83 FR 11794 - Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fees Schedule
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 52 (March 16, 2018)
Federal Register Volume 83, Issue 52 (March 16, 2018)
| Page Range | 11794-11797 | |
| FR Document | 2018-05330 |
[Federal Register Volume 83, Number 52 (Friday, March 16, 2018)] [Notices] [Pages 11794-11797] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-05330] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-82855; File No. SR-CBOE-2018-019] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fees Schedule March 12, 2018. 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 February 27, 2018, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') 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. --------------------------------------------------------------------------- \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 its Fees Schedule to adopt the Select Customer Options Reduction (``SCORe'') program. The text of the proposed rule change is also available on the Exchange's website (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. [[Page 11795]] A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to adopt the Select Customer Options Reduction program (``SCORe'').\3\ SCORe is a new discount program for Retail, Non-FLEX Customer (``C'' origin code) volume in the following options classes: SPX (including SPXW), VIX, RUT, MXEA, MXEF & XSP (``Qualifying Classes''). For purposes of this program ``Retail'' orders will be defined as Customer orders for which the original order size (in the case of a simple order) or largest leg size (in the case of a complex order) is 100 contracts or less. Volume executed during Extended Trading Hours (``ETH'') will be aggregated with volume executed during Regular Trading Hours (``RTH''). --------------------------------------------------------------------------- \3\ The proposed SCORe program will be effective March 1, 2018 (i.e., March discounts will be based on February 2018 volume for all participants that sign up prior to the second to last business day of February). --------------------------------------------------------------------------- The SCORe program is available to any Trading Permit Holder (``TPH'') Originating Clearing Firm or non-TPH Originating Clearing Firm. For this program, an ``Originating Clearing Firm'' will be defined as either (a) the executing clearing Options Clearing Corporation (``OCC'') number on any transaction which does not also include a Clearing Member Trading Agreement (``CMTA'') OCC clearing number or (b) the CMTA in the case of any transaction which does include a CMTA OCC clearing number. In order to participate, an Originating Firm must complete the SCORe Registration Form by the second to last business day of the month preceding the month in which their participation in the SCORe program will commence. The Exchange will aggregate an Originating Firm's volume with volume of their OCC clearing affiliates if such affiliates are reported to the Exchange via the SCORe Registration Form and there is at least 75% common ownership between the firms as reflected on each firm's Form BD, Schedule A. ``Originating Firm'' will refer to both an Originating Clearing Firm and any applicable affiliates. The SCORe program will utilize two measures for participation and discounts: (1) The Qualifying Tiers, which determine whether a firm qualifies for the discounts in either Tier A or Tier B and (2) the Discount Tiers, which determine the Originating Firm's applicable discount tiers and corresponding discounts, as further described below. Qualifying Tier B--Retail Volume Percentage in Qualifying Classes Between 35.00% and 69.99% ------------------------------------------------------------------------ Percentage of all Discount per Discount tier customer retail volume retail in qualifying classes contract ------------------------------------------------------------------------ B3............................. 0.00%-5.00%............ 0.00 B2............................. Above 5.00%-26.00%..... 0.04 B1............................. Above 26.00%........... 0.08 ------------------------------------------------------------------------ Qualifying Tier A--Retail Volume Percentage in Qualifying Classes at or Above 70.00% ------------------------------------------------------------------------ Percentage of all Discount per Discount tier customer retail volume retail in qualifying classes contract ------------------------------------------------------------------------ A5............................. 0.00%-5.00%............ $0.00 A4............................. Above 5.00%-37.00%..... 0.08 A3............................. Above 37.00%-41.00%.... 0.15 A2............................. Above 41.00%-47.00%.... 0.19 A1............................. Above 47.00%........... 0.23 ------------------------------------------------------------------------ Volume Multiplier ------------------------------------------------------------------------ MXEA/MXEF XSP RUT ------------------------------------------------------------------------ 99.............................................. 99 2 ------------------------------------------------------------------------ Qualifying Tiers To determine an Originating Firm's Qualifying Tier, the Originating Firm's total Retail volume in the Qualifying Classes will be divided by the Originating Firm's total Customer volume, Retail and non-Retail, in the Qualifying Classes. If an Originating Firm's Retail volume is between 35.00% and 69.99%, the Originating Firm will qualify for Tier B discounts. If an Originating Firm's Retail volume is at or above 70.00%, the Originating Firm will qualify for Tier A discounts. The Qualifying Tier that is applied in a given month is based on an Originating Firm's Retail volume in the prior month (e.g., an Originating Firm's volume in January determines which Qualifying Tier applies in February).