81 FR 7867 - 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 30 (February 16, 2016)
Federal Register Volume 81, Issue 30 (February 16, 2016)
| Page Range | 7867-7871 | |
| FR Document | 2016-02986 |
[Federal Register Volume 81, Number 30 (Tuesday, February 16, 2016)] [Notices] [Pages 7867-7871] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-02986] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77093; File No. SR-CBOE-2016-008] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule To Amend the Fees Schedule February 9, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on February 4, 2016, Chicago Board Options Exchange, Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange Commission (``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 Substance of the Proposed Rule Change The Exchange proposes to amend the 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.\3\ --------------------------------------------------------------------------- \3\ The Exchange initially filed the proposed fee changes on January 4, 2016 (SR-CBOE-2016-001). On January 27, 2016, the Exchange withdrew that filing and replaced it with SR-CBOE-2016-006. On February 4, 2016, the Exchange withdrew that filing and submitted this filing. --------------------------------------------------------------------------- CBOE Proprietary Products Sliding Scale The CBOE Proprietary Products Sliding Scale table provides that Clearing Trading Permit Holder Proprietary transaction fees and transaction fees for Non-Clearing Trading Permit Holder Affiliates in Underlying Symbol List A \4\ are reduced provided a Clearing Trading Permit Holder (``Clearing TPH'') (including its Non-Trading Permit Holder affiliates) reaches certain average daily volume (``ADV'') thresholds in all underlying symbols excluding Underlying Symbol List A and mini-options on the Exchange in a month. The Exchange proposes to implement changes to the CBOE Proprietary Products Sliding Scale (``Proprietary Sliding Scale''). First, the Exchange proposes to amend the current qualifying ADV thresholds. Specifically, the threshold 20,000 ADV to 79,999 ADV would be changed to 25,000 ADV to 69,999 ADV, and the threshold 80,000 ADV and above would be changed to 70,000 ADV and above. The Exchange also proposes to increase the rates set forth in Tiers B1 through B3, as well as in Tiers A1 and A2. Specifically, the Exchange proposes to increase the rate in Tier B3 to $0.22 from $0.20, in Tier B2 to $0.12 from $0.10, in Tier B1 to $0.05 from $0.02, in Tier A2 to $0.18 from $0.16 and in Tier A1 to $0.02 from $0.01. The proposed changes are further detailed below. --------------------------------------------------------------------------- \4\ As of December 31, 2015, Underlying Symbol List A includes the following products: OEX, XEO, RUT, RLV, RLG, RUI, SPX (including SPXw), SPXpm, SRO, VIX, VXST, VOLATILITY INDEXES and binary options. ---------------------------------------------------------------------------------------------------------------- Current Proposed ---------------------------------------------------------------------------------------------------------------- Proprietary Proprietary Tier product volume Transaction fee Tier product volume Transaction fee thresholds per contract thresholds per contract ---------------------------------------------------------------------------------------------------------------- >=20,000 ADV <=79,999 ADV in multi >=25,000 ADV <=69,999 ADV in multi list products list products ---------------------------------------------------------------------------------------------------------------- B3.............. 0.00%-6.50%....... $0.20 B3.............. 0.00%-6.50%...... $0.22 B2.............. 6.51%-8.50%....... 0.10 B2.............. 6.51%-8.50%...... 0.12 B1.............. Above 8.50%....... 0.02 B1.............. Above 8.50%...... $0.05 ---------------------------------------------------------------------------------------------------------------- [[Page 7868]] >=80,000 ADV in multi list roducts >=70,000 ADV in multi list products ---------------------------------------------------------------------------------------------------------------- A2.............. 0.00%-6.50%....... 0.16 A2.............. 0.00%-6.50%...... 0.18 A1.............. Above 6.50%....... 0.01 A1.............. Above 6.50%...... 0.02 ---------------------------------------------------------------------------------------------------------------- The purpose of amending the tier volume thresholds is to adjust for current volume trends and demographics across the Clearing TPH proprietary population and to rationalize fees across that population. The purpose of increasing the transaction Fee Per Contract rates (and thereby reducing the amount of the discount Clearing TPHs may receive on proprietary products) is to moderate the discount levels for these products in view of their growth and performance. Particularly, the Exchange does not believe it's necessary to maintain the existing discounted rates for these tiers, but still seeks to maintain an incremental incentive for Clearing TPHs to strive for the highest tier level. VIX Sliding Scale The Exchange proposes to adopt a new Clearing Trading Permit Holder Proprietary VIX Sliding Scale (the ``VIX Sliding Scale''). The VIX Sliding Scale allows VIX volatility index options (``VIX options'') transaction fees for Clearing TPH (including its Non-Trading Permit Holder affiliates) proprietary orders to be reduced provided a Clearing TPH (including its Non-Trading Permit Holder affiliates) reaches certain proprietary VIX options volume thresholds during a month. The proposed applicable transaction fees for the different volume tiers on the VIX Sliding Scale are as follows: ------------------------------------------------------------------------ Transaction Tier Percentage thresholds of fee per total VIX volume contract ------------------------------------------------------------------------ 1......................... 0.00%-1.00%................. $0.25 2......................... 1.01%-5.50%................. 0.17 3......................... 5.51%-8.00%................. 0.05 4......................... Above 8.00%................. 