81_FR_55029 81 FR 54870 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to COPS

81 FR 54870 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to COPS

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 159 (August 17, 2016)

Page Range54870-54873
FR Document2016-19584

Federal Register, Volume 81 Issue 159 (Wednesday, August 17, 2016) 
[Federal Register Volume 81, Number 159 (Wednesday, August 17, 2016)]
[Notices]
[Pages 54870-54873]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-19584]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78554; File No. SR-CBOE-2016-059]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to COPS

August 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 August 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 purpose of the proposed rule change is to re-implement the 
contributor compensation structure of the Exchange's Customized Option 
Pricing Service (``COPS''),\3\ specifically,

[[Page 54871]]

the COPS data revenue-sharing plan. The Exchange is not proposing to 
change the fees for COPS data.
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    \3\ See Securities Exchange Act Release Nos. 34-67813 (September 
10, 2012), 77 FR 56903 (September 14, 2012) (SR-CBOE-2012-083); 34-
67928 (September 26, 2012), 77 FR 60161 (October 2, 2012) (SR-CBOE-
2012-090); 34-70705 (October 17, 2013), 78 FR 63265 (October 23, 
2013) (SR-CBOE-2013-097); 34-70845 (November 12, 2013), 78 FR 69168 
(November 18, 2013) (SR-CBOE-2013-104); 34-72621 (July 16, 2014), 79 
FR 42616 (July 22, 2014) (SR-CBOE-2014-057); 34-74159 (January 28, 
2015), 80 FR 5863 (February 23, 2015) (SR-CBOE-2015-007); 34-74937 
(May 12, 2015), 80 FR 28319 (May 18, 2015) (SR-CBOE-2015-046); and 
34-76888 (January 13, 2016), 81 FR 12 (January 20, 2016) (SR-CBOE-
2015-122).
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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 purpose of the proposed rule change is to re-implement the 
contributor compensation structure of the Exchange's COPS,\4\ 
specifically, the COPS data revenue-sharing plan. The Exchange is not 
proposing to change the fees for COPS data.
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    \4\ See Securities Exchange Act Release Nos. 34-67813 (September 
10, 2012), 77 FR 56903 (September 14, 2012) (SR-CBOE-2012-083); 34-
67928 (September 26, 2012), 77 FR 60161 (October 2, 2012) (SR-CBOE-
2012-090); 34-70705 (October 17, 2013), 78 FR 63265 (October 23, 
2013) (SR-CBOE-2013-097); 34-70845 (November 12, 2013), 78 FR 69168 
(November 18, 2013) (SR-CBOE-2013-104); 34-72621 (July 16, 2014), 79 
FR 42616 (July 22, 2014) (SR-CBOE-2014-057); 34-74159 (January 28, 
2015), 80 FR 5863 (February 23, 2015) (SR-CBOE-2015-007); 34-74937 
(May 12, 2015), 80 FR 28319 (May 18, 2015) (SR-CBOE-2015-046); and 
34-76888 (January 13, 2016), 81 FR 12 (January 20, 2016) (SR-CBOE-
2015-122).
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Background
    COPS provides market participants with an ``end-of-day'' \5\ file 
and ``historical'' \6\ files of valuations for Flexible Exchange 
(``FLEX'') \7\ options and certain over-the-counter (``OTC'') options 
(collectively, ``COPS Data''). Market Data Express, LLC (``MDX''), an 
affiliate of CBOE, offers COPS Data for sale to all market 
participants. COPS Data is available to ``Subscribers'' for internal 
use and internal distribution only, and to ``Customers'' who, pursuant 
to a written vendor agreement between MDX and a Customer, may 
distribute the COPS Data externally (i.e., act as a vendor) and/or use 
and distribute the COPS Data internally.
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    \5\ ``End of day'' refers to data that is distributed prior to 
the opening of the next trading day.
    \6\ ``Historical'' COPS data consists of COPS data that is over 
one month old (i.e., copies of the ``end-of-day'' COPS file that are 
over one month old).
    \7\ FLEX options are exchange traded options that provide 
investors with the ability to customize basic option features 
including size, expiration date, exercise style, and certain 
exercise prices.