\4\ --------------------------------------------------------------------------- \4\ For example, in January, if an Originating Firm executes a total of 1,000,000 Customer (C) contracts in the Qualifying Classes, of which 600,000 contracts qualify as Retail volume, the Originating Firm would have a retail percentage of 60% and qualifies for the B Tier discounts to be applied to the Originating Firm's qualifying Retail Customer volume in February. --------------------------------------------------------------------------- Discount Tiers For the Discount Tier, an Originating Firm's Retail volume in the Qualifying Classes will be divided by total Retail volume in the Qualifying Classes executed on the Exchange. Additionally, SCORe will employ the use of ``product multipliers'' for the Discount Tier only. Multipliers will be applied to MXEF, MXEA, RUT and XSP volume only, as reflected below. Specifically, Retail volume in these products will be multiplied by the values indicated below so that any volume executed by an Originating Firm in these classes will be increased for purposes of the Discount Tier calculation, but not for purposes of calculating the Qualifying Tiers. Additionally, discounts will be applied to executed volume only, not on multiplied volume. If an Originating Firm's volume in a given month includes volume from MXEF, MXEA, [[Page 11796]] RUT or XSP, an average rate will be calculated using the Discount Tiers.\5\ --------------------------------------------------------------------------- \5\ For example, assume Originating Firms A and B both qualify for Tier A discounts in a given month and that the total qualifying contracts for that month is 1.4 million contracts. In that month, Originating Firm A executes 900,000 contracts from orders which qualify as Customer Retail volume, none of which were in product multiplier classes (i.e., MXEA, MXEF, XSP or RUT). Out of a total of 1.4 million total Retail volume executed on the Exchange in the Qualifying Classes, Originating Firm B [sic] has 64.3% (900,000/1,400,000) of all qualifying contracts, and thus receives a discount of up to Tier A1. Originating Firm A therefore receives a discount using the following formula: receives $.00 on 70,000 (5%) contracts, $.08/contract on 448,000 contracts equaling $35,840 (32%) (i.e. above 5% to 37%), $.15/contract on 56,000 contracts equaling $8,400 (4%) (i.e. above 37.00% to 41%), $.19/ contract on 84,000 contracts equaling $15,960 (6%) (i.e., above 41%--47%), and $.23/contract on the remaining 242,000 contracts equaling $55,660, resulting in a total discount of $115,860. In the same month, Originating Firm B executes 900,000 contracts from orders which qualify as Customer Retail volume, of which 10,000 contracts were in XSP. The XSP volume of Originating Firm B is multiplied by 99 (i.e. adding an additional 980,000 [sic] contracts to the qualifying total). Originating Firm B's recalculated total of contracts is now ``1,880,000'' [sic] contracts (i.e., 134.3% of the total 1,400,000), and thus receives a discount up to Tier A1. Originating Firm B therefore receives an average rate using the following formula: the average of: $.00 on 70,000 (5%) contracts, $.08/contract on 448,000 contracts equaling $35,840 (32%) (i.e. above 5% to 37%), $.15/contract on 56,000 contracts equaling $8,400 (4%) (i.e. above 37.00% to 41%), $.19/contract on 84,000 contracts equaling $15,960 (6%) (i.e., above 41%--47%), and $.23/contract on the remaining ``1,222,000'' contracts equaling $281,060, resulting in an average discount rate of $0.182 contract ($341,260/1,880,000) and a total discount of $163,800 ($0.182 x 900,000). --------------------------------------------------------------------------- The Clearing TPH(s) that is billed for an Originating Firm's transactions will receive the applicable discounts. If more than one Clearing TPH was billed transaction fees for an Originating Firm's transactions subject to the SCORe program, the discounts will be applied pro-rata to the Clearing TPHs. 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.\6\ Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) \7\ 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,\8\ 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. --------------------------------------------------------------------------- \6\ 15 U.S.C. 78f(b). \7\ 15 U.S.C. 78f(b)(5). \8\ 15 U.S.C. 78f(b)(4). --------------------------------------------------------------------------- The adoption of SCORe is reasonable because it will allow Customers orders from Originating Firms that register for the program an opportunity to receive certain discounts for reaching certain trading volume thresholds. The Exchange notes that SCORe provides an incremental incentive for Originating Firms to strive for the highest tier level, which provides increasingly higher discounts. The Exchange notes that it is voluntary for Originating Firms to choose whether or not to register for the program. The Exchange believes it's equitable and not unfairly discriminatory to establish the program for Originating Firms only because this is designed to attract a greater number of customer orders in the Qualifying Classes. This increased volume creates greater trading opportunities that benefit all market participants by providing more trading opportunities and tighter spreads. Additionally, the Exchange notes that incentive programs based on Customer volume already exist elsewhere within the industry.