0.01 ------------------------------------------------------------------------ The VIX Sliding Scale applies to orders bearing the origin codes ``F'' and ``L''. The purpose of the VIX Sliding Scale is to encourage greater Clearing TPH proprietary trading of VIX options. In conjunction with the adoption of the VIX Sliding Scale, the Exchange proposes to amend Footnote 11 of its Fees Schedule. Footnote 11 provides the details regarding the Clearing Trading Permit Holder Fee Cap (``Fee Cap'') in all products except Underlying Symbol List A (excluding binary options) and the CBOE Proprietary Products Sliding Scale for Clearing Trading Permit Holder Proprietary Orders, both of which apply to Clearing TPH proprietary orders. Because the VIX Sliding Scale also applies to Clearing TPH proprietary orders, and because many of the details regarding the Fee Cap and the Proprietary Products Sliding Scale will also apply to the VIX Sliding Scale, the Exchange proposes to reference the VIX Sliding Scale in Footnote 11 as well. First, Footnote 11 defines the CBOE Proprietary Products Sliding Scale for Clearing Trading Permit Holder Proprietary Orders as the ``Sliding Scale''. In order to avoid confusion that could arise due to the addition of the VIX Sliding Scale, the Exchange proposes to define CBOE Proprietary Products Sliding Scale for Clearing Trading Permit Holder Proprietary Orders as the ``Proprietary Products Sliding Scale''. As such, any references within Footnote 11 to the ``Sliding Scale'' will now be referred to as the ``Proprietary Products Sliding Scale''. Any references to the Clearing Trading Permit Holder Proprietary VIX Sliding Scale within Footnote 11 will be referred to as the ``VIX Sliding Scale.'' Like the Fee Cap and the Proprietary Sliding Scale, the VIX Sliding Scale will apply to (i) Clearing TPH proprietary orders (``F'' origin code), and (ii) orders of Non-Trading Permit Holder Affiliates of a Clearing TPH.\5\ A ``Non-Trading Permit Holder Affiliate'' would be defined for the purposes of the VIX Sliding Scale the same way it is defined for the Fee Cap and Proprietary Sliding Scale: A 100% wholly- owned affiliate or subsidiary of a Clearing TPH that is registered as a United States or foreign broker-dealer and that is not a CBOE Trading Permit Holder (``TPH''). As with the Fee Cap and the Proprietary Sliding Scale, only proprietary orders of the Non-Trading Permit Holder Affiliate (``L'' origin code) effected for purposes of hedging the proprietary over-the-counter trading of the Clearing TPH or its affiliates will be included in calculating the VIX Sliding Scale, and such orders must be marked with a code approved by the Exchange identifying the orders as eligible for the VIX Sliding Scale. As with the Fee Cap and the Proprietary Sliding Scale, each Clearing TPH is responsible for notifying the TPH Department of all of its affiliations so that fees and contracts of the Clearing TPH and its affiliates may be aggregated for purposes of the VIX Sliding Scale and is required to certify the affiliate status of any Non-Trading Permit Holder Affiliate whose trading activity it seeks to aggregate. In addition, each Clearing TPH is required to inform the Exchange immediately of any event that causes an entity to cease to be an affiliate. --------------------------------------------------------------------------- \5\ See CBOE Fees Schedule, Footnote 11. --------------------------------------------------------------------------- As with the Fee Cap and the Proprietary Sliding Scale, the Exchange will aggregate the fees and trading activity of separate Clearing TPHs for the purposes of the VIX Sliding Scale if there is at least 75% common ownership between the Clearing TPHs as reflected on each Clearing TPH's Form BD, Schedule A. As with the Fee Cap and the Proprietary Sliding Scale, a Clearing TPH's fees and contracts executed pursuant to a CMTA agreement (i.e., executed by another clearing firm and then transferred to the Clearing TPH's account at the OCC) are aggregated with the Clearing TPH's non-CMTA fees and contracts for purposes of the VIX Sliding Scale. For calculating a Clearing TPH's total proprietary product transaction fees, CBOE will use the following methodology: If using the VIX Sliding Scale plus the Proprietary Sliding Scale (minus VIX options volume) results in lower total Clearing TPH proprietary transaction fees than just using the Proprietary Sliding Scale, CBOE will apply the new VIX Sliding Scale plus the Proprietary Sliding Scale (deducting the VIX options volume from the Proprietary Sliding Scale). If using the VIX Sliding Scale plus the Proprietary Sliding Scale (minus VIX options volume) results in higher total Clearing TPH proprietary transaction fees than just using the Proprietary Sliding Scale, CBOE will apply only the Proprietary Sliding Scale. The purpose of this methodology is to provide a Clearing TPH with the most beneficial fee [[Page 7869]] arrangement (the lowest fees) without double-counting VIX options volume. For example, consider a situation in which, in a month, a Clearing TPH has a combined total for both the Regular Trading Hours (``RTH'') session and Extended Trading Hours (``ETH'') session (i) qualifying ADV of 66,000 in all underlying symbols excluding Underlying Symbol List A and mini-options, (ii) qualifying proprietary VIX options volume of 500,000 contracts, and (iii) qualifying volume of other proprietary products of 350,000 contracts (totaling 850,000 contracts of proprietary products).\6\ Total firm proprietary options contracts executed in the month was 15,298,000, including total VIX volume of 6,433,000. The Clearing TPH's total 850,000 proprietary contracts represent 5.56% of the total monthly firm proprietary option contracts volume (i.e., 850,000/15,298,000). As such, the Clearing TPH's transaction fees for its proprietary volume under the Proprietary Sliding Scale (including the proposed rate change) would be $0.22 per contract, or a total of $187,000 (i.e., 850,000 x $0.22). --------------------------------------------------------------------------- \6\ For this example, all volumes listed exclude volume in SROs, Mini-Options and contracts for which a strategy cap has been applied. --------------------------------------------------------------------------- Continuing with the example, the Clearing TPH's fees using the VIX Sliding Scale plus the Proprietary Sliding Scale (minus VIX options volume) would be calculated. Under the VIX Sliding Scale, the Clearing TPH total 500,000 VIX contracts represent 7.77% of the total monthly firm VIX option contracts volume (i.e., 500,000/6,433,000). As such, the Clearing TPH would be assessed a $0.25-per-contract fee for contracts 1-64,330 (totaling $16,082.50), a $0.17-per-contract fee for contracts 64,331-353,815 (totaling $49,212.45), and a $0.05-per- contract fee for contracts 353,816-500,000 (totaling $7,309.25). Therefore, under the VIX Sliding Scale, the Clearing TPH's proprietary transaction fees are $72,604.20 ($16,082.50 + $49,212.45 + $7,309.25). To this the Clearing TPH's proprietary fees under the Proprietary Sliding Scale (subtracting out the VIX options volume) would be added. Under the Proprietary Sliding Scale, the Clearing TPH's total non-VIX proprietary contracts represent 3.85% of the total monthly firm non-VIX proprietary option contracts volume (i.e., 350,000 non-VIX proprietary volume/8,865,000 total non-VIX proprietary volume (15,298,000 total proprietary volume - 6,433,000 VIX volume)). The Clearing TPH's transaction fees for its non-VIX proprietary volume under the Proprietary Sliding Scale (including the proposed rate change) would be $0.22 per contract, or a total of $77,000 (i.e., 350,000 x $0.22). The Clearing TPH's fees under the VIX Sliding Scale ($72,604.20) added to the fees using the Proprietary Sliding Scale (minus VIX volume) ($77,000), totals $149,604.20. Because this amount is less than the Clearing TPH's fees using just the Proprietary Sliding Scale (including the VIX options volume) of $187,000, the Exchange would apply the VIX Sliding Scale plus the Proprietary Sliding Scale to determine the Clearing TPH's proprietary fees, and assess the lower fee of $149,604.20. In conjunction with the proposed changes, the Exchange proposes to make a number of related non-substantive clarifying and reorganizational changes to its Fees Schedule. First, the Exchange proposes to rename the CBOE Proprietary Products Sliding Scale rate table to the ``Clearing Trading Permit Holder Proprietary Products Sliding Scales.'' The Exchange also proposes to specify that Table A represents the Proprietary Products Sliding Scale and Table B represents the VIX Sliding Scale. Additionally, in light of renaming the table and adding the VIX Sliding Scale, the Exchange proposes to update the corresponding reference to the ``CBOE Proprietary Products Sliding Scale'' in the Specified Proprietary Index Options Rate Table to ``CBOE Clearing Trading Permit Holder Proprietary Products Sliding Scales''. The Exchange also proposes to eliminate Footnote 23 (which footnote relates to the CBOE Proprietary Sliding Scale) and consolidate the notes currently located within Footnote 23 with the notes currently located within the Notes section of the CBOE Proprietary Products Sliding Scale table, as well as update the Notes section with a description of how the sliding scales will work. The Exchange believes maintaining both a Notes section and a footnote is unnecessary and that the proposed change will alleviate potential confusion and make the Fees Schedule easier to read. Lastly, in light of the additional language that is being added regarding the VIX Sliding Scale, the Exchange proposes a few non-substantive and clarifying changes to the language contained within the Notes section of the CBOE Proprietary Products Sliding Scales table, which the Exchange believes will enhance the section's readability. For example, the Exchange has eliminated the sentence ``Mini-options and SROs are excluded from the CBOE Proprietary Products Sliding Scale'' and instead clarified where and when those products are excluded (i.e., SROs are not eligible for the reduce [sic] transaction fee discounts and Mini-Options are not counted towards the ADV volume thresholds). Additionally, the Exchange is amending the last sentence of the Notes section relating to ETH and RTH volume, which the Exchange believes will make the sentence easier to read and avoid potential confusion. For example, the Exchange proposes to eliminate the reference to ``VIX and SPX/SPXW'' volume and ``Underlying Symbol List A''. The Exchange notes that these changes are not substantive and do not change the applicability of the sliding scales to ETH or make any other changes as to how the sliding scales apply. 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.\7\ Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) \8\ 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,\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. --------------------------------------------------------------------------- \7\ 15 U.S.C. 78f(b). \8\ 15 U.S.C. 78f(b)(5). \9\ 15 U.S.C. 78f(b)(4). --------------------------------------------------------------------------- The Exchange believes the proposal to change the qualifying volume thresholds for the reduced fees in the Proprietary Sliding Scale is reasonable because it adjusts for current volume trends and demographics across the Clearing TPH proprietary population and rationalizes fees across that population. The Exchange notes that the rebalance of tiers also still allows the Exchange to maintain an incremental [[Page 7870]] incentive for Clearing TPHs to strive for the highest tier level. The Exchange believes it is equitable and not unfairly discriminatory because the proposed changes to the qualifying volume thresholds apply to all Clearing TPHs. The Exchange believes increasing the rates in each of the tiers of the Proprietary Sliding Scale (and thereby reducing the overall discount) is reasonable because it still provides Clearing TPHs an opportunity to receive notable discounted rates on classes in Underlying Symbol list A for reaching certain qualifying volume thresholds that they would not otherwise receive (now just a smaller discount). Additionally, the Exchange notes that lower fees for executing more contracts is equitable and not unfairly discriminatory because it provides market participants with an incentive to execute more contracts on the Exchange. This brings greater liquidity and trading opportunity, which benefits all market participants. The Exchange believes that the proposed change is not unfairly discriminatory because it will apply to all Clearing TPHs that meet the qualifying volume thresholds. The Exchange also believes offering lower fees under the Proprietary Sliding Scale to Clearing TPHs and not other CBOE market participants is equitable and not unfairly discriminatory because Clearing TPHs must take on certain obligations and responsibilities, such as clearing and membership with the Options Clearing Corporation, as well as significant