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    COPS Data consists of indicative \8\ values for four categories of 
``customized'' options. The first category of options is all open 
series of FLEX options listed on any exchange that offers FLEX options 
for trading.\9\ The second category is OTC options that have the same 
degree of customization as FLEX options. The third category includes 
options with strike prices expressed in percentage terms. Values for 
such options are expressed in percentage terms and are theoretical 
values.\10\ The fourth category includes ``exotic'' options.\11\
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    \8\ ``Indicative'' values are indications of potential market 
prices only and as such are neither firm nor the basis for a 
transaction.
    \9\ Current FLEX options open interest spans over 2,000 series 
on over 300 different underlying securities.
    \10\ These values are theoretical in that they are indications 
of potential market prices for options that have not traded (i.e., 
do not yet exist). Market participants sometimes express option 
values in percentage terms rather than in dollar terms because they 
find it is easier to assess the change, or lack of change, in the 
marketplace from one day to the next when values are expressed in 
percentage terms.
    \11\ Exotic options are options which are generally traded OTC 
and are more complex than standard options, usually relating to 
determination of payoff. An exotic option may also include a non-
standard underlying instrument, developed for a particular client or 
for a particular market.
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    The Exchange uses values produced by CBOE Trading Permit Holders 
(``TPHs'') to produce COPS Data. Participating CBOE TPHs submit values 
to MDX on options series specified by MDX on a daily basis. These 
values are generated by the TPHs' internal pricing models. The 
valuations that MDX ultimately publishes are an average of multiple 
contributions of values from participating CBOE TPHs. For each value 
provided by MDX through COPS, MDX includes a corresponding indication 
of the number of TPH contributors that factored into that value.
    CBOE TPHs that meet the following objective qualification criteria 
are allowed to contribute values to MDX for purposes of producing COPS 
Data. Interested CBOE TPHs must be approved by the Exchange, have the 
ability to provide valuations to MDX in a timely manner each day after 
the close of trading, and sign a services agreement with CBOE. 
Interested CBOE TPHs must also have the ability to provide both 
indicative and implied volatility valuations on several different types 
of options, including (i) options on all open FLEX series traded on any 
exchange that offers FLEX options for trading, (ii) options on any 
potential new FLEX options series, (iii) OTC options that have the same 
degree of customization as FLEX options, (iv) customized options where 
the strike price is expressed in percentage terms (the valuations 
provided to MDX must also be expressed in percentage terms), and (v) 
exotic options. In addition, interested CBOE TPHs must participate in a 
testing phase with MDX. The values submitted by a TPH during the 
testing phase and in live production must meet MDX's quality control 
standards designed to ensure the integrity and accuracy of COPS Data. 
MDX has implemented procedures including monthly performance reviews to 
help ensure the integrity and accuracy of COPS Data.
    To help ensure that MDX receives numerous values from multiple TPHs 
on a consistent basis, MDX shares revenue from the sale of COPS Data 
with participating CBOE TPHs.\12\ The amount of revenue that MDX shares 
with participating TPHs is a percentage of the total revenue received 
by MDX from the sale of COPS Data. The revenue sharing is based on the 
following table:
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    \12\ The fees that MDX charges for COPS Data are set forth on 
the Price List on the MDX Web site (www.marketdataexpress.com). MDX 
currently charges a fee per option per day for ``end-of-day'' COPS 
data. The amount of the fee is reduced based on the number of 
options valuations purchased.

