82 FR 22580 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fees Schedule

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 93 (May 16, 2017)

[Federal Register Volume 82, Number 93 (Tuesday, May 16, 2017)]
[Notices]
[Pages 22580-22581]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-09816]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80644; File No. SR-CBOE-2017-038]


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

May 10, 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 28, 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

    The Exchange proposes to amend its Fees Schedule. The text of the 
proposed rule change is provided below. 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 Order Routing Subsidy (ORS) and 
Complex Order Routing Subsidy (CORS) Programs (collectively 
``Programs''). The proposed changes will be effective on May 1, 2017. 
By way of background, the ORS and CORS Programs allow CBOE to enter 
into subsidy arrangements with any CBOE Trading Permit Holder (``TPH'') 
(each, a ``Participating TPH'') or Non-CBOE TPH broker-dealer (each a 
``Participating Non-CBOE TPH'') that meet certain criteria and provide 
certain order routing functionalities to other CBOE TPHs, Non-CBOE TPHs 
and/or use such functionalities themselves.\3\ (The term 
``Participant'' as used in this filing refers to either a Participating 
TPH or a Participating Non-CBOE TPH). Participants in the ORS Program 
receive a payment from CBOE for every executed contract for simple 
orders routed to CBOE through their system. CBOE does not make payments 
under the ORS Program with respect to executed contracts in single-
listed options classes traded on CBOE, or with respect to complex 
orders or spread orders. Similarly, participants in the CORS Program 
receive a payment from CBOE for every executed contract for complex 
orders routed to CBOE through their system. CBOE does not make payments 
under the CORS Program with respect to executed contracts in single-
listed options classes traded on CBOE or with respect to simple orders. 
Currently, under both programs the Exchange does not pay a subsidy for 
customer (origin code ``C'') orders but does pay a subsidy of $0.07 per 
contract for all non-customer orders.
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    \3\ See CBOE Fees Schedule, ``Order Router Subsidy Program'' and 
``Complex Order Router Subsidy Program'' tables for more details on 
the ORS and CORS Programs.
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    The Exchange proposes to increase the subsidy for all non-customer 
orders under both programs. The Exchange proposes that ORS/CORS 
participants whose total aggregate non-customer ORS and CORS volume is 
greater than 0.40% of the total national volume (excluding volume in 
options classes included in Underlying Symbol List A, DJX, MXEA, MXEF, 
XSP or XSPAM) will receive an additional payment of $0.07 per contract 
for all executed contracts exceeding that threshold during a calendar 
month. The Exchange notes that another exchange with a similar subsidy 
program offers an additional payment based on the percentage of 
national volume executed by the participant.\4\
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    \4\ See NASDAQ PHLX LLC Pricing Schedule, Preface (B), Customer 
Rebate Program (paying an additional $0.05 per contract rebate if a 
participant qualifies for Market Access and Routing Subsidy payments 
and meets certain volume thresholds as a percentage of national 
customer volume) and Section IV(e) [sic], Other Transaction Fees, 
Market Access and Routing Subsidy.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\5\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \6\ 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) \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)(5).
    \7\ Id.
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    In particular, the Exchange believes the proposed amendments to the 
ORS and CORS Programs are reasonable because the proposed changes still 
affords Participants an opportunity to

[[Page 22581]]

receive additional payments to subsidize the costs associated with 
providing certain order routing functionalities. Additionally, the 
Exchange believes the increased $0.07 per contract subsidy for non-
customer orders when the participating TPHs and participating Non-CBOE 
TPHs reach the applicable volume threshold is reasonable because it is 
similar to the subsidies paid by another exchange under a similar 
subsidy program.\8\ The Exchange also believes it is reasonable, 
equitable and not unfairly discriminatory to increase the subsidy as it 
relates to non-customer orders only under the Programs. Particularly, 
the Exchange notes that customer orders already have the opportunity to 
earn various rebates, discounts or fee caps.\9\ Moreover, the Exchange 
notes that another exchange also does not provide subsidies for 
customer orders.\10\
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    \8\ See supra note 4.
    \9\ See e.g., CBOE Fees Schedule, Customer Large Trade Discount 
and Volume Incentive Program.
    \10\ See supra note 4.
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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. The Exchange does not believe 
that the proposed changes will impose an unnecessary burden on 
intramarket competition because they will apply equally to all 
participating parties. Although the subsidy for orders routed to CBOE 
through a Participant's system only applies to Participants of the 
Programs, the subsidies are designed to encourage the sending of more 
orders to the Exchange, which should provide greater liquidity and 
trading opportunities for all market participants. Additionally, 
although customer orders will not be eligible for the increased subsidy 
under the Programs, customer orders are eligible for other rebates, 
discounts or fee caps.\11\ The Exchange also does not believe that such 
changes will impose any burden on intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. The 
Exchange notes that, should the proposed changes make CBOE more 
attractive for trading, market participants trading on other exchanges 
can always elect to provide order routing functionality to CBOE. 
Additionally, to the extent that the proposed changes to the ORS and 
CORS Programs result in increased trading volume on CBOE and lessened 
volume on other exchanges, the Exchange notes that market participants 
trading on other exchanges can always elect to become TPHs on CBOE to 
take advantage of the trading opportunities.
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    \11\ See e.g., CBOE Fees Schedule, Customer Large Trade Discount 
and Volume Incentive Program.
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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 \12\ and paragraph (f) of Rule 19b-4 \13\ 
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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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CBOE-2017-038 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-2017-038. 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-2017-038 and should be 
submitted on or before June 6, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09816 Filed 5-15-17; 8:45 am]
BILLING CODE 8011-01-P