\9\ In addition the Exchange believes the proposed program is equitable and not unfairly discriminatory because any Originating Firm may avail itself of this program provided it registers with the Exchange. --------------------------------------------------------------------------- \9\ See e.g., Cboe Options Fees Schedule, the Volume Incentive Program and Frequent Trader; and Nasdaq PHLX LLC Pricing Schedule, Section B. Customer Rebate Program. --------------------------------------------------------------------------- The Exchange believes limiting the SCORe program to the Qualifying Classes is equitable and not unfairly discriminatory because the Exchange has expended considerable time and resources in developing these products. The SCORe program is designed to encourage greater customer options trading in the Qualifying Classes, which, along with bringing greater options trading opportunities to all market participants, would bring in more fees to the Exchange, and such fees can be used to recoup the Exchange's costs and expenditures from developing and maintaining the Qualifying Classes. The Exchange believes limiting the SCORe program to Retail orders is equitable and not unfairly discriminatory because the Exchange wants to encourage more Retail Customer volume in the Qualifying classes, which as noted above will bring greater volume and liquidity, which benefit all market participants by providing more trading opportunities and tighter spreads. Additionally, the Exchange notes other incentive programs already exist for non-Retail Customer orders.\10\ --------------------------------------------------------------------------- \10\ See e.g., Cboe Options Fees Schedule, Customer Large Trade Discount. --------------------------------------------------------------------------- The Exchange believes it's reasonable, equitable and not unfairly discriminatory to adopt a product multiplier because the Exchange wishes to support and encourage customers to provide greater order flow in these particular classes, which allows for price improvement in these products and has a number of positive impacts on the market system. The Exchange also believes however, that it's reasonable, equitable and not unfairly discriminatory to base the discount paid off the amount of transaction fees that would be assessed pursuant to the Fees Schedule (as opposed to being based off the ``theoretical'' number of contracts using the product multiplier) because the Exchange does not want to provide discount on contracts for which it is not also collecting transaction fees. The Exchange also believes it's reasonable, equitable and not unfairly discriminatory to provide that it will aggregate the volume of affiliated Originating Firms to determine whether and what volume thresholds are met as the entities being aggregated share more than majority ownership. Particularly, the Exchange notes multiple incentive programs allow for aggregation between affiliates provided there is at least 75% common ownership between the firms as reflected on each firm's Form BD, Schedule A.\11\ --------------------------------------------------------------------------- \11\ See e.g., Cboe Options Fees Schedule, Footnote 10, which provides the Exchange will aggregate the trading activity of separate Liquidity Provider firms for purposes of the Liquidity Provider Sliding Scale if there is at least 75% common ownership between the firms as reflected on each firm's Form BD, Schedule A. --------------------------------------------------------------------------- Lastly, the Exchange believes it's reasonable, equitable and not unfairly discriminatory to provide the discount to the executing Clearing TPH (or if more than one Clearing TPH, than on a pro-rata basis to the Clearing TPHs) because the executing Clearing TPH is the entity that is assessed transactions fees on the SCORe eligible volume. [[Page 11797]] 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 because, while the discounts apply only to Customer orders from Originating Firms, the Program is designed to encourage increased Customer options volume in the Qualifying Classes, which provides greater trading opportunities for all market participants. Additionally, there is a history in the options markets of providing preferential treatment to Customers orders. The Exchange believes that the proposed rule change will not cause an unnecessary burden on intermarket competition because the Qualifying Classes are products that only trade on Cboe Options. 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 Options 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 \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. --------------------------------------------------------------------------- \12\ 15 U.S.C. 78s(b)(3)(A). \13\ 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-2018-019 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-2018-019. 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 website (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 website 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2018-019 and should be submitted on or before April 6, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\14\ --------------------------------------------------------------------------- \14\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-05330 Filed 3-15-18; 8:45 am] BILLING CODE 8011-01-P
![11794 Federal Register / Vol. 83, No. 52 / Friday, March 16, 2018 / Notices
POSTAL REGULATORY COMMISSION can be accessed through compliance SECURITIES AND EXCHANGE
with the requirements of 39 CFR COMMISSION
[Docket Nos. MC2018–128 and CP2018–178;
MC2018–129 and CP2018–179; MC2018–130 3007.40.
