83 FR 11803 - Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Establish Fees for Options That Overlie the S&P Select Sector Index Options
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 52 (March 16, 2018)
Federal Register Volume 83, Issue 52 (March 16, 2018)
| Page Range | 11803-11807 | |
| FR Document | 2018-05329 |
[Federal Register Volume 83, Number 52 (Friday, March 16, 2018)] [Notices] [Pages 11803-11807] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-05329] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-82854; File No. SR-CBOE-2018-012] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Establish Fees for Options That Overlie the S&P Select Sector Index Options 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 March 1, 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 establish fees for options that overlie the S&P Select Sector Index options (``Sector Index options''). The text of the [[Page 11804]] proposed rule change is provided in Exhibit 5. 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. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose On October 4, 2017, the Exchange submitted a proposed rule change to amend certain rules in connection with listing S&P Select Sector Index \3\ options under generic narrow-based listing standards, which became effective on November 3, 2017.\4\ The Exchange rules currently permit the Exchange to list and trade options overlying each S&P Select Sector Index (``Sector Index options''). The Exchange proposes to establish fees for Sector Index options. --------------------------------------------------------------------------- \3\ There are ten S&P Select Sector Indexes: S&P Financial Select Sector Index (IXM), S&P Energy Select Sector Index (IXE), S&P Technology Select Sector Index (IXT), S&P Health Care Select Sector Index (IXV), S&P Utilities Select Sector Index (IXU), S&P Consumer Staples Select Sector Index (IXR), S&P Industrials Select Sector Index (IXI), S&P Consumer Discretionary Select Sector Index (IXY), S&P Materials Select Sector Index (IXB), and S&P Real Estate Select Sector Index (IXRE). The options listing symbols for options overlying these indexes will be: SIXM, SIXE, SIXT, SIXV, SIXU, SIXR, SIXI, SIXY, SIXB, and SIXRE, respectively. \4\ Securities Exchange Act Release No. 81879 (October 16, 2017), 82 FR 48858 (October 20, 2017) (SR-CBOE-2017-065). --------------------------------------------------------------------------- By way of background, a specific set of proprietary products are commonly included or excluded from a variety of programs, qualification calculations and transaction fees. In lieu of listing out these products in various sections of the Fees Schedule, the Exchange uses the term ``Underlying Symbol List A'' to represent these products.\5\ The Exchange notes the reason the products in Underlying Symbol List A are often collectively included or excluded from certain programs, qualification calculations and transactions fees is because the Exchange has expended considerable resources developing and maintaining its proprietary, exclusively listed products. Similar to the products currently represented by ``Underlying Symbol List A,'' Sector Index options are not listed on any other exchange. As such, the Exchange proposes to establish fees for Sector Index options similar to those applicable to options overlying the indexes in Underlying Symbol List A, as well as similarly exclude those options from several programs from products [sic] in Underlying Symbol List A are excluded. The Exchange does not propose to add Sector Index options to Underlying Symbol List A. In lieu of listing out these products in various sections of the Fees Schedule, the Exchange proposes to refer to Sector Indexes in the Fees Schedule (which is defined in proposed footnote 47). --------------------------------------------------------------------------- \5\ Currently, Underlying Symbol List A is defined in Footnote 34 and represents the following proprietary products: OEX, XEO, RUT, RLG, RLV, RUI, AWDE, FTEM, FXTM, UKXM, SPX (including SPXW), VIX, VOLATILITY INDEXES and binary options. --------------------------------------------------------------------------- Specifically, like products in Underlying Symbol List A, the Exchange proposes to except Sector Index options from the Volume Incentive Program (``VIP''),\6\ the Marketing Fee,\7\ the Clearing Trading Permit Holder Fee Cap (``Fee Cap''),\8\ exemption from fees for facilitation orders,\9\ the AIM Contra Execution Fee,\10\ the CFLEX AIM Response Fee,\11\ the Clearing Trading Permit Holder Proprietary and/or their Non-Trading Permit Holder Affiliates transaction fee cap for all non-facilitation business executed in AIM or open outcry, or as a QCC or FLEX transaction,\12\ the Order Router Subsidy (``ORS'') and Complex Order Router Subsidy (``CORS'') Programs,\13\ the per contract per side surcharge for noncustomer complex order executions that remove liquidity from the COB and auction response in the complex order auction and AIM,\14\ and the calculation of qualifying volume for rebates for Floor Broker Trading Permit Holder Trading Permit Fees.