------------------------------------------------------------------------
                                  Total
                                 revenue
 Number of participating TPHs     share        Revenue share per TPH
                                (percent)
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3.............................         21  7%.
4.............................         24  6%.
5 or more.....................         30  30% divided by the number of
                                            participating TPHs.
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    If only three TPHs participate, MDX shares 21% of total revenue 
with each TPH receiving a 7% share. If four TPHs participate, MDX 
shares 24% of total revenue with each TPH receiving a 6% share. If five 
or more TPHs participate, MDX shares 30% of total revenue divided 
equally among the TPHs.
    In July 2014, the Exchange submitted a proposed rule change to, 
among other things, temporarily change the COPS contributor 
compensation structure

[[Page 54872]]

from a revenue sharing plan to a fixed payment structure for a six-
month period (``Fixed Payment Period'').\13\ In May 2015, the Exchange 
submitted a proposed rule change to change the COPS contributor 
compensation structure for the remainder of 2015.\14\ Pursuant to that 
proposed rule change, as of May 1, 2015, all revenue from the sale of 
COPS Data was paid to COPS contributors, with revenue divided equally 
among COPS contributors. In December 2015, (sic) As described in that 
proposed rule change, MDX would transition back to the revenue share 
plan described above on January 1, 2016. In December 2015, the Exchange 
submitted a proposed rule change to extend the temporary suspension 
through June 30, 2016.\15\
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    \13\ See Securities Exchange Act Release No. 34-72621 (July 16, 
2014), 79 FR 42616 (July 22, 2014) (SR-CBOE-2014-057).
    \14\ Securities Exchange Act Release No. 34-74937 (May 12, 
2015), 80 FR 28319 (May 18, 2015) (SR-CBOE-2015-046).
    \15\ Securities Exchange Act Release No. 34-76888 (January 13, 
2016), 81 FR 12 (January 20, 2016) (SR-CBOE-2015-122). The Exchange 
is not proposing to eliminate the revenue share plan, but rather re-
implement the temporary suspension as described in this rule filing.
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Proposal
    The Exchange proposes to re-implement the temporary suspension 
described above through the end of the year. As such, all revenue from 
the sale of COPS Data would be paid to COPS contributors through 
December 31, 2016. As before, the revenue would continue to be divided 
equally among COPS contributors. The Exchange had hoped that at the end 
June 2016, COPS revenue would be at a level such that the COPS 
contributors would receive a revenue share roughly in line with the 
fixed payments they received during the Fixed Payment Period. This has 
not yet occurred. The payments to COPS contributors are intended to, at 
a minimum, help COPS contributors cover their costs of producing 
valuations for COPS while the Exchange continues to grow the COPS 
business.
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.\16\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \17\ 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) \18\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ Id.
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    The Exchange believes the proposed rule change is not designed to 
permit unfair discrimination between CBOE TPHs because all COPS data 
revenue would be divided equally among TPH contributors through 
December 31, 2016. The Exchange believes the proposed rule change is 
consistent with the protection of investors and the public interest in 
that it would provide incentive for all of the COPS contributors to 
participate in COPS while the Exchange continues to grow the COPS 
business, thereby helping to maintain the quality of COPS Data.