regulatory burdens and financial obligations, that other market participants are not required to undertake. The adoption of the VIX Sliding Scale is reasonable because it will allow Clearing TPHs who engage in VIX options trading the opportunity to pay lower fees for such transactions. Similarly, aggregating the fees and trading activity of separate Clearing TPHs for the purposes of the VIX Sliding Scale if there is at least 75% common ownership between the Clearing TPHs and aggregating a Clearing TPH's fees and contracts executed pursuant to a CMTA agreement with the Clearing TPH's non-CMTA fees and contracts for the purpose of the VIX Sliding Scale is reasonable because this will allow more Clearing TPHs to qualify for the lowered fees at the higher volume tiers in the VIX Sliding Scale. The proposed methodology to be used in calculating a Clearing TPH's total proprietary product transaction fees is reasonable because it provides Clearing TPHs who engage in VIX options trading with a second way to maximize their ability to reduce their proprietary products transaction fees. Subtracting VIX options volume from the Proprietary Sliding Scale when taking into account the VIX Sliding Scale to calculate proprietary product transaction fees is reasonable because it would be illogical (and not financially viable) to count VIX options volume twice (once in the VIX Sliding Scale and once in the Proprietary Sliding Scale) to allow a Clearing TPH to qualify for a lowered fee rate when the VIX options transactions (and volume such transactions created) only occurred once and fees were therefore only assessed on such transactions once. Applying the VIX Sliding Scale to Clearing TPH (and their affiliates, in the manner described above) proprietary orders only is equitable and not unfairly discriminatory because, as noted above, Clearing TPHs take on a number of obligations and responsibilities (such as membership with the Options Clearing Corporation), significant regulatory burdens, and financial obligations that other market participants are not required to undertake. Further, the VIX Sliding Scale is designed to encourage increased Clearing TPH proprietary VIX options volume, which provides increased VIX options volume and greater trading opportunities for all market participants. Similarly, applying lower fee rates for Clearing TPHs who hit the higher VIX options contract volume tiers on the VIX Sliding Scale is equitable and not unfairly discriminatory because this is designed to encourage increased TPH proprietary VIX options volume, which provides increased VIX options volume and greater trading opportunities for all Clearing TPHs, including those who are not able to reach the higher-volume tiers. Moreover, the Exchange already offers other fee-lowering programs (such as the Fee Cap and Proprietary Sliding Scale) which entail lower fees for Clearing TPHs (and their affiliates, in the manner described above) and are limited to Clearing TPHs (and their affiliates, in the manner described above). Applying the VIX Sliding Scale to VIX options and not to other products is equitable and not unfairly discriminatory because the Exchange has expended considerable time and resources in developing VIX options. The Exchange believes (i) redefining the Proprietary Sliding Scale and adding references to the VIX Sliding Scale in Footnote 11 of the Fees Schedule and (ii) updating the reference to the ``CBOE Proprietary Products Sliding Scale'' to ``CBOE Clearing Trading Permit Holder Proprietary Products Sliding Scales'' in the Specified Proprietary Index Options Rate Table alleviates potential confusion by investors reading the Fees Schedule in light of the proposed change. Additionally, the Exchange believes its proposal to make non- substantive clarifying language changes to the Notes section, as well as its proposal to eliminate Footnote 23 and consolidate the description set forth in Footnote 23 within the Notes section of the current CBOE Proprietary Products Sliding Scale table will alleviate potential confusion and make the Fees Schedule easier to read and more streamlined. This avoidance of confusion removes impediments to and perfects the mechanism of a free and open market and a national market system, and, in general, protects investors and the public interest. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule changes will impose any burden on competition that is 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 it applies only to Clearing TPH proprietary orders, Clearing TPHs take on a number of obligations and responsibilities (such as membership with the Options Clearing Corporation), significant regulatory burdens, and financial obligations that other market participants are not required to undertake. Further, the VIX Sliding Scale is designed to encourage increased Clearing TPH proprietary VIX options volume, which provides increased VIX options volume and greater trading opportunities for all market participants. Therefore, the Exchange believes that any potential effects on intramarket competition that the proposed changes to the Proprietary Sliding Scale and adoption of the VIX Sliding Scale may cause are therefore justifiable. The Exchange does not believe that the proposed rule changes will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed rule change applies only to 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. [[Page 7871]] 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 CommentsUse 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-2016-008 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-2016-008. 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-2016-008 and should be submitted on or before March 8, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\12\ --------------------------------------------------------------------------- \12\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-02986 Filed 2-12-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 30 / Tuesday, February 16, 2016 / Notices 7867
reduce their potential for losses, SECURITIES AND EXCHANGE places specified in Item IV below. The
encourage better counterparty risk COMMISSION Exchange has prepared summaries, set
management and promote firms’ forth in sections A, B, and C below, of
[Release No. 34–77093; File No. SR–CBOE–
financial stability. 2016–008]
the most significant aspects of such
The Commission does not believe that statements.