and CP2018–180] The Commission invites comments on [Release No. 34–82855; File No. SR–CBOE–
whether the Postal Service’s request(s) 2018–019]
New Postal Products in the captioned docket(s) are consistent
with the policies of title 39. For Self-Regulatory Organizations; Cboe
AGENCY: Postal Regulatory Commission.
request(s) that the Postal Service states Exchange, Inc.; Notice of Filing and
ACTION: Notice.
concern market dominant product(s), Immediate Effectiveness of a Proposed
SUMMARY: The Commission is noticing a applicable statutory and regulatory Rule Change To Amend the Fees
recent Postal Service filing for the requirements include 39 U.S.C. 3622, 39 Schedule
Commission’s consideration concerning U.S.C. 3642, 39 CFR part 3010, and 39 March 12, 2018.
negotiated service agreements. This CFR part 3020, subpart B. For request(s)
notice informs the public of the filing, that the Postal Service states concern Pursuant to Section 19(b)(1) of the
invites public comment, and takes other competitive product(s), applicable Securities Exchange Act of 1934 (the
administrative steps. statutory and regulatory requirements ‘‘Act’’),1 and Rule 19b–4 thereunder,2
DATES: Comments are due: March 19, include 39 U.S.C. 3632, 39 U.S.C. 3633, notice is hereby given that on February
2018. 39 U.S.C. 3642, 39 CFR part 3015, and 27, 2018, Cboe Exchange, Inc. (the
ADDRESSES: Submit comments 39 CFR part 3020, subpart B. Comment ‘‘Exchange’’ or ‘‘Cboe Options’’) filed
electronically via the Commission’s deadline(s) for each request appear in with the Securities and Exchange
Filing Online system at http:// section II. Commission (the ‘‘Commission’’) the
www.prc.gov. Those who cannot submit proposed rule change as described in
comments electronically should contact II. Docketed Proceeding(s) Items I, II, and III below, which Items
the person identified in the FOR FURTHER have been prepared by the Exchange.
1. Docket No(s).: MC2018–128 and
INFORMATION CONTACT section by The Commission is publishing this
CP2018–178; Filing Title: USPS Request
telephone for advice on filing notice to solicit comments on the
to Add Priority Mail Contract 423 to
alternatives. proposed rule change from interested
Competitive Product List and Notice of
FOR FURTHER INFORMATION CONTACT: persons.