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. To the contrary, the Exchange 
believes the proposal is procompetitive in that it will incentivize 
COPS contributors to continue producing quality valuations to help keep 
COPS competitive with other similar market data products.\19\
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    \19\ Market data vendors including SuperDerivatives, Markit, 
Prism, and Bloomberg's BVAL service produce option value data that 
is similar to COPS Data. The Options Clearing Corporation (``OCC'') 
also produces FLEX option value data that is similar to the FLEX 
option value data that is included in COPS.
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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 \20\ and paragraph (f)(2) of Rule 19b-4 \21\ 
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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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(2).
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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-2016-059 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-2016-059. 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 the filing also will be available 
for

[[Page 54873]]

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-2016-059 and should be 
submitted on or before September 7, 2016.
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    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19584 Filed 8-16-16; 8:45 am]
 BILLING CODE 8011-01-P

54870 Federal Register / Vol. 81, No. 159 / Wednesday, August 17, 2016 / Notices C. Self-Regulatory Organization’s obligations to the markets, which would 10:00 a.m. and 3:00 p.m. Copies of the Statement on Comments on the in turn benefit all market participants filing will also be available for Proposed Rule Change Received From because Market Makers would be inspection and copying at the principal Members, Participants, or Others encouraged to provide tighter and office of the Exchange. All comments No written comments were solicited deeper markets. received will be posted without change; Within 45 days of the date of the Commission does not edit personal or received with respect to the proposed publication of this notice in the Federal identifying information from rule change. Register or within such longer period submissions. You should submit only III. Date of Effectiveness of the up to 90 days (i) as the Commission may information that you wish to make Proposed Rule Change and Timing for designate if it finds such longer period available publicly. All submissions Commission Action to be appropriate and publishes its should refer to File Number SR– The Exchange believes that the reasons for so finding or (ii) as to which NYSEARCA–2016–109 and should be proposal qualifies for accelerated the self-regulatory organization submitted on or before September 7, effectiveness in accordance with section consents, the Commission will: 2016. (A) By order approve or disapprove 19(b)(2) of the Act. The Exchange For the Commission, by the Division of the proposed rule change, or Trading and Markets, pursuant to delegated believes that there is good cause for the (B) institute proceedings to determine authority.17 Commission to accelerate effectiveness whether the proposed rule change Robert W. Errett, because the proposed rule change is should be disapproved. consistent with the rules of at least two Deputy Secretary. competing options markets, which have IV. Solicitation of Comments [FR Doc. 2016–19577 Filed 8–16–16; 8:45 am] amended their rules to prevent Interested persons are invited to BILLING CODE 8011–01–P directional complex orders from submit written data, views and undermining market maker risk settings arguments concerning the foregoing, and do not allow such orders to leg including whether the proposed rule SECURITIES AND EXCHANGE out.16 The Exchange would like to change is consistent with the Act. COMMISSION similarly enhance the protection it Comments may be submitted by any of [Release No. 34–78554; File No. SR–CBOE– provides to Market Makers. Because of the following methods: 2016–059] the non-traditional nature of these directional complex orders, the Electronic Comments Self-Regulatory Organizations; Exchange believes it unlikely that they • Use the Commission’s Internet Chicago Board Options Exchange, would execute against complex interest. comment form (http://www.sec.gov/ Incorporated; Notice of Filing and Accordingly, the Exchange believes rules/sro.shtml); or Immediate Effectiveness of a Proposed rejecting the orders outright (as opposed • Send an email to rule-comments@ Rule Change Relating to COPS to simply preventing them from legging sec.gov. Please include File Number SR– out) would have the same practical NYSEARCA–2016–109 on the subject August 11, 2016. impact for the order-sending firms and line. Pursuant to Section 19(b)(1) of the would be the most effective and Securities Exchange Act of 1934 (the Paper Comments ‘‘Act’’),1 and Rule 19b–4 thereunder,2 transparent means of handling these orders. Thus, accelerated approval of • Send paper comments in triplicate notice is hereby given that on August 1, this proposal would enable the to Brent J. Fields, Secretary, Securities 2016, Chicago Board Options Exchange, Exchange to implement the rule change and Exchange Commission, 100 F Street Incorporated (the ‘‘Exchange’’ or without delay, thereby strengthening NE., Washington, DC 20549–1090. ‘‘CBOE’’) filed with the Securities and market maker risk settings and All submissions should refer to File Exchange Commission (the enhancing the competitiveness of the Number SR–NYSEARCA–2016–109. ‘‘Commission’’) the proposed rule Exchange. This file number should be included on change as described in Items I, II, and In addition, the Exchange believes the subject line if email is used. To help III below, which Items have been that the proposed rejection of the the Commission process and review prepared by the Exchange. The specified directional complex orders your comments more efficiently, please Commission is publishing this notice to would prevent such orders from use only one method. The Commission solicit comments on the proposed rule executing before triggering (and thus, will post all comments on the change from interested persons. bypassing) the Market Maker risk Commission’s Internet Web site (http:// I. Self-Regulatory Organization’s settings. The Exchange believes that the www.sec.gov/rules/sro.shtml). Copies of Statement of the Terms of Substance of potential risk of these types of the submission, all subsequent the Proposed Rule Change directional complex orders undermining amendments, all written statements with respect to the proposed rule The purpose of the proposed rule the effectiveness of Market Maker risk change that are filed with the change is to re-implement the settings outweighs any potential benefit Commission, and all written contributor compensation structure of to OTP Holders or OTP Firms communications relating to the the Exchange’s Customized Option submitting such orders. Market proposed rule change between the Pricing Service (‘‘COPS’’),3 specifically, participants would continue to be able to enter each leg of such complex orders Commission and any person, other than 17 17 CFR 200.30–3(a)(12). those that may be withheld from the mstockstill on DSK3G9T082PROD with NOTICES as separate orders. Thus, the Exchange 1 15 U.S.C. 78s(b)(1). believes good cause exists to accelerate public in accordance with the 2 17 CFR 240.19b–4. effectiveness of this proposal because it provisions of 5 U.S.C. 552, will be 3 See Securities Exchange Act Release Nos. 34– would help eliminate a degree of available for Web site viewing and 67813 (September 10, 2012), 77 FR 56903 unnecessary risk borne by Market printing in the Commission’s Public (September 14, 2012) (SR–CBOE–2012–083); 34– 67928 (September 26, 2012), 77 FR 60161 (October Makers when fulfilling their quoting Reference Room, 100 F Street NE., 2, 2012) (SR–CBOE–2012–090); 34–70705 (October Washington, DC 20549, on official 17, 2013), 78 FR 63265 (October 23, 2013) (SR– 16 See supra n. 11. business days between the hours of CBOE–2013–097); 34–70845 (November 12, 2013), VerDate Sep<11>2014 16:39 Aug 16, 2016 Jkt 238001 PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 E:\FR\FM\17AUN1.SGM 17AUN1