\15\ --------------------------------------------------------------------------- \6\ See Cboe Options Fees Schedule, Volume Incentive Program (VIP) table and Footnote 36. \7\ See Cboe Options Fees Schedule, Footnote 6. \8\ See Cboe Options Fees Schedule, Footnote 11. \9\ See Cboe Options Fees Schedule, Footnotes 11 and 12. \10\ See Cboe Options Fees Schedule, Footnote 18. \11\ See Cboe Options Fees Schedule, Footnote 20. \12\ See Cboe Options Fees Schedule, Footnote 22. \13\ See Cboe Options Fees Schedule, Order Router Subsidy Program and Complex Order Router Subsidy Program table and Footnotes 29 and 30. \14\ See Cboe Options Fees Schedule, Footnote 35. \15\ See Cboe Options Fees Schedule, Footnote 25. --------------------------------------------------------------------------- The Exchange does intend to apply to Sector Index options the Liquidity Provider Sliding Scale.\16\ Although the Exchange proposes fees for Sector Index options similar to those established for products in ``Underlying Symbol List A,'' the Exchange proposes to apply to Sector Index options the Liquidity Provider Sliding Scale to encourage Market-Makers to provide liquidity in these classes and believes that including them in this sliding scale will provide such incentive. --------------------------------------------------------------------------- \16\ See Cboe Options Fees Schedule, Specified Proprietary Index Options Rate Table--Underlying Symbol List A and Sector Indexes. --------------------------------------------------------------------------- The Exchange next proposes to establish transaction fees for Sector Index options. Particularly, the Exchange proposes to assess the same fees for Sector Index options as apply to OEX Weekly and XEO Weekly options, except for Market-Maker transaction fees, which will be subject to the Liquidity Provider Sliding Scale as described above, and except for Clearing Trading Permit Holder Proprietary transactions, which will be $0.25 rather than subject to the Proprietary Products Sliding Scale for Clearing Trading Permit Holder Proprietary Orders. Transaction fees for Sector Index options will be as follows (all listed rates are per contract): \17\ --------------------------------------------------------------------------- \17\ See id. ------------------------------------------------------------------------ ------------------------------------------------------------------------ Customer (origin code C)..... $0.30. Clearing Trading Permit $0.25.\18\ Holder Proprietary (origin codes F and L). Market-Maker (origin code M). Liquidity Provider Sliding Scale. Joint Back-Office, Broker- $0.40. Dealer, Non-Trading Permit Holder Market-Maker, Professional/Voluntary Professional (origin codes BNWJ). ------------------------------------------------------------------------ [[Page 11805]] The Exchange also proposes to apply to Sector Index options the CFLEX Surcharge Fee of $0.10 per contract for all Sector Index option orders executed electronically on CFLEX, capped at $250 per trade (i.e., first 2,500 contracts per trade).\19\ The CFLEX Surcharge Fee assists the Exchange in recouping the cost of developing and maintaining the CFLEX system. The Exchange notes that the CFLEX Surcharge Fee (and $250 cap) also applies to other proprietary index options, including products in Underlying Symbol List A. --------------------------------------------------------------------------- \18\ Currently, there is one line in the Specified Proprietary Index Options Rate Table for Clearing Trading Permit Holder Proprietary, pursuant to which all products subject to that table (Underlying Symbol List A) were [sic] subject to the Proprietary Products Sliding Scale for Clearing Trading Permit Holder Proprietary Orders. The proposed rule change divides Clearing Trading Permit Holder Proprietary line in the transaction rate table into two, indicating that Underlying Symbol List A will continue to be subject to the sliding scale, and Sector Indexes will be $0.25. \19\ See id. [sic]. --------------------------------------------------------------------------- The Exchange currently assesses an Index License Surcharge of $0.10 per contract for all non-customer orders for products in Underlying Symbol A except RUT and SPX. The Exchange proposes to assess a Surcharge of $0.10 per contract in order to recoup the costs associated with the Sector Index license. In order to promote and encourage trading of Sector Index options, the Exchange proposes to waive the Index License Surcharge for Sector Index option transactions through June 30, 2018.