Filing Materials Under Seal; Filing
David A. Trissell, General Counsel, at Acceptance Date: March 9, 2018; Filing I. Self-Regulatory Organization’s
202–789–6820. Authority: 39 U.S.C. 3642 and 39 CFR Statement of the Terms of Substance of
SUPPLEMENTARY INFORMATION: 3020.30 et seq.; Public Representative: the Proposed Rule Change
Table of Contents Timothy J. Schwuchow; Comments Due:
March 19, 2018. The Exchange proposes to amend its
I. Introduction Fees Schedule to adopt the Select
II. Docketed Proceeding(s) 2. Docket No(s).: MC2018–129 and
Customer Options Reduction (‘‘SCORe’’)
CP2018–179; Filing Title: USPS Request
I. Introduction program. The text of the proposed rule
to Add Priority Mail Express & Priority
change is also available on the
The Commission gives notice that the Mail Contract 62 to Competitive Product
Exchange’s website (http://
Postal Service filed request(s) for the List and Notice of Filing Materials
www.cboe.com/AboutCBOE/CBOELegal
Commission to consider matters related Under Seal; Filing Acceptance Date:
RegulatoryHome.aspx), at the
to negotiated service agreement(s). The March 9, 2018; Filing Authority: 39
Exchange’s Office of the Secretary, and
request(s) may propose the addition or U.S.C. 3642 and 39 CFR 3020.30 et seq.;
removal of a negotiated service at the Commission’s Public Reference
Public Representative: Timothy J.
agreement from the market dominant or Room.
Schwuchow; Comments Due: March 19,
the competitive product list, or the 2018. II. Self-Regulatory Organization’s
modification of an existing product Statement of the Purpose of, and
3. Docket No(s).: MC2018–130 and
currently appearing on the market Statutory Basis for, the Proposed Rule
dominant or the competitive product CP2018–180; Filing Title: USPS Request
to Add Priority Mail Contract 424 to Change
list.
Section II identifies the docket Competitive Product List and Notice of In its filing with the Commission, the
number(s) associated with each Postal Filing Materials Under Seal; Filing Exchange included statements
Service request, the title of each Postal Acceptance Date: March 9, 2018; Filing concerning the purpose of and basis for
Service request, the request’s acceptance Authority: 39 U.S.C. 3642 and 39 CFR the proposed rule change and discussed
date, and the authority cited by the 3020.30 et seq.; Public Representative: any comments it received on the
Postal Service for each request. For each Timothy J. Schwuchow; Comments Due: proposed rule change. The text of these
request, the Commission appoints an March 19, 2018. statements may be examined at the
officer of the Commission to represent This Notice will be published in the places specified in Item IV below. The
the interests of the general public in the Federal Register. Exchange has prepared summaries, set
proceeding, pursuant to 39 U.S.C. 505 forth in sections A, B, and C below, of
(Public Representative). Section II also Stacy L. Ruble,
daltland on DSKBBV9HB2PROD with NOTICES
the most significant aspects of such
establishes comment deadline(s) Secretary.
statements.
pertaining to each request. [FR Doc. 2018–05300 Filed 3–15–18; 8:45 am]
The public portions of the Postal BILLING CODE 7710–FW–P
Service’s request(s) can be accessed via
the Commission’s website (http://
www.prc.gov). Non-public portions of 1 15 U.S.C. 78s(b)(1).
the Postal Service’s request(s), if any, 2 17 CFR 240.19b–4.
VerDate Sep<11>2014 21:54 Mar 15, 2018 Jkt 244001 PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 E:\FR\FM\16MRN1.SGM 16MRN1](https://thefederalregister.org/doc/83_FR_11846/page/1.svg)
![11796 Federal Register / Vol. 83, No. 52 / Friday, March 16, 2018 / Notices
RUT or XSP, an average rate will be securities, to remove impediments to The Exchange believes limiting the
calculated using the Discount Tiers.5 and perfect the mechanism of a free and SCORe program to Retail orders is
The Clearing TPH(s) that is billed for open market and a national market equitable and not unfairly
an Originating Firm’s transactions will system, and, in general, to protect discriminatory because the Exchange
receive the applicable discounts. If more investors and the public interest. wants to encourage more Retail
than one Clearing TPH was billed Additionally, the Exchange believes the Customer volume in the Qualifying
transaction fees for an Originating proposed rule change is consistent with classes, which as noted above will bring
Firm’s transactions subject to the SCORe Section 6(b)(4) of the Act,8 which greater volume and liquidity, which
program, the discounts will be applied requires that Exchange rules provide for benefit all market participants by
pro-rata to the Clearing TPHs. the equitable allocation of reasonable providing more trading opportunities
2. Statutory Basis dues, fees, and other charges among its and tighter spreads. Additionally, the
Trading Permit Holders and other Exchange notes other incentive
The Exchange believes the proposed persons using its facilities.