Federal Register / Vol. 81, No. 159 / Wednesday, August 17, 2016 / Notices 54871 the COPS data revenue-sharing plan. Market Data Express, LLC (‘‘MDX’’), an of trading, and sign a services agreement The Exchange is not proposing to affiliate of CBOE, offers COPS Data for with CBOE. Interested CBOE TPHs must change the fees for COPS data. sale to all market participants. COPS also have the ability to provide both Data is available to ‘‘Subscribers’’ for indicative and implied volatility II. Self-Regulatory Organization’s internal use and internal distribution valuations on several different types of Statement of the Purpose of, and only, and to ‘‘Customers’’ who, pursuant options, including (i) options on all Statutory Basis for, the Proposed Rule to a written vendor agreement between open FLEX series traded on any Change MDX and a Customer, may distribute exchange that offers FLEX options for In its filing with the Commission, the the COPS Data externally (i.e., act as a trading, (ii) options on any potential Exchange included statements vendor) and/or use and distribute the new FLEX options series, (iii) OTC concerning the purpose of and basis for COPS Data internally. options that have the same degree of the proposed rule change and discussed COPS Data consists of indicative 8 customization as FLEX options, (iv) any comments it received on the values for four categories of customized options where the strike proposed rule change. The text of these ‘‘customized’’ options. The first category price is expressed in percentage terms statements may be examined at the of options is all open series of FLEX (the valuations provided to MDX must places specified in Item IV below. The options listed on any exchange that also be expressed in percentage terms), Exchange has prepared summaries, set offers FLEX options for trading.9 The and (v) exotic options. In addition, forth in sections A, B, and C below, of second category is OTC options that interested CBOE TPHs must participate the most significant aspects of such have the same degree of customization in a testing phase with MDX. The values statements. as FLEX options. The third category submitted by a TPH during the testing A. Self-Regulatory Organization’s includes options with strike prices phase and in live production must meet Statement of the Purpose of, and expressed in percentage terms. Values MDX’s quality control standards Statutory Basis for, the Proposed Rule for such options are expressed in designed to ensure the integrity and Change percentage terms and are theoretical accuracy of COPS Data. MDX has values.10 The fourth category includes implemented procedures including 1. Purpose ‘‘exotic’’ options.11 monthly performance reviews to help The purpose of the proposed rule The Exchange uses values produced ensure the integrity and accuracy of change is to re-implement the by CBOE Trading Permit Holders COPS Data. contributor compensation structure of (‘‘TPHs’’) to produce COPS Data. To help ensure that MDX receives the Exchange’s COPS,4 specifically, the Participating CBOE TPHs submit values numerous values from multiple TPHs COPS data revenue-sharing plan. The to MDX on options series specified by on a consistent basis, MDX shares Exchange is not proposing to change the MDX on a daily basis. These values are revenue from the sale of COPS Data fees for COPS data. generated by the TPHs’ internal pricing with participating CBOE TPHs.12 The models. The valuations that MDX amount of revenue that MDX shares Background ultimately publishes are an average of with participating TPHs is a percentage COPS provides market participants multiple contributions of values from of the total revenue received by MDX with an ‘‘end-of-day’’ 5 file and participating CBOE TPHs. For each from the sale of COPS Data. The revenue ‘‘historical’’ 6 files of valuations for value provided by MDX through COPS, sharing is based on the following table: Flexible Exchange (‘‘FLEX’’) 7 options MDX includes a corresponding and certain over-the-counter (‘‘OTC’’) indication of the number of TPH Total options (collectively, ‘‘COPS Data’’). contributors that factored into that Number of revenue Revenue share participating share value. per TPH TPHs (per- 78 FR 69168 (November 18, 2013) (SR–CBOE– CBOE TPHs that meet the following cent) 2013–104); 34–72621 (July 16, 2014), 79 FR 42616 objective qualification criteria are (July 22, 2014) (SR–CBOE–2014–057); 34–74159 3 ................... 