the proposed rule change will result in Self-Regulatory Organizations; A. Self-Regulatory Organization’s
burden on competition that is not Chicago Board Options Exchange, Statement of the Purpose of, and
necessary or appropriate in furtherance Incorporated; Notice of Filing and Statutory Basis for, the Proposed Rule
of the purposes of the Exchange Act. Immediate Effectiveness of a Proposed Change
Rule To Amend the Fees Schedule
The Commission believes FINRA has 1. Purpose
carefully crafted the proposed rule February 9, 2016.
change to achieve its intended and Pursuant to Section 19(b)(1) of the The Exchange proposes to amend its
necessary regulatory purpose while Securities Exchange Act of 1934 Fees Schedule.3
minimizing the burden on firms. (‘‘Act’’),1 and Rule 19b–4 thereunder,2 CBOE Proprietary Products Sliding
Although the proposed rule change notice is hereby given that on February Scale
expands the number of firms required to 4, 2016, Chicago Board Options
Exchange, Incorporated (the ‘‘Exchange’’ The CBOE Proprietary Products
file the OBS, the expansion is limited to Sliding Scale table provides that
non-clearing firms that have a minimum or ‘‘CBOE’’) filed with the Securities
and Exchange Commission Clearing Trading Permit Holder
dollar net capital requirement equal to Proprietary transaction fees and
or greater than $100,000, and at least (‘‘Commission’’) the proposed rule
change as described in Items I, II, and transaction fees for Non-Clearing
$10 million in reportable items pursuant Trading Permit Holder Affiliates in
to the OBS. In addition, the current de III below, which Items have been
prepared by the Exchange. The Underlying Symbol List A 4 are reduced
minimis exception continues to remain provided a Clearing Trading Permit
Commission is publishing this notice to
available to any firm that conducts off- Holder (‘‘Clearing TPH’’) (including its
solicit comments on the proposed rule
balance sheet activity that is limited Non-Trading Permit Holder affiliates)
change from interested persons.
relative to its excess net capital. reaches certain average daily volume
I. Self-Regulatory Organization’s (‘‘ADV’’) thresholds in all underlying
IV. Conclusion Statement of the Terms of Substance of symbols excluding Underlying Symbol
It is therefore ordered, pursuant to the Proposed Rule Change List A and mini-options on the
Section 19(b)(2) of the Exchange Act,18 The Exchange proposes to amend the Exchange in a month. The Exchange
that the proposed rule change (SR– Fees Schedule. The text of the proposed proposes to implement changes to the
FINRA–2015–059) be and hereby is rule change is available on the CBOE Proprietary Products Sliding
approved. Exchange’s Web site (http:// Scale (‘‘Proprietary Sliding Scale’’).
www.cboe.com/AboutCBOE/ First, the Exchange proposes to amend
For the Commission, by the Division of the current qualifying ADV thresholds.
CBOELegalRegulatoryHome.aspx), at
Trading and Markets, pursuant to delegated Specifically, the threshold 20,000 ADV
the Exchange’s Office of the Secretary,
authority.19 to 79,999 ADV would be changed to
and at the Commission’s Public
Brent J. Fields, Reference Room. 25,000 ADV to 69,999 ADV, and the
Secretary. threshold 80,000 ADV and above would
II. Self-Regulatory Organization’s be changed to 70,000 ADV and above.
[FR Doc. 2016–02990 Filed 2–12–16; 8:45 am]
Statement of the Purpose of, and The Exchange also proposes to increase
BILLING CODE 8011–01–P Statutory Basis for, the Proposed Rule the rates set forth in Tiers B1 through
Change B3, as well as in Tiers A1 and A2.
