81 FR 46721 - 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 137 (July 18, 2016)

[Federal Register Volume 81, Number 137 (Monday, July 18, 2016)]
[Notices]
[Pages 46721-46723]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-16852]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78292; File No. SR-CBOE-2016-054]


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 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 July 1, 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.
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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 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
    On March 21, 2016, the Exchange began offering Asian style 
settlement and Cliquet style settlement for certain FLEX Broad-Based 
Index Options (``Exotics'').\3\ In conjunction with the adoption of 
FLEX Broad-Based Index Options with Asian or Cliquet style settlement, 
the Exchange adopted an Exotic Surcharge of $0.25 to be assessed on all 
customer (``C'' origin code) Exotic contracts executed on CBOE. The 
Exchange proposes to decrease the Exotic Surcharge of $0.25 to $0.03 
for all customer XSP Exotic contracts executed on CBOE. Particularly, 
the Exchange notes that XSP options have \1/10\ the value of S&P 500 
Index (``SPX'') options. As XSP has a smaller exercise and assignment 
value due to the reduced number of shares they deliver as compared to 
standard SPX option contracts, the Exchange is proposing a lower per 
contract Exotic Surcharge.
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    \3\ In general, Asian style settlement provides for payout based 
on the average of prices of a broad-based index on pre-determined 
dates over a specified time period, and Cliquet style settlement 
provides for a payout that is the greater of $0 or the (positive) 
sum of ``capped'' monthly returns of a broad-based index on pre-
determined dates over a specified period of time. These settlement 
types are also referred to as ``Exotics'' due to their untraditional 
nature.
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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.\4\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section

[[Page 46722]]

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 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,\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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    The Exchange believes that reducing the Exotic Surcharge of $0.25 
per contract to $0.03 per contract for Exotic customer XSP options is 
reasonable because customers will pay lower fees for such transactions. 
The Exchange believes that it is reasonable, equitable and not unfairly 
discriminatory to reduce the Exotic Surcharge for XSP options only 
because XSP options are \1/10\ the size of standard options and as such 
the Exchange believes it's reasonable to assess a lower surcharge. 
Further, the Exchange notes that the proposed Exotic Surcharge of $0.03 
per contract for Exotic XSP options, is only slightly more than \1/10\ 
of the $0.25 amount assessed as the Exotic Surcharge for standard sized 
classes. The proposed change is also equitable and not unfairly 
discriminatory because it is designed to attract greater customer order 
flow in XSP Exotic options to the Exchange, which would bring greater 
liquidity to the market, thereby benefiting all market participants.
    The Exchange also believes that it is equitable and not unfairly 
discriminatory to assess the Exotic Surcharge to customers and not 
other market participants because customers are not subject to 
additional costs for effecting transactions in FLEX Broad-Based Index 
options that are applicable to other market participants, such as 
license surcharges. Additionally, customers are not subject to fees for 
effecting transactions in general that are applicable to other market 
participants, such as connectivity fees and fees relating to Trading 
Permits, and are not subject to the same obligations as other market 
participants, including regulatory and compliance requirements and 
quoting obligations.

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

    The Exchange does not believe that the proposed rule changes will 
impose any burdens 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 the Exotic 
Surcharge is assessed only to customer orders, lower fees for customers 
is commonplace within the options marketplace for the reasons discussed 
above. Further, to the extent that any change in intramarket 
competition may result from the proposed change, such change is 
justifiable and offset because the proposed change is designed to 
attract greater customer order flow in XSP Exotic options and because 
the Exchange does not wish to assess the same per contract surcharge on 
a class that is \1/10\ the size of standard options. The Exchange does 
not believe that the proposed change will cause any unnecessary burden 
on intermarket competition because the proposed change only affects 
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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \7\ and paragraph (f) of Rule 19b-4 \8\ 
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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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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-2016-054 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-2016-054. 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 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-2016-054, and should be 
submitted on or before August 8, 2016.


[[Page 46723]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-16852 Filed 7-15-16; 8:45 am]
 BILLING CODE 8011-01-P