 
day of a calendar month to be designated an ETH executing agent 
under the program, and thus eligible for the subsidy, beginning the 
following calendar month.
    \5\ This generally means the TPH has persons available during 
all hours of the ETH trading session to take orders (such as by 
telephone) from customers.
---------------------------------------------------------------------------

    A designated ETH executing agent will be eligible to receive a 
$5,000 monthly subsidy if it executes at least 1,000 contracts on 
behalf of customers (including public and broker-dealer customers) 
during ETH in a calendar month (which is an average of 50 contracts per 
ETH trading session, assuming a 20-trading day month). Within two 
business days following the end of a calendar month, in order to 
receive the subsidy for that month, the designated ETH executing agent 
must submit to the Exchange (in a form and manner determined by the 
Exchange) documentation and other evidence it executed at least 1,000 
contracts on behalf of customers during ETH that month.
    The Exchange believes this program will incentivize TPHs to conduct 
executing agent operations during ETH to increase customer 
accessibility to the ETH trading session. The purpose of the subsidy is 
to help TPHs offset the costs that accompany this type of operation 
during ETH, including costs related to staffing and clearing.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\6\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \7\ 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) \8\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. The Exchange also believes the 
proposed rule change is consistent with Section 6(b)(4) of the Act,\9\ 
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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ Id.
    \9\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    In particular, the ETH Executing Agent Subsidy Program is 
reasonable because it incentivizes TPHs to conduct executing agent 
operations willing to accept orders from all customers during ETH to 
increase customer accessibility to the ETH trading session, which 
removes impediments to and perfects the mechanism of a free and open 
market and a national market system. By encouraging TPHs to conduct 
this type

[[Page 46126]]

of operation during ETH, this program may result in additional order 
flow and liquidity during ETH, which creates greater trading 
opportunities and benefits all market participants trading during ETH.
    The Exchange believes limiting the program to TPHs conducting 
executing agent operations willing to accept orders from all customers 
is equitable and not unfairly discriminatory due to the additional 
risks and potential costs (including those related to staffing and 
clearing) associated with this type of business, as well as the 
benefits this type of operation may provide during ETH (including 
increased customer accessibility to the ETH trading session). All TPHs 
that conduct this type of operation during ETH have an opportunity to 
become a designated ETH executing agent and thus eligible for the 
monthly subsidy.
    The Exchange believes the amount of the subsidy is reasonable based 
on its understanding of the additional costs and risks associated with 
the executing agent operation during ETH. Additionally, the Exchange 
believes the 1,000 contract volume threshold is reasonable based on 
current ETH volumes.

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

    CBOE does not believe the proposed rule change will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act. All TPHs that conduct executing agent 
operations willing to accept orders from all customers have an 
opportunity to be eligible for the program, and thus the monthly 
subsidy. The Exchange believes limiting the program to TPHs conducting 
this type of operation is equitable and not unfairly discriminatory due 
to the additional risks and potential costs (including those related to 
staffing and clearing) associated with this type of business, as well 
as the benefits this type of operation may provide during ETH 
(including increased customer accessibility to the ETH trading 
session). All designated ETH executing agents must meet the same volume 
threshold to qualify for the same monthly subsidy. The subsidy is 
designed to provide opportunities for more customers to submit orders 
during ETH, which generates more order flow and liquidity during that 
trading session and benefits all market participants.
    As CBOE is the only Exchange currently offering an ETH session, the 
Exchange does not believe the proposed rule change will impose any 
burden on intermarket competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange notes, should this 
program make CBOE more attractive for trading, market participants can 
always elect to become TPHs and take part in this program, and take 
advantage of potential increased trading volume and opportunities 
during ETH that may result from the program.

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 \10\ and paragraph (f) of Rule 19b-4 \11\ 
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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2016-041 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-2016-041. 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 such 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-2016-041, and should be 
submitted on or before August 5, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-16717 Filed 7-14-16; 8:45 am]
 BILLING CODE 8011-01-P