21 7%. (January 28, 2015), 80 FR 5863 (February 23, 2015) allowed to contribute values to MDX for purposes of producing COPS Data. 4 ................... 24 6%. (SR–CBOE–2015–007); 34–74937 (May 12, 2015), 80 5 or more ..... 30 30% divided by FR 28319 (May 18, 2015) (SR–CBOE–2015–046); Interested CBOE TPHs must be and 34–76888 (January 13, 2016), 81 FR 12 (January the number of approved by the Exchange, have the participating 20, 2016) (SR–CBOE–2015–122). 4 See Securities Exchange Act Release Nos. 34– ability to provide valuations to MDX in TPHs. 67813 (September 10, 2012), 77 FR 56903 a timely manner each day after the close (September 14, 2012) (SR–CBOE–2012–083); 34– If only three TPHs participate, MDX 67928 (September 26, 2012), 77 FR 60161 (October 8 ‘‘Indicative’’ values are indications of potential shares 21% of total revenue with each 2, 2012) (SR–CBOE–2012–090); 34–70705 (October market prices only and as such are neither firm nor 17, 2013), 78 FR 63265 (October 23, 2013) (SR– the basis for a transaction. TPH receiving a 7% share. If four TPHs CBOE–2013–097); 34–70845 (November 12, 2013), 9 Current FLEX options open interest spans over participate, MDX shares 24% of total 78 FR 69168 (November 18, 2013) (SR–CBOE– 2,000 series on over 300 different underlying revenue with each TPH receiving a 6% 2013–104); 34–72621 (July 16, 2014), 79 FR 42616 securities. share. If five or more TPHs participate, (July 22, 2014) (SR–CBOE–2014–057); 34–74159 10 These values are theoretical in that they are (January 28, 2015), 80 FR 5863 (February 23, 2015) MDX shares 30% of total revenue indications of potential market prices for options (SR–CBOE–2015–007); 34–74937 (May 12, 2015), 80 that have not traded (i.e., do not yet exist). Market divided equally among the TPHs. FR 28319 (May 18, 2015) (SR–CBOE–2015–046); participants sometimes express option values in In July 2014, the Exchange submitted and 34–76888 (January 13, 2016), 81 FR 12 (January percentage terms rather than in dollar terms a proposed rule change to, among other 20, 2016) (SR–CBOE–2015–122). because they find it is easier to assess the change, things, temporarily change the COPS mstockstill on DSK3G9T082PROD with NOTICES 5 ‘‘End of day’’ refers to data that is distributed or lack of change, in the marketplace from one day prior to the opening of the next trading day. to the next when values are expressed in percentage contributor compensation structure 6 ‘‘Historical’’ COPS data consists of COPS data terms. that is over one month old (i.e., copies of the ‘‘end- 11 Exotic options are options which are generally 12 The fees that MDX charges for COPS Data are of-day’’ COPS file that are over one month old). traded OTC and are more complex than standard set forth on the Price List on the MDX Web site 7 FLEX options are exchange traded options that options, usually relating to determination of payoff. (www.marketdataexpress.com). MDX currently provide investors with the ability to customize An exotic option may also include a non-standard charges a fee per option per day for ‘‘end-of-day’’ basic option features including size, expiration underlying instrument, developed for a particular COPS data. The amount of the fee is reduced based date, exercise style, and certain exercise prices. client or for a particular market. on the number of options valuations purchased. VerDate Sep<11>2014 16:39 Aug 16, 2016 Jkt 238001 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 E:\FR\FM\17AUN1.SGM 17AUN1