In its filing with the Commission, the Specifically, the Exchange proposes to
Exchange included statements increase the rate in Tier B3 to $0.22
concerning the purpose of and basis for from $0.20, in Tier B2 to $0.12 from
the proposed rule change and discussed $0.10, in Tier B1 to $0.05 from $0.02, in
any comments it received on the Tier A2 to $0.18 from $0.16 and in Tier
proposed rule change. The text of these A1 to $0.02 from $0.01. The proposed
statements may be examined at the changes are further detailed below.
Current Proposed
Proprietary product volume Transaction fee Proprietary product volume Transaction fee
Tier Tier
thresholds per contract thresholds per contract
≥20,000 ADV ≤79,999 ADV in multi list products ≥25,000 ADV ≤69,999 ADV in multi list products
B3 ............ 0.00%–6.50% ................................... $0.20 B3 ............ 0.00%–6.50% ................................... $0.22
B2 ............ 6.51%–8.50% ................................... 0.10 B2 ............ 6.51%–8.50% ................................... 0.12
mstockstill on DSK4VPTVN1PROD with NOTICES
B1 ............ Above 8.50% .................................... 0.02 B1 ............ Above 8.50% .................................... $0.05
18 See 15 U.S.C. 78s(b)(2). 3 The Exchange initially filed the proposed fee 4 As of December 31, 2015, Underlying Symbol
19 See 17 CFR 200.30–3(a)(12). changes on January 4, 2016 (SR–CBOE–2016–001). List A includes the following products: OEX, XEO,
1 15 U.S.C. 78s(b)(1). On January 27, 2016, the Exchange withdrew that RUT, RLV, RLG, RUI, SPX (including SPXw),
filing and replaced it with SR–CBOE–2016–006. On SPXpm, SRO, VIX, VXST, VOLATILITY INDEXES
2 17 CFR 240.19b–4.
February 4, 2016, the Exchange withdrew that filing
and binary options.
and submitted this filing.
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![Federal Register / Vol. 81, No. 30 / Tuesday, February 16, 2016 / Notices 7869
arrangement (the lowest fees) without proprietary volume under the Sliding Scale’’ and instead clarified
double-counting VIX options volume. Proprietary Sliding Scale (including the where and when those products are
For example, consider a situation in proposed rate change) would be $0.22 excluded (i.e., SROs are not eligible for
which, in a month, a Clearing TPH has per contract, or a total of $77,000 (i.e., the reduce [sic] transaction fee
a combined total for both the Regular 350,000 × $0.22). The Clearing TPH’s discounts and Mini-Options are not
Trading Hours (‘‘RTH’’) session and fees under the VIX Sliding Scale counted towards the ADV volume
Extended Trading Hours (‘‘ETH’’) ($72,604.20) added to the fees using the thresholds). Additionally, the Exchange
session (i) qualifying ADV of 66,000 in Proprietary Sliding Scale (minus VIX is amending the last sentence of the
all underlying symbols excluding volume) ($77,000), totals $149,604.20. Notes section relating to ETH and RTH
Underlying Symbol List A and mini- Because this amount is less than the volume, which the Exchange believes
options, (ii) qualifying proprietary VIX Clearing TPH’s fees using just the will make the sentence easier to read
options volume of 500,000 contracts, Proprietary Sliding Scale (including the and avoid potential confusion. For
and (iii) qualifying volume of other VIX options volume) of $187,000, the example, the Exchange proposes to
proprietary products of 350,000 Exchange would apply the VIX Sliding eliminate the reference to ‘‘VIX and
contracts (totaling 850,000 contracts of Scale plus the Proprietary Sliding Scale SPX/SPXW’’ volume and ‘‘Underlying
proprietary products).6 Total firm to determine the Clearing TPH’s Symbol List A’’. The Exchange notes
proprietary options contracts executed proprietary fees, and assess the lower that these changes are not substantive
in the month was 15,298,000, including fee of $149,604.20. and do not change the applicability of
total VIX volume of 6,433,000. The In conjunction with the proposed the sliding scales to ETH or make any
Clearing TPH’s total 850,000 proprietary other changes as to how the sliding
changes, the Exchange proposes to make
contracts represent 5.56% of the total scales apply.
a number of related non-substantive
monthly firm proprietary option
clarifying and reorganizational changes 2. Statutory Basis
contracts volume (i.e., 850,000/
to its Fees Schedule. First, the Exchange The Exchange believes the proposed
15,298,000). As such, the Clearing
proposes to rename the CBOE rule change is consistent with the
TPH’s transaction fees for its proprietary
Proprietary Products Sliding Scale rate Securities Exchange Act of 1934 (the
volume under the Proprietary Sliding
table to the ‘‘Clearing Trading Permit ‘‘Act’’) and the rules and regulations
Scale (including the proposed rate
Holder Proprietary Products Sliding thereunder applicable to the Exchange
change) would be $0.22 per contract, or
Scales.’’ The Exchange also proposes to
a total of $187,000 (i.e., 850,000 × and, in particular, the requirements of
specify that Table A represents the Section 6(b) of the Act.7 Specifically,
$0.22).