rule change is consistent with the programs already exist for non-Retail
The adoption of SCORe is reasonable Customer orders.10
Securities Exchange Act of 1934 (the because it will allow Customers orders
‘‘Act’’) and the rules and regulations from Originating Firms that register for The Exchange believes it’s reasonable,
thereunder applicable to the Exchange the program an opportunity to receive equitable and not unfairly
and, in particular, the requirements of certain discounts for reaching certain discriminatory to adopt a product
Section 6(b) of the Act.6 Specifically, trading volume thresholds. The multiplier because the Exchange wishes
the Exchange believes the proposed rule Exchange notes that SCORe provides an to support and encourage customers to
change is consistent with the Section incremental incentive for Originating provide greater order flow in these
6(b)(5) 7 requirements that the rules of Firms to strive for the highest tier level, particular classes, which allows for
an exchange be designed to prevent price improvement in these products
which provides increasingly higher
fraudulent and manipulative acts and and has a number of positive impacts on
discounts. The Exchange notes that it is
practices, to promote just and equitable the market system. The Exchange also
voluntary for Originating Firms to
principles of trade, to foster cooperation believes however, that it’s reasonable,
choose whether or not to register for the
and coordination with persons engaged equitable and not unfairly
program.
in regulating, clearing, settling, discriminatory to base the discount paid
The Exchange believes it’s equitable
processing information with respect to, off the amount of transaction fees that
and not unfairly discriminatory to
and facilitating transactions in would be assessed pursuant to the Fees
establish the program for Originating
Firms only because this is designed to Schedule (as opposed to being based off
5 For example, assume Originating Firms A and
attract a greater number of customer the ‘‘theoretical’’ number of contracts
B both qualify for Tier A discounts in a given
month and that the total qualifying contracts for orders in the Qualifying Classes. This using the product multiplier) because
that month is 1.4 million contracts. increased volume creates greater trading the Exchange does not want to provide
In that month, Originating Firm A executes opportunities that benefit all market discount on contracts for which it is not
900,000 contracts from orders which qualify as also collecting transaction fees.
Customer Retail volume, none of which were in participants by providing more trading
product multiplier classes (i.e., MXEA, MXEF, XSP opportunities and tighter spreads. The Exchange also believes it’s
or RUT). Out of a total of 1.4 million total Retail Additionally, the Exchange notes that reasonable, equitable and not unfairly
volume executed on the Exchange in the Qualifying
Classes, Originating Firm B [sic] has 64.3%
incentive programs based on Customer discriminatory to provide that it will
(900,000/1,400,000) of all qualifying contracts, and volume already exist elsewhere within aggregate the volume of affiliated
thus receives a discount of up to Tier A1. the industry.9 In addition the Exchange Originating Firms to determine whether
Originating Firm A therefore receives a discount believes the proposed program is and what volume thresholds are met as
using the following formula: receives $.00 on
70,000 (5%) contracts, $.08/contract on 448,000
equitable and not unfairly the entities being aggregated share more
contracts equaling $35,840 (32%) (i.e. above 5% to discriminatory because any Originating than majority ownership. Particularly,
37%), $.15/contract on 56,000 contracts equaling Firm may avail itself of this program the Exchange notes multiple incentive
$8,400 (4%) (i.e. above 37.00% to 41%), $.19/ provided it registers with the Exchange.
contract on 84,000 contracts equaling $15,960 (6%)
programs allow for aggregation between
(i.e., above 41%—47%), and $.23/contract on the The Exchange believes limiting the affiliates provided there is at least 75%
remaining 242,000 contracts equaling $55,660, SCORe program to the Qualifying common ownership between the firms
resulting in a total discount of $115,860. Classes is equitable and not unfairly as reflected on each firm’s Form BD,
In the same month, Originating Firm B executes discriminatory because the Exchange
900,000 contracts from orders which qualify as
Schedule A.11
Customer Retail volume, of which 10,000 contracts
has expended considerable time and
Lastly, the Exchange believes it’s
were in XSP. The XSP volume of Originating Firm resources in developing these products.