54872 Federal Register / Vol. 81, No. 159 / Wednesday, August 17, 2016 / Notices from a revenue sharing plan to a fixed fraudulent and manipulative acts and of the Act 20 and paragraph (f)(2) of Rule payment structure for a six-month practices, to promote just and equitable 19b–4 21 thereunder. At any time within period (‘‘Fixed Payment Period’’).13 In principles of trade, to foster cooperation 60 days of the filing of the proposed rule May 2015, the Exchange submitted a and coordination with persons engaged change, the Commission summarily may proposed rule change to change the in regulating, clearing, settling, temporarily suspend such rule change if COPS contributor compensation processing information with respect to, it appears to the Commission that such structure for the remainder of 2015.14 and facilitating transactions in action is necessary or appropriate in the Pursuant to that proposed rule change, securities, to remove impediments to public interest, for the protection of as of May 1, 2015, all revenue from the and perfect the mechanism of a free and investors, or otherwise in furtherance of sale of COPS Data was paid to COPS open market and a national market the purposes of the Act. If the contributors, with revenue divided system, and, in general, to protect Commission takes such action, the equally among COPS contributors. In investors and the public interest. Commission will institute proceedings December 2015, (sic) As described in Additionally, the Exchange believes the to determine whether the proposed rule that proposed rule change, MDX would proposed rule change is consistent with change should be approved or transition back to the revenue share the Section 6(b)(5) 18 requirement that disapproved. plan described above on January 1, the rules of an exchange not be designed IV. Solicitation of Comments 2016. In December 2015, the Exchange to permit unfair discrimination between submitted a proposed rule change to customers, issuers, brokers, or dealers. Interested persons are invited to extend the temporary suspension The Exchange believes the proposed submit written data, views, and through June 30, 2016.15 rule change is not designed to permit arguments concerning the foregoing, unfair discrimination between CBOE including whether the proposed rule Proposal change is consistent with the Act. TPHs because all COPS data revenue The Exchange proposes to re- would be divided equally among TPH Comments may be submitted by any of implement the temporary suspension contributors through December 31, the following methods: described above through the end of the 2016. The Exchange believes the Electronic Comments year. As such, all revenue from the sale proposed rule change is consistent with of COPS Data would be paid to COPS • Use the Commission’s Internet the protection of investors and the contributors through December 31, comment form (http://www.sec.gov/ public interest in that it would provide 2016. As before, the revenue would rules/sro.shtml); or incentive for all of the COPS continue to be divided equally among • Send an email to rule-comments@ contributors to participate in COPS COPS contributors. The Exchange had sec.gov. Please include File Number SR– while the Exchange continues to grow hoped that at the end June 2016, COPS CBOE–2016–059 on the subject line. the COPS business, thereby helping to revenue would be at a level such that maintain the quality of COPS Data. Paper Comments the COPS contributors would receive a revenue share roughly in line with the B. Self-Regulatory Organization’s • Send paper comments in triplicate fixed payments they received during the Statement on Burden on Competition to Secretary, Securities and Exchange Fixed Payment Period. This has not yet Commission, 100 F Street NE., CBOE does not believe that the Washington, DC 20549–1090. occurred. The payments to COPS proposed rule change will impose any contributors are intended to, at a All submissions should refer to File burden on competition that is not minimum, help COPS contributors Number SR–CBOE–2016–059. This file necessary or appropriate in furtherance cover their costs of producing number should be included on the of the purposes of the Act. To the valuations for COPS while the Exchange subject line if email is used. To help the contrary, the Exchange believes the continues to grow the COPS business. Commission process and review your proposal is procompetitive in that it will comments more efficiently, please use 2. Statutory Basis incentivize COPS contributors to only one method. The Commission will continue producing quality valuations The Exchange believes the proposed post all comments on the Commission’s to help keep COPS competitive with rule change is consistent with the Internet Web site (http://www.sec.gov/ other similar market data products.19 Securities Exchange Act of 1934 (the rules/sro.shtml). Copies of the ‘‘Act’’) and the rules and regulations C. Self-Regulatory Organization’s submission, all subsequent thereunder applicable to the Exchange Statement on Comments on the amendments, all written statements and, in particular, the requirements of Proposed Rule Change Received From with respect to the proposed rule Section 6(b) of the Act.16 Specifically, Members, Participants, or Others change that are filed with the the Exchange believes the proposed rule The Exchange neither solicited nor Commission, and all written change is consistent with the Section received comments on the proposed communications relating to the 6(b)(5) 17 requirements that the rules of rule change. proposed rule change between the an exchange be designed to prevent Commission and any person, other than III. Date of Effectiveness of the those that may be withheld from the 13 See Securities Exchange Act Release No. 34– Proposed Rule Change and Timing for public in accordance with the 72621 (July 16, 2014), 79 FR 42616 (July 22, 2014) Commission Action provisions of 5 U.S.C. 552, will be (SR–CBOE–2014–057). 14 Securities Exchange Act Release No. 34–74937 The foregoing rule change has become available for Web site viewing and (May 12, 2015), 80 FR 28319 (May 18, 2015) (SR– effective pursuant to Section 19(b)(3)(A) printing in the Commission’s Public mstockstill on DSK3G9T082PROD with NOTICES CBOE–2015–046). Reference Room, 100 F Street NE., 15 Securities Exchange Act Release No. 34–76888 18 Id. Washington, DC 20549 on official (January 13, 2016), 81 FR 12 (January 20, 2016) (SR– 19 Market data vendors including business days between the hours of CBOE–2015–122). The Exchange is not proposing to SuperDerivatives, Markit, Prism, and Bloomberg’s eliminate the revenue share plan, but rather re- 10:00 a.m. and 3:00 p.m. Copies of the BVAL service produce option value data that is implement the temporary suspension as described similar to COPS Data. The Options Clearing filing also will be available for in this rule filing. Corporation (‘‘OCC’’) also produces FLEX option 16 15 U.S.C. 78f(b). 20 15 U.S.C. 78s(b)(3)(A). value data that is similar to the FLEX option value 17 15 U.S.C. 78f(b)(5). data that is included in COPS. 21 17 CFR 240.19b–4(f)(2). VerDate Sep<11>2014 16:39 Aug 16, 2016 Jkt 238001 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 E:\FR\FM\17AUN1.SGM 17AUN1

