82 FR 18802 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MDX Fees Schedule

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 76 (April 21, 2017)

[Federal Register Volume 82, Number 76 (Friday, April 21, 2017)]
[Notices]
[Pages 18802-18805]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-08059]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80470; File No. SR-CBOE-2017-030]


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

April 17, 2017.
    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 April 3, 2017, 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

    Chicago Board Options Exchange, Incorporated (the ``Exchange'' or 
``CBOE'') proposes to amend its MDX 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

[[Page 18803]]

Exchange has prepared summaries, set forth in sections A, B, and C 
below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to make a number of changes to the Fees 
Schedule of the Exchange's affiliate Market Data Express, LLC 
(``MDX''). The purpose of the proposed rule change is to amend fees for 
the Best Bid and Offer (``BBO'') data feed. This data feed is made 
available by MDX.
BBO Data Feed
    The BBO Data Feed is a real-time data feed that includes the 
following information: (i) Outstanding quotes and standing orders at 
the best available price level on each side of the market; (ii) 
executed trades time, size, and price; (iii) totals of customer versus 
non-customer contracts at the BBO; (iv) all-or-none contingency orders 
priced better than or equal to the BBO; (v) expected opening price and 
expected opening size; (vi) end-of-day summaries by product, including 
open, high, low, and closing price during the trading session; (vi) 
recap messages any time there is a change in the open, high, low or 
last sale price of a listed option; (vii) Complex Order Book (``COB'') 
information; and (viii) product IDs and codes for all listed options 
contracts. The quote and last sale data contained in the BBO data feed 
is identical to the data sent to the Options Price Reporting Authority 
for redistribution to the public.
Background
    Fees for the BBO data feed are payable by all ``Customers.'' A 
``Customer'' is any person, company or other entity that, pursuant to a 
market data agreement with MDX, is entitled to receive data, either 
directly from MDX or through an authorized redistributor (i.e., a 
Customer or an extranet service provider), whether that data is 
distributed externally or used internally.\3\ In addition to the BBO 
Data Fee assessed to Customers, the Exchange assesses reduced ``user 
fees'' for entities who access BBO data through a Display Only Service 
or as a Floor Broker User.
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    \3\ The MDX fee schedule for CBOE data is located at https://www.cboe.org/MDX/CSM/OBOOKMain.aspx.
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    In March 2017, the Exchange adopted a fee of $100 per month, per 
Approved Third-Party Device, for Floor Broker Users accessing the BBO 
data feed on the Exchange floor.\4\ An ``Approved Third-Party Device'' 
means any computer, workstation or other item of equipment, fixed or 
portable, that receives, accesses and/or displays data in visual, 
audible or other form that has been provided by a third-party and that 
has been approved, by CBOE, for use on the CBOE trading floor. A 
``Floor Broker User'' is a person or entity registered with CBOE as a 
floor broker pursuant to CBOE Rules.
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    \4\ See Securities Exchange Act Release No. 80286 (March 21, 
2017), 82 FR 15247 (March 27, 2015) (SR-CBOE-2017-022).
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    Floor Brokers use the BBO Data Feed primarily to comply with 
customer priority obligations, such as those outlined in CBOE Rule 6.45 
(as mentioned above, the BBO data includes customer contracts at the 
BBO). Floor Brokers who receive the BBO data feed via Approved Third 
Party Device are not considered ``Customers'' of MDX to whom the BBO 
Data Fee applies (unless the Floor Broker has a separate market data 
agreement in place with MDX) and accordingly are not charged the BBO 
Data Fee. Additionally, a third-party vendor of an Approved Third-Party 
Device is not a Customer unless it has a market data agreement in place 
with MDX.
    In addition to Floor Broker User Fees, the Exchange assesses User 
fees payable for external Display Only Service users (Devices or user 
IDs of Display Only Service users who receive data from a Customer and 
are not employees or natural person independent contractors of the 
Customer, the Customer's affiliates or an authorized service 
facilitator). For the purpose of Display Only Service users, a 
``Device'' means any computer, workstation or other item of equipment, 
fixed or portable, that receives, accesses and/or displays data in 
visual, audible or other form.
Fee Cap
    The Exchange is proposing Floor Broker User fees be subject to a 
monthly cap of $1000 per Trading Permit Holder (``TPH'') firm. The cap 
will limit the amount of Floor Broker User fees a TPH firm will pay in 
a calendar month to $1000 in the event said TPH firm accesses the BBO 
data feed through more than 10 Approved Third-Party Devices. As Floor 
Broker Users are using the BBO data primarily to meet their priority 
obligations (and not for proprietary trading purposes), the Exchange 
believes it is appropriate to limit the amount of Floor Broker User 
fees to be assessed to a TPH firm.
    By way of example, if a TPH firm accesses the BBO data feed through 
14 Approved Third-Party Devices, said TPH firm would currently be 
assessed Floor Broker User fees of $1400 per month (14 Approved Third-
Party Devices x $100 per Approved Third-Party Device = $1400). Under 
the proposed cap, the same TPH firm accessing the BBO data feed through 
14 Approved Third-Party Devices would be assessed Floor Broker User 
fees of $1000 per month (14 Approved Third-Party Devices x $100 per 
Approved Third-Party Device (subject to a monthly cap of $1000 per TPH 
firm) = $1000).
Additional MDX Fee Schedule Updates
    The Exchange is proposing a number of additional updates to the MDX 
fee schedule to clarify certain items as they relate to Floor Broker 
User fees or User fees for Display Only Users. First, the Exchange is 
specifying that a Floor Broker User, as defined below, is not a 
Customer unless it has a market data agreement in place with MDX. In 
addition, the Exchange is changing the name of ``User fees'' payable 
for external Display Only Service Users to ``Display Only User fees'' 
in order to reduce confusion with the BBO Data fee or Floor Broker User 
fees. Finally, the Exchange is deleting language on the MDX schedule 
stating that ``Floor Broker Users may directly interact with the CBOE 
Hybrid Order Handling System and view and manipulate data using their 
Approved Third-Party Devices, but not save, copy, export or transfer 
the data or any results of a manipulation to any other computer 
hardware, software or media, except for printing it to paper or other 
non-magnetic media''. The Exchange believes that, as outlined above, 
``Floor Broker Users'' and ``Approved Third-Party Devices'' are 
adequately defined elsewhere in the MDX fee schedule. The Exchange does 
not believe the deleted language is necessary to further clarify or 
limit what a Floor Broker User may or may not do with the BBO data it 
receives via Approved Third-Party Device.
Display Only User and Floor Broker User Fee Reporting
    In addition to the clarifications above, the Exchange is adding 
language to the MDX schedule to explain the reporting process used to 
determine applicable Display Only User fees and Floor Broker User fees. 
With regard to the Display Only User fees, the proposed language 
states, ``Customers who distribute BBO Data to external users via a 
Display Only service must report to MDX the number of authorized 
external devices that

[[Page 18804]]

receive BBO data from the Customer during a calendar month within 15 
days after such month in the manner and format specified by MDX from 
time to time to determine applicable fees.'' With regard to the Floor 
Broker User fees, the proposed language states, ``Third-party vendors 
who distribute BBO Data to Floor Broker Users via Approved Third-Party 
Devices must report to MDX the number of Approved Third-Party Devices 
that receive BBO data from such third party vendor during a calendar 
month within 15 days after such month in the manner and format 
specified by MDX from time to time to determine applicable fees.'' 
Including the reporting processes used to determine applicable Display 
Only User fees and Floor Broker User fees on the MDX fee schedule will 
provide greater clarity to both Customers who provide Display Only 
Services to users and third-party vendors of Approved Third-Party 
Devices. Furthermore, including the reporting processes will ensure the 
Exchange accurately charges fees for these services.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\5\ Specifically, the 
Exchange believes the proposed rule change is consistent with Section 
6(b)(4) of the Act,\6\ which requires that Exchange rules provide for 
the equitable allocation of reasonable dues, fees, and other charges 
among its Trading Permit Holders and other persons using its 
facilities. The Exchange also believes the proposed rule change is 
consistent with the Section 6(b)(5) \7\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed Floor Broker User fee cap is 
equitable and not unfairly discriminatory because it would apply 
equally to all TPH firms using Approved Third-Party Devices on the 
Exchange trading floor. Furthermore, the Exchange believes it is 
reasonable, equitable and not unfairly discriminatory to cap Floor 
Broker User Fees because Floor Broker Users generally use the data for 
the limited purpose of meeting their order priority obligations (as 
opposed to using the data for proprietary trading activity).
    The Exchange believes the additional updates to the MDX fee 
schedule related to further defining Floor Broker users and the 
reporting obligations of Customers and third-party vendors of Approved 
Third Party Devices are designed to add clarity and reduce confusion 
related to the BBO Data Feed and will therefore lead to the equitable 
allocation of reasonable dues, fees, and other charges among its TPHs 
and other persons using its facilities.

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

    The Exchange 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. The proposed fee cap on 
Floor Broker User Fees will not have an impact on intramarket 
competition as it will apply to all TPH firms equally who use more than 
10 Approved Third-Party Devices. The other clarifications made to the 
fee schedule related to further defining Floor Broker users and the 
reporting obligations of Customers and third-party vendors of Approved 
Third Party Devices will not have an impact on intramarket competition 
as they are non-substantive and only designed to add clarity to the fee 
schedule and reduce confusion among TPHs and other persons accessing 
the BBO data feed.
    Furthermore, the Exchange does not believe that the proposed fee 
cap will cause any unnecessary burden on intermarket competition 
because the proposed change only affects trading on the Exchange's 
trading floor. To the extent that the proposed changes make the 
Exchange a more attractive marketplace for market participants at other 
exchanges, such market participants are welcome to become CBOE market 
participants.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \8\ and paragraph (f) of Rule 19b-4 \9\ 
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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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File No. SR-CBOE-2017-030 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 No. SR-CBOE-2017-030. 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

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information that you wish to make available publicly. All submissions 
should refer to File No. SR-CBOE-2017-030, and should be submitted on 
or before May 12, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2017-08059 Filed 4-20-17; 8:45 am]
BILLING CODE 8011-01-P