reasonable, equitable and not unfairly
B is multiplied by 99 (i.e. adding an additional The SCORe program is designed to
980,000 [sic] contracts to the qualifying total). discriminatory to provide the discount
encourage greater customer options
Originating Firm B’s recalculated total of contracts
trading in the Qualifying Classes, to the executing Clearing TPH (or if
is now ‘‘1,880,000’’ [sic] contracts (i.e., 134.3% of more than one Clearing TPH, than on a
the total 1,400,000), and thus receives a discount up which, along with bringing greater
to Tier A1. Originating Firm B therefore receives an options trading opportunities to all pro-rata basis to the Clearing TPHs)
average rate using the following formula: the market participants, would bring in because the executing Clearing TPH is
average of: $.00 on 70,000 (5%) contracts, $.08/
more fees to the Exchange, and such the entity that is assessed transactions
contract on 448,000 contracts equaling $35,840 fees on the SCORe eligible volume.
(32%) (i.e. above 5% to 37%), $.15/contract on fees can be used to recoup the
56,000 contracts equaling $8,400 (4%) (i.e. above Exchange’s costs and expenditures from
daltland on DSKBBV9HB2PROD with NOTICES
37.00% to 41%), $.19/contract on 84,000 contracts 10 See e.g., Cboe Options Fees Schedule,
equaling $15,960 (6%) (i.e., above 41%—47%), and
developing and maintaining the
Customer Large Trade Discount.
$.23/contract on the remaining ‘‘1,222,000’’ Qualifying Classes. 11 See e.g., Cboe Options Fees Schedule, Footnote
contracts equaling $281,060, resulting in an average 10, which provides the Exchange will aggregate the
discount rate of $0.182 contract ($341,260/ 8 15
U.S.C. 78f(b)(4). trading activity of separate Liquidity Provider firms
1,880,000) and a total discount of $163,800 ($0.182 9 See
e.g., Cboe Options Fees Schedule, the for purposes of the Liquidity Provider Sliding Scale
x 900,000). Volume Incentive Program and Frequent Trader; if there is at least 75% common ownership between
6 15 U.S.C. 78f(b).
and Nasdaq PHLX LLC Pricing Schedule, Section B. the firms as reflected on each firm’s Form BD,
7 15 U.S.C. 78f(b)(5). Customer Rebate Program. Schedule A.
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![Federal Register / Vol. 83, No. 52 / Friday, March 16, 2018 / Notices 11797
B. Self-Regulatory Organization’s Electronic Comments SECURITIES AND EXCHANGE
Statement on Burden on Competition COMMISSION
• Use the Commission’s internet
The Exchange does not believe that comment form (http://www.sec.gov/ [Release No. 34–82857; File No. SR–
the proposed rule change will impose NYSEARCA–2018–14]
rules/sro.shtml); or
any burden on competition that is not
necessary or appropriate in furtherance • Send an email to rule-comments@ Self-Regulatory Organizations; NYSE
of the purposes of the Act because, sec.gov. Please include File Number SR– Arca, Inc.; Notice of Filing and
while the discounts apply only to CBOE–2018–019 on the subject line. Immediate Effectiveness of Proposed
Customer orders from Originating Rule Change To Expand the Short
Paper Comments Term Options Series Program
Firms, the Program is designed to
encourage increased Customer options • Send paper comments in triplicate March 12, 2018.
volume in the Qualifying Classes, which to Secretary, Securities and Exchange Pursuant to Section 19(b)(1) 1 of the
provides greater trading opportunities Commission, 100 F Street NE, Securities Exchange Act of 1934 (the
for all market participants. Additionally, Washington, DC 20549–1090. ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
there is a history in the options markets
All submissions should refer to File notice is hereby given that, on March 1,
of providing preferential treatment to
2018, NYSE Arca, Inc. (the ‘‘Exchange’’
Customers orders. The Exchange Number SR–CBOE–2018–019. This file
or ‘‘NYSE Arca’’) filed with the
believes that the proposed rule change number should be included on the
Securities and Exchange Commission
will not cause an unnecessary burden subject line if email is used. To help the (the ‘‘Commission’’) the proposed rule
on intermarket competition because the Commission process and review your change as described in Items I and II
Qualifying Classes are products that comments more efficiently, please use below, which Items have been prepared
only trade on Cboe Options. To the only one method. The Commission will by the self-regulatory organization. The
extent that the proposed changes make post all comments on the Commission’s Commission is publishing this notice to
the Exchange a more attractive internet website (http://www.sec.gov/ solicit comments on the proposed rule
marketplace for market participants at rules/sro.shtml). Copies of the change from interested persons.