Proprietary Products Sliding Scale and the Exchange believes the proposed rule
Continuing with the example, the
Table B represents the VIX Sliding change is consistent with the Section
Clearing TPH’s fees using the VIX
Scale. Additionally, in light of renaming 6(b)(5) 8 requirements that the rules of
Sliding Scale plus the Proprietary
the table and adding the VIX Sliding an exchange be designed to prevent
Sliding Scale (minus VIX options
Scale, the Exchange proposes to update fraudulent and manipulative acts and
volume) would be calculated. Under the
the corresponding reference to the practices, to promote just and equitable
VIX Sliding Scale, the Clearing TPH
‘‘CBOE Proprietary Products Sliding principles of trade, to foster cooperation
total 500,000 VIX contracts represent
Scale’’ in the Specified Proprietary and coordination with persons engaged
7.77% of the total monthly firm VIX
Index Options Rate Table to ‘‘CBOE in regulating, clearing, settling,
option contracts volume (i.e., 500,000/
Clearing Trading Permit Holder processing information with respect to,
6,433,000). As such, the Clearing TPH
Proprietary Products Sliding Scales’’. and facilitating transactions in
would be assessed a $0.25-per-contract
The Exchange also proposes to securities, to remove impediments to
fee for contracts 1–64,330 (totaling
eliminate Footnote 23 (which footnote and perfect the mechanism of a free and
$16,082.50), a $0.17-per-contract fee for
relates to the CBOE Proprietary Sliding open market and a national market
contracts 64,331–353,815 (totaling
Scale) and consolidate the notes system, and, in general, to protect
$49,212.45), and a $0.05-per-contract fee
currently located within Footnote 23 investors and the public interest.
for contracts 353,816–500,000 (totaling
with the notes currently located within Additionally, the Exchange believes the
$7,309.25). Therefore, under the VIX
the Notes section of the CBOE proposed rule change is consistent with
Sliding Scale, the Clearing TPH’s
Proprietary Products Sliding Scale table, Section 6(b)(4) of the Act,9 which
proprietary transaction fees are
as well as update the Notes section with requires that Exchange rules provide for
$72,604.20 ($16,082.50 + $49,212.45 +
a description of how the sliding scales the equitable allocation of reasonable
$7,309.25). To this the Clearing TPH’s
will work. The Exchange believes dues, fees, and other charges among its
proprietary fees under the Proprietary
maintaining both a Notes section and a Trading Permit Holders and other
Sliding Scale (subtracting out the VIX
footnote is unnecessary and that the persons using its facilities.
options volume) would be added. Under
proposed change will alleviate potential The Exchange believes the proposal to
the Proprietary Sliding Scale, the
confusion and make the Fees Schedule change the qualifying volume
Clearing TPH’s total non-VIX
easier to read. Lastly, in light of the thresholds for the reduced fees in the
proprietary contracts represent 3.85% of
additional language that is being added Proprietary Sliding Scale is reasonable
the total monthly firm non-VIX
regarding the VIX Sliding Scale, the because it adjusts for current volume
proprietary option contracts volume
Exchange proposes a few non- trends and demographics across the
(i.e., 350,000 non-VIX proprietary
substantive and clarifying changes to Clearing TPH proprietary population
volume/8,865,000 total non-VIX
mstockstill on DSK4VPTVN1PROD with NOTICES
the language contained within the Notes and rationalizes fees across that
proprietary volume (15,298,000 total
section of the CBOE Proprietary population. The Exchange notes that the
proprietary volume ¥ 6,433,000 VIX
Products Sliding Scales table, which the rebalance of tiers also still allows the
volume)). The Clearing TPH’s
Exchange believes will enhance the Exchange to maintain an incremental
transaction fees for its non-VIX
section’s readability. For example, the
6 For this example, all volumes listed exclude Exchange has eliminated the sentence 7 15 U.S.C. 78f(b).
volume in SROs, Mini-Options and contracts for ‘‘Mini-options and SROs are excluded 8 15 U.S.C. 78f(b)(5).
which a strategy cap has been applied. from the CBOE Proprietary Products 9 15 U.S.C. 78f(b)(4).
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![Federal Register / Vol. 81, No. 30 / Tuesday, February 16, 2016 / Notices 7871
C. Self-Regulatory Organization’s communications relating to the I. Introduction
Statement on Comments on the proposed rule change between the Section 19(g)(1) of the Securities
Proposed Rule Change Received From Commission and any person, other than Exchange Act of 1934 (‘‘Act’’),2 among
Members, Participants, or Others those that may be withheld from the other things, requires every self-
The Exchange neither solicited nor public in accordance with the regulatory organization (‘‘SRO’’)
received comments on the proposed provisions of 5 U.S.C. 552, will be registered as either a national securities
rule change. available for Web site viewing and exchange or national securities
printing in the Commission’s Public association to examine for, and enforce
III. Date of Effectiveness of the
Reference Room, 100 F Street NE., compliance by, its members and persons
Proposed Rule Change and Timing for
Washington, DC 20549, on official associated with its members with the
Commission Action
business days between the hours of Act, the rules and regulations
The foregoing rule change has become 10:00 a.m. and 3:00 p.m. Copies of the thereunder, and the SRO’s own rules,
effective pursuant to Section 19(b)(3)(A) filing also will be available for unless the SRO is relieved of this
of the Act 10 and paragraph (f) of Rule inspection and copying at the principal responsibility pursuant to Section 17(d)
19b–4 11 thereunder. At any time within office of the Exchange. All comments or Section 19(g)(2) of the Act.3 Without
60 days of the filing of the proposed rule received will be posted without change; this relief, the statutory obligation of
change, the Commission summarily may each individual SRO could result in a
the Commission does not edit personal
temporarily suspend such rule change if pattern of multiple examinations of
identifying information from
it appears to the Commission that such broker-dealers that maintain
action is necessary or appropriate in the submissions. You should submit only
information that you wish to make memberships in more than one SRO
public interest, for the protection of (‘‘common members’’). Such regulatory
investors, or otherwise in furtherance of available publicly. All submissions
duplication would add unnecessary
the purposes of the Act. If the should refer to File Number SR–CBOE–
expenses for common members and
Commission takes such action, the 2016–008 and should be submitted on
their SROs.
Commission will institute proceedings or before March 8, 2016. Section 17(d)(1) of the Act 4 was
to determine whether the proposed rule For the Commission, by the Division of intended, in part, to eliminate
change should be approved or Trading and Markets, pursuant to delegated unnecessary multiple examinations and
disapproved. authority.12 regulatory duplication.5 With respect to
IV. Solicitation of Comments Brent J. Fields, a common member, Section 17(d)(1)
Secretary. authorizes the Commission, by rule or
Interested persons are invited to order, to relieve an SRO of the
submit written data, views and [FR Doc. 2016–02986 Filed 2–12–16; 8:45 am]
responsibility to receive regulatory
arguments concerning the foregoing, BILLING CODE 8011–01–P
reports, to examine for and enforce
including whether the proposed rule compliance with applicable statutes,
change is consistent with the Act. rules, and regulations, or to perform
Comments may be submitted by any of SECURITIES AND EXCHANGE other specified regulatory functions.
the following methods: COMMISSION To implement Section 17(d)(1), the
Electronic Comments Commission adopted two rules: Rule
[Release No. 34–77089; File No. 4–694] 17d–1 and Rule 17d–2 under the Act.6
• Use the Commission’s Internet Rule 17d–1 authorizes the Commission
comment form (http://www.sec.gov/ Program for Allocation of Regulatory to name a single SRO as the designated
rules/sro.shtml); or Responsibilities Pursuant to Rule 17d– examining authority (‘‘DEA’’) to
• Send an email to rule-comments@ 2; Order Approving and Declaring examine common members for
sec.gov. Please include File Number SR– Effective a Proposed Plan for the compliance with the financial
CBOE–2016–008 on the subject line. Allocation of Regulatory responsibility requirements imposed by
Paper Comments Responsibilities Between the Financial the Act, or by Commission or SRO
• Send paper comments in triplicate Industry Regulatory Authority, Inc. and rules.7 When an SRO has been named as
to Secretary, Securities and Exchange the National Stock Exchange, Inc. a common member’s DEA, all other
Commission, 100 F Street NE., SROs to which the common member
February 9, 2016. belongs are relieved of the responsibility
Washington, DC 20549–1090.
All submissions should refer to File On December 23, 2015, the National to examine the firm for compliance with
Number SR–CBOE–2016–008. This file Stock Exchange, Inc. (‘‘NSX’’) and the the applicable financial responsibility
number should be included on the Financial Industry Regulatory rules. On its face, Rule 17d–1 deals only
subject line if email is used. To help the Authority, Inc. (‘‘FINRA’’) (together with an SRO’s obligations to enforce
Commission process and review your with NSX, the ‘‘Parties’’) filed with the member compliance with financial
comments more efficiently, please use Securities and Exchange Commission responsibility requirements. Rule 17d–1
only one method. The Commission will (‘‘Commission’’ or ‘‘SEC’’) a plan for the does not relieve an SRO from its
post all comments on the Commission’s allocation of regulatory responsibilities,
2 15 U.S.C. 78s(g)(1).
Internet Web site (http://www.sec.gov/ dated December 22, 2015 (‘‘17d–2 Plan’’ 3 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2),
rules/sro.shtml). Copies of the or the ‘‘Plan’’). The Plan was published respectively.
mstockstill on DSK4VPTVN1PROD with NOTICES
submission, all subsequent for comment on January 14, 2016.1 The 4 15 U.S.C. 78q(d)(1).
amendments, all written statements Commission received no comments on 5 See Securities Act Amendments of 1975, Report
with respect to the proposed rule the Plan. This order approves and of the Senate Committee on Banking, Housing, and
Urban Affairs to Accompany S. 249, S. Rep. No. 94–
change that are filed with the declares effective the Plan. 75, 94th Cong., 1st Session 32 (1975).
Commission, and all written 6 17 CFR 240.17d–1 and 17 CFR 240.17d–2,
12 17CFR 200.30–3(a)(12). respectively.
10 15 U.S.C. 78s(b)(3)(A). 1 SeeSecurities Exchange Act Release No. 76856 7 See Securities Exchange Act Release No. 12352
11 17 CFR 240.19b–4(f). (January 8, 2016), 81 FR 1971. (April 20, 1976), 41 FR 18808 (May 7, 1976).
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Document Created: 2016-02-13 03:13:07
Document Modified: 2016-02-13 03:13:07
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| Section | Notices | |
| FR Citation | 81 FR 7867 |
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