Federal Register / Vol. 81, No. 159 / Wednesday, August 17, 2016 / Notices 54873 inspection and copying at the principal fees related to the Central Registration (B) Non-Displayed Match Fee office of the Exchange. All comments Depository (‘‘CRD system’’), which will received will be posted without change; be collected by the Financial Industry The Exchange proposes to charge the Commission does not edit personal Regulatory Authority, Inc. (‘‘FINRA’’) $0.0009 per share (or 0.30% of the total identifying information from pursuant to IEX Rule 15.110(a). The dollar value of the transaction for submissions. You should submit only Exchange proposes to implement the securities priced below $1.00) to information that you wish to make rule change effective with its exchange Members for executions on IEX that available publicly. All submissions launch. The text of the proposed rule include resting interest with non- should refer to File Number SR–CBOE– change is available at the Exchange’s displayed priority (i.e., an order or 2016–059 and should be submitted on Web site at www.iextrading.com, at the portion of a reserve order that is booked or before September 7, 2016. principal office of the Exchange, and at and ranked with non-display priority on For the Commission, by the Division of the Commission’s Public Reference the Order Book either at the NBBO Trading and Markets, pursuant to delegated Room. midpoint or at a worse price on the authority.22 II. Self-Regulatory Organization’s Order Book) for both the liquidity Robert W. Errett, Statement of the Purpose of, and adding and liquidity removing order,8 Deputy Secretary. Statutory Basis for, the Proposed Rule with the exception of executions on the [FR Doc. 2016–19584 Filed 8–16–16; 8:45 am] Change Exchange where the adding and removing order originated from the BILLING CODE 8011–01–P In its filing with the Commission, the same Exchange Member and displayable self-regulatory organization included orders removing non-displayed liquidity statements concerning the purpose of upon entry, each as described below. SECURITIES AND EXCHANGE and basis for the proposed rule change COMMISSION and discussed any comments it received Notwithstanding the foregoing, the [Release No. 34–78550; File No. SR–IEX– on the proposed rule change. The text Exchange does not propose to charge 2016–09] of these statement [sic] may be any fee to Members for executions on examined at the places specified in Item IEX that involve taking resting interest Self-Regulatory Organizations; IV below. The self-regulatory with non-displayed priority where (a) Investors Exchange LLC; Notice of organization has prepared summaries, the liquidity removing order was Filing and Immediate Effectiveness of set forth in Sections A, B, and C below, displayable (i.e., the order would have Proposed Rule Change Related to of the most significant aspects of such booked and displayed if posted to the Transaction and Regulatory Fees statements. Order Book) and (b) on a monthly basis, August 11, 2016. A. Self-Regulatory Organization’s at least 90% of the liquidity removing Pursuant to Section 19(b)(1) 1 of the Statement of the Purpose of, and the Member’s aggregate executions of Securities Exchange Act of 1934 Statutory Basis for, the Proposed Rule displayable orders added liquidity (‘‘Act’’),2 and Rule 19b–4 thereunder,3 Change during such calendar month. However, notice is hereby given that, on August in such transactions, the non-displayed 1. Purpose liquidity adding interest will be subject 5, 2016, the Investors Exchange LLC (‘‘IEX’’ or the ‘‘Exchange’’) filed with the Transaction Fees to the Non-Displayed Match Fee Securities and Exchange Commission described above. The Exchange proposes to implement (‘‘Commission’’) the proposed rule a fee schedule applicable to use of the (C) Internalization Fee change as described in Items I, II and III Exchange commencing on the date it below, which Items have been prepared begins operating as a national securities The Exchange does not propose to by the self-regulatory organization. The exchange. The Exchange currently charge any fee to Members for Commission is publishing this notice to intends to commence operations as a executions on IEX when the adding and solicit comments on the proposed rule national securities exchange on or about removing order originated from the change from interested persons. August 19, 2016. IEX proposes to same Exchange Member.9 Orders from implement the Fee Schedule described different market participant identifiers I. Self-Regulatory Organization’s herein, which will be applicable to of the same broker dealer, with the same Statement of the Terms of Substance of transactions executed in all trading Central Registration Depository the Proposed Rule Change sessions, effective with its exchange registration number, would be treated as Pursuant to the provisions of Section launch. originating from the same Exchange 19(b)(1) under the Securities Exchange Member. Act of 1934 (‘‘Act’’),4 and Rule 19b–4 (A) Displayed Match Fee thereunder,5 Investors Exchange LLC The Exchange does not propose to (D) Routing Charges (‘‘IEX’’ or ‘‘Exchange’’) is filing with the charge any fee to Members for The Exchange proposes to pass the fee Securities and Exchange Commission executions on IEX that include resting or rebate from an away trading center to (‘‘Commission’’) a proposed rule change interest with displayed priority (i.e., an the Member and charge a fee of $0.0001 to (i) adopt transaction fees applicable order or portion of a reserve order that per share for all routing options offered to Members 6 of the Exchange pursuant is booked and ranked with display by the Exchange. All charges for routing to IEX Rule 15.110(a) and (c) (‘‘Fee priority on the Order Book either as the IEX best bid or best offer (‘‘BBO’’) or at are applicable only in the event that an Schedule’’), and (ii) adopt regulatory mstockstill on DSK3G9T082PROD with NOTICES a worse price on the Order Book) for 8 This pricing is referred to by the Exchange as 22 17 CFR 200.30–3(a)(12). both the liquidity adding and liquidity ‘‘Non-Displayed Match Fee’’ on the proposed Fee 1 15 U.S.C. 78s(b)(1). removing order.7 Schedule with a Fee Code of ‘I’ to be provided by 2 15 U.S.C. 78a. the Exchange on execution reports. 3 17 CFR 240.19b–4. 7 This pricing is referred to by the Exchange as 9 This pricing is referred to by the Exchange as 4 15 U.S.C. 78s(b)(1). ‘‘Displayed Match Fee’’ on the proposed Fee ‘‘Internalization Fee’’ on the proposed Fee Schedule 5 17 CRF [sic] 240.19b–4. Schedule with a Fee Code of ‘L’ to be provided by with a Fee Code of ‘S’ to be provided by the 6 See, IEX Rule 1.160(s). the Exchange on execution reports. Exchange on execution reports. VerDate Sep<11>2014 16:39 Aug 16, 2016 Jkt 238001 PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 E:\FR\FM\17AUN1.SGM 17AUN1


Document Created: 2018-02-09 11:35:16
Document Modified: 2018-02-09 11:35:16
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation81 FR 54870 
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