\20\ --------------------------------------------------------------------------- \20\ See id. [sic]. --------------------------------------------------------------------------- 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.\21\ Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) \22\ 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) \23\ requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange also believes the proposed rule change is consistent with Section 6(b)(4) of the Act,\24\ 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. --------------------------------------------------------------------------- \21\ 15 U.S.C. 78f(b). \22\ 15 U.S.C. 78f(b)(5). \23\ Id. \24\ 15 U.S.C. 78f(b)(4). --------------------------------------------------------------------------- Particularly, the Exchange believes it is reasonable to charge different fee amounts to different user types in the manner proposed because the proposed fees are consistent with the price differentiation that exists today for other index products, including those in Underlying Symbol A. The Exchange also believes that the proposed fee amounts for Sector Index option orders are reasonable because the proposed fee amounts are the same already assessed for other proprietary products (i.e. OEX Weeklys and XEO Weeklys), as well as are within the range of amounts assessed for the Exchange's other proprietary products.\25\ --------------------------------------------------------------------------- \25\ See Cboe Options Fees Schedule, Specified Proprietary Index Options Rate Table--Underlying Symbol A and Sector Indexes. --------------------------------------------------------------------------- The Exchange believes that it is equitable and not unfairly discriminatory to assess lower fees to Customers as compared to certain other market participants except Market-Makers and Clearing Trading Permit Holders because Customer order flow enhances liquidity on the Exchange for the benefit of all market participants. Specifically, customer liquidity benefits all market participants by providing more trading opportunities, which attracts Market-Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. The fees offered to customers are intended to attract more customer trading volume to the Exchange. Moreover, the options industry has a long history of providing preferential pricing to Customers, and the Exchange's current Fees Schedule currently does so in many places, as do the fees structures of many other exchanges. Finally, all fee amounts listed as applying to Customers will be applied equally to all Customers (meaning that all Customers will be assessed the same amount). The Exchange believes that it is equitable and not unfairly discriminatory to, [sic] assess lower fees to Market-Makers pursuant to the Liquidity Provider Sliding Scale as compared to other market participants because Market-Makers, unlike other market participants, take on a number of obligations, including quoting obligations, that other market participants do not have. Further, these lower fees offered to Market-Makers are intended to incent Market-Makers to quote and trade more on the Exchange, thereby providing more trading opportunities for all market participants. Additionally, the proposed fee for Market-Makers will be applied equally to all Market-Makers (meaning that all Market-Makers will be subject to the Liquidity Provider Sliding Scale). This concept also applies to orders from all other origins. It should also be noted that all fee amounts described herein are intended to attract greater order flow to the Exchange in Sector Index options, which should therefore serve to benefit all Exchange market participants. Similarly, it is equitable and not unfairly discriminatory to assess lower fees to Clearing Trading Permit Holder Proprietary orders than those of other market participants (except Market-Makers) because Clearing Trading Permit Holders also have a number of obligations (such as membership with the Options Clearing Corporation), significant regulatory burdens, and financial obligations, that other market participants do not need to take on. The Exchange also notes that the Sector Index option fee amounts for each separate type of market participant will be assessed equally to all such market participants (i.e. all Broker-Dealer orders will be assessed the same amount, all Joint Back-Office orders will be assessed the same amount, etc.). The Exchange believes the proposed transaction fee of $0.25 per contract for Clearing Trading Permit Holders is reasonable, equitable, and not unfairly discriminatory because is comparable to the amount of transaction fees for Clearing Trading Permit Holders in other proprietary products.