other exchanges, such market
submission, all subsequent
participants are welcome to become I. Self-Regulatory Organization’s
amendments, all written statements
Cboe Options market participants. Statement of the Terms of Substance of
with respect to the proposed rule
the Proposed Rule Change
C. Self-Regulatory Organization’s change that are filed with the
Statement on Comments on the Commission, and all written The Exchange proposes to expand the
Proposed Rule Change Received From communications relating to the Short Term Options Series (‘‘STOS’’)
Members, Participants, or Others proposed rule change between the Program to allow Monday expirations
for SPDR S&P 500 ETF Trust (‘‘SPY’’)
The Exchange neither solicited nor Commission and any person, other than
options. The proposed rule change is
received comments on the proposed those that may be withheld from the
rule change. available on the Exchange’s website at
public in accordance with the
www.nyse.com, at the principal office of
III. Date of Effectiveness of the provisions of 5 U.S.C. 552, will be the Exchange, and at the Commission’s
Proposed Rule Change and Timing for available for website viewing and Public Reference Room.
Commission Action printing in the Commission’s Public
Reference Room, 100 F Street NE, II. Self-Regulatory Organization’s
The foregoing rule change has become Statement of the Purpose of, and
Washington, DC 20549 on official
effective pursuant to Section 19(b)(3)(A) Statutory Basis for, the Proposed Rule
of the Act 12 and paragraph (f) of Rule business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the Change
19b–4 13 thereunder. At any time within
60 days of the filing of the proposed rule filing also will be available for In its filing with the Commission, the
change, the Commission summarily may inspection and copying at the principal self-regulatory organization included
temporarily suspend such rule change if office of the Exchange. All comments statements concerning the purpose of,
it appears to the Commission that such received will be posted without change. and basis for, the proposed rule change
action is necessary or appropriate in the Persons submitting comments are and discussed any comments it received
public interest, for the protection of cautioned that we do not redact or edit on the proposed rule change. The text
investors, or otherwise in furtherance of personal identifying information from of those statements may be examined at
the purposes of the Act. If the comment submissions. You should the places specified in Item IV below.
Commission takes such action, the submit only information that you wish The Exchange has prepared summaries,
Commission will institute proceedings to make available publicly. All set forth in sections A, B, and C below,
to determine whether the proposed rule of the most significant parts of such
submissions should refer to File
change should be approved or statements.
Number SR–CBOE–2018–019 and
disapproved. should be submitted on or before April A. Self-Regulatory Organization’s
IV. Solicitation of Comments 6, 2018. Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Interested persons are invited to For the Commission, by the Division of
Change
submit written data, views, and Trading and Markets, pursuant to delegated
arguments concerning the foregoing, authority.14 1. Purpose
daltland on DSKBBV9HB2PROD with NOTICES
including whether the proposed rule Eduardo A. Aleman, The Exchange proposes to expand the
change is consistent with the Act. Assistant Secretary. STOS Program to allow Monday
Comments may be submitted by any of [FR Doc. 2018–05330 Filed 3–15–18; 8:45 am] expirations for SPY options. In
the following methods: BILLING CODE 8011–01–P
1 15 U.S.C. 78s(b)(1).
12 15 U.S.C. 78s(b)(3)(A). 2 15 U.S.C. 78a.
13 17 CFR 240.19b–4(f). 14 17 CFR 200.30–3(a)(12). 3 17 CFR 240.19b–4.
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Document Created: 2018-03-16 01:12:04
Document Modified: 2018-03-16 01:12:04
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 83 FR 11794 |
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