\26\ --------------------------------------------------------------------------- \26\ See Cboe Options Fee Schedule, Cboe Options Clearing Trading Permit Holder Proprietary Products Sliding Scales Table. The maximum transaction fee per contract in the Table B (related to the VIX Sliding Scale) part of that table is $0.25. --------------------------------------------------------------------------- The Exchange believes the proposed transaction fees for Brokers Dealers, Non-Trading Permit Holder Market-Makers, Professionals/ Voluntary Professionals, JBOs and Customers are reasonable because they are the same as those assessed for transactions in certain other proprietary products.\27\ The [[Page 11806]] Exchange also notes that the Sector Index option fee amounts for each separate type of market participant will be assessed equally to all such market participants (i.e. all Broker-Dealer orders will be assessed the same amount, all Joint Back-Office orders will be assessed the same amount, etc.). --------------------------------------------------------------------------- \27\ Id. --------------------------------------------------------------------------- The Exchange believes that assessing an Index License Surcharge Fee of $0.10 per contract to Sector Index option transactions is reasonable because the Surcharge helps recoup some of the costs associated with the license for Sector Index options. Additionally, the Exchange notes that the Surcharge amount is the same as, and in some cases lower than, the amount assessed as an Index License Surcharge to other index products. The proposed Surcharge is also equitable and not unfairly discriminatory because the amount will be assessed to all market participants to whom the Surcharge applies. Not applying the Sector Index License Surcharge Fee to Customer orders is equitable and not unfairly discriminatory because this is designed to attract Customer Sector Index option orders, which increases liquidity and provides greater trading opportunities to all market participants. The Exchange believes it is reasonable, equitable and not unfairly discriminatory to waive the Index License Surcharge because it promotes and encourages trading of these new products and applies to all Trading Permit Holders. Similarly, the Exchange believes assessing a CFLEX Surcharge Fee of $0.10 per contract for all Sector Index option orders executed electronically on CFLEX and capping it at $250 (i.e., first 2,500 contracts per trade) is reasonable because it is the same amount currently charged to other proprietary index products for the same transactions.\28\ The proposed Surcharge is also equitable and not unfairly discriminatory because the amount will be assessed to all market participants to whom the CFLEX Surcharge applies. --------------------------------------------------------------------------- \28\ See Cboe Options Fees Schedule, Index Options Rate Table-- All Index Products Excluding Underlying Symbol List A and Sector Indexes, CFLEX Surcharge Fee and Specified Proprietary Index Options Rate Table--Underlying Symbol List A and Sector Indexes, CFLEX Surcharge Fee. --------------------------------------------------------------------------- Excepting VIP, the Marketing Fee, the Fee Cap, exemption from fees for facilitation orders, the AIM Contra Execution Fee, the CFLEX AIM Response Fee, the Clearing Trading Permit Holder Proprietary and/or their Non-Trading Permit Holder Affiliates transaction fee cap for all non-facilitation business executed in AIM or open outcry, or as a QCC or FLEX transaction, the ORS and CORS Programs,\29\ the per contract per side surcharge for noncustomer complex order executions that remove liquidity from the COB and auction response in the complex order auction and AIM,\30\ and the calculation of qualifying volume for rebates for Floor Broker Trading Permit Holder Trading Permit Fees is reasonable because other proprietary products are excepted from those same items. This is equitable and not unfairly discriminatory for the same reason; it seems equitable to except Sector Index options from items on the Fees Schedule from which other proprietary products are also excepted. --------------------------------------------------------------------------- \29\ See Cboe Options Fees Schedule, Order Router Subsidy Program and Complex Order Router Subsidy Program table and Footnotes 29 and 30. \30\ See Cboe Options Fees Schedule, Footnote 22. --------------------------------------------------------------------------- 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 are 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 different fees are assessed to different market participants in some circumstances, these different market participants have different obligations and different circumstances as discussed above. For example, Market-Makers have quoting obligations that other market participants do not have. The Exchange does not believe the proposed rule change to waive the Index License Surcharge through June 30, 2018 will impose any burden on intramarket competition because it applies to all Trading Permit Holders and encourages trading in these new products. 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 Sector Index options will be exclusively listed on Cboe Options. To the extent that the proposed changes make Cboe Options 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 \31\ and paragraph (f) of Rule 19b-4 \32\ 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. --------------------------------------------------------------------------- \31\ 15 U.S.C. 78s(b)(3)(A). \32\ 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 rule-comments@sec.gov. Please include File Number SR-CBOE-2018-012 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-2018-012. 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 [[Page 11807]] 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-2018-012, and should be submitted on or beforeApril 6, 2018. --------------------------------------------------------------------------- \33\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\33\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-05329 Filed 3-15-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 52 / Friday, March 16, 2018 / Notices 11803
Monday expirations. Finally, the Therefore, the Commission hereby Reference Room, 100 F Street NE,
Exchange does not believe the proposal waives the 30-day operative delay and Washington, DC 20549 on official
would impose any burden on intra- designates the proposal operative upon business days between the hours of
market competition, as all market filing.22 10:00 a.m. and 3:00 p.m. Copies of the
participants will be treated in the same At any time within 60 days of the filing also will be available for
manner under this proposal. filing of the proposed rule change, the inspection and copying at the principal
Commission summarily may office of the Exchange. All comments
C. Self-Regulatory Organization’s temporarily suspend such rule change if
Statement on Comments on the received will be posted without change.
it appears to the Commission that such Persons submitting comments are
Proposed Rule Change Received From action is necessary or appropriate in the
Members, Participants, or Others cautioned that we do not redact or edit
public interest, for the protection of personal identifying information from
No written comments were solicited investors, or otherwise in furtherance of comment submissions. You should
or received with respect to the proposed the purposes of the Act. If the submit only information that you wish
rule change. Commission takes such action, the to make available publicly. All
III. Date of Effectiveness of the Commission shall institute proceedings submissions should refer to File
Proposed Rule Change and Timing for to determine whether the proposed rule Number SR–NYSEAMER–2018–08 and
Commission Action should be approved or disapproved. should be submitted on or before
IV. Solicitation of Comments April 6, 2018.
Because the foregoing proposed rule
change does not: (i) Significantly affect Interested persons are invited to For the Commission, by the Division of
the protection of investors or the public submit written data, views, and Trading and Markets, pursuant to delegated
interest; (ii) impose any significant authority.23
arguments concerning the foregoing,
burden on competition; and (iii) become including whether the proposed rule Eduardo A. Aleman,
operative for 30 days from the date on change is consistent with the Act. Assistant Secretary.
which it was filed, or such shorter time Comments may be submitted by any of [FR Doc. 2018–05333 Filed 3–15–18; 8:45 am]
as the Commission may designate, the the following methods: BILLING CODE 8011–01–P
proposed rule change has become
effective pursuant to Section 19(b)(3)(A) Electronic Comments
of the Act 18 and Rule 19b–4(f)(6) • Use the Commission’s internet SECURITIES AND EXCHANGE
thereunder.19 comment form (http://www.sec.gov/ COMMISSION
A proposed rule change filed under rules/sro.shtml); or
Rule 19b–4(f)(6) normally does not • Send an email to rule-comments@ [Release No. 34–82854; File No. SR–CBOE–
become operative for 30 days from the sec.gov. Please include File Number SR– 2018–012]
date of filing. However, Rule 19b– NYSEAMER–2018–08 on the subject
4(f)(6)(iii) 20 permits the Commission to line. Self-Regulatory Organizations; Cboe
designate a shorter time if such action Exchange, Inc.; Notice of Filing and
Paper Comments Immediate Effectiveness of a Proposed
is consistent with the protection of
investors and the public interest. The • Send paper comments in triplicate Rule Change To Establish Fees for
Exchange has asked the Commission to to Brent J. Fields, Secretary, Securities Options That Overlie the S&P Select
waive the 30-day operative delay so that and Exchange Commission, 100 F Street Sector Index Options
the proposal may become operative NE, Washington, DC 20549–1090.
immediately upon filing. The All submissions should refer to File March 12, 2018.
Commission notes that it recently Number SR–NYSEAMER–2018–08. This Pursuant to Section 19(b)(1) of the
approved Phlx’s substantially similar file number should be included on the Securities Exchange Act of 1934 (the
proposal to list and trade Monday SPY subject line if email is used. To help the ‘‘Act’’),1 and Rule 19b–4 thereunder,2
Expirations.21 The Exchange has stated Commission process and review your notice is hereby given that on March 1,
that waiver of the operative delay will comments more efficiently, please use 2018, Cboe Exchange, Inc. (the
allow the Exchange to list and trade only one method. The Commission will ‘‘Exchange’’ or ‘‘Cboe Options’’) filed
Monday SPY Expirations as soon as post all comments on the Commission’s with the Securities and Exchange
possible, and therefore, promote internet website (http://www.sec.gov/ Commission (the ‘‘Commission’’) the
competition among the option rules/sro.shtml). Copies of the proposed rule change as described in
exchanges. For these reasons, the submission, all subsequent Items I, II, and III below, which Items
Commission believes that the proposed amendments, all written statements have been prepared by the Exchange.
rule change presents no novel issues with respect to the proposed rule The Commission is publishing this
and that waiver of the 30-day operative change that are filed with the notice to solicit comments on the
delay is consistent with the protection Commission, and all written proposed rule change from interested
of investors and the public interest, and communications relating to the persons.
will allow the Exchange to remain proposed rule change between the
competitive with other exchanges. Commission and any person, other than I. Self-Regulatory Organization’s
those that may be withheld from the Statement of the Terms of Substance of
18 15 U.S.C. 78s(b)(3)(A). public in accordance with the the Proposed Rule Change
19 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– provisions of 5 U.S.C. 552, will be The Exchange proposes to establish
daltland on DSKBBV9HB2PROD with NOTICES
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intention to
available for website viewing and fees for options that overlie the S&P
file the proposed rule change at least five business printing in the Commission’s Public Select Sector Index options (‘‘Sector
days prior to the date of filing of the proposed rule Index options’’). The text of the
change, or such shorter time as designated by the 22 For purposes only of waiving the 30-day
Commission. The Exchange has satisfied this operative delay, the Commission has also
requirement. 23 17 CFR 200.30–3(a)(12).
considered the proposed rule’s impact on
20 17 CFR 240.19b–4(f)(6)(iii). 1 15 U.S.C. 78s(b)(1).
efficiency, competition, and capital formation. See
21 See supra note 4. 15 U.S.C. 78c(f). 2 17 CFR 240.19b–4.
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proposed rule change is provided in included or excluded from a variety of Permit Holder Affiliates transaction fee
Exhibit 5. programs, qualification calculations and cap for all non-facilitation business
The text of the proposed rule change transaction fees. In lieu of listing out executed in AIM or open outcry, or as
is also available on the Exchange’s these products in various sections of the a QCC or FLEX transaction,12 the Order
website (http://www.cboe.com/ Fees Schedule, the Exchange uses the Router Subsidy (‘‘ORS’’) and Complex
AboutCBOE/ term ‘‘Underlying Symbol List A’’ to Order Router Subsidy (‘‘CORS’’)
CBOELegalRegulatoryHome.aspx), at represent these products.5 The Programs,13 the per contract per side
the Exchange’s Office of the Secretary, Exchange notes the reason the products surcharge for noncustomer complex
and at the Commission’s Public in Underlying Symbol List A are often order executions that remove liquidity
Reference Room. collectively included or excluded from from the COB and auction response in
II. Self-Regulatory Organization’s certain programs, qualification the complex order auction and AIM,14
Statement of the Purpose of, and calculations and transactions fees is and the calculation of qualifying volume
Statutory Basis for, the Proposed Rule because the Exchange has expended
for rebates for Floor Broker Trading
Change considerable resources developing and
Permit Holder Trading Permit Fees.15
maintaining its proprietary, exclusively
In its filing with the Commission, the listed products. Similar to the products The Exchange does intend to apply to
Exchange included statements currently represented by ‘‘Underlying Sector Index options the Liquidity
concerning the purpose of and basis for Symbol List A,’’ Sector Index options Provider Sliding Scale.16 Although the
the proposed rule change and discussed are not listed on any other exchange. As Exchange proposes fees for Sector Index
any comments it received on the such, the Exchange proposes to options similar to those established for
proposed rule change. The text of these establish fees for Sector Index options products in ‘‘Underlying Symbol List
statements may be examined at the similar to those applicable to options A,’’ the Exchange proposes to apply to
places specified in Item IV below. The overlying the indexes in Underlying Sector Index options the Liquidity
Exchange has prepared summaries, set Symbol List A, as well as similarly Provider Sliding Scale to encourage
forth in sections A, B, and C below, of exclude those options from several Market-Makers to provide liquidity in
the most significant aspects of such programs from products [sic] in these classes and believes that including
statements. Underlying Symbol List A are excluded. them in this sliding scale will provide
A. Self-Regulatory Organization’s The Exchange does not propose to add such incentive.
Statement of the Purpose of, and the Sector Index options to Underlying
Symbol List A. In lieu of listing out The Exchange next proposes to
Statutory Basis for, the Proposed Rule establish transaction fees for Sector
Change these products in various sections of the
Fees Schedule, the Exchange proposes Index options. Particularly, the
1. Purpose to refer to Sector Indexes in the Fees Exchange proposes to assess the same
On October 4, 2017, the Exchange Schedule (which is defined in proposed fees for Sector Index options as apply to
submitted a proposed rule change to footnote 47). OEX Weekly and XEO Weekly options,
amend certain rules in connection with Specifically, like products in except for Market-Maker transaction
listing S&P Select Sector Index 3 options Underlying Symbol List A, the fees, which will be subject to the
under generic narrow-based listing Exchange proposes to except Sector Liquidity Provider Sliding Scale as
standards, which became effective on Index options from the Volume described above, and except for Clearing
November 3, 2017.4 The Exchange rules Incentive Program (‘‘VIP’’),6 the Trading Permit Holder Proprietary
currently permit the Exchange to list Marketing Fee,7 the Clearing Trading transactions, which will be $0.25 rather
and trade options overlying each S&P Permit Holder Fee Cap (‘‘Fee Cap’’),8 than subject to the Proprietary Products
Select Sector Index (‘‘Sector Index exemption from fees for facilitation Sliding Scale for Clearing Trading
options’’). The Exchange proposes to orders,9 the AIM Contra Execution Permit Holder Proprietary Orders.
establish fees for Sector Index options. Fee,10 the CFLEX AIM Response Fee,11 Transaction fees for Sector Index
By way of background, a specific set the Clearing Trading Permit Holder options will be as follows (all listed
of proprietary products are commonly Proprietary and/or their Non-Trading rates are per contract): 17
Customer (origin code C) ...................................................................................................................................... $0.30.
Clearing Trading Permit Holder Proprietary (origin codes F and L) ..................................................................... $0.25.18
Market-Maker (origin code M) ............................................................................................................................... Liquidity Provider Sliding Scale.
Joint Back-Office, Broker-Dealer, Non-Trading Permit Holder Market-Maker, $0.40.
Professional/Voluntary Professional (origin codes BNWJ).
3 There are ten S&P Select Sector Indexes: S&P 4 Securities Exchange Act Release No. 81879 9 See Cboe Options Fees Schedule, Footnotes 11
Financial Select Sector Index (IXM), S&P Energy (October 16, 2017), 82 FR 48858 (October 20, 2017) and 12.
Select Sector Index (IXE), S&P Technology Select (SR–CBOE–2017–065). 10 See Cboe Options Fees Schedule, Footnote 18.
Sector Index (IXT), S&P Health Care Select Sector 5 Currently, Underlying Symbol List A is defined 11 See Cboe Options Fees Schedule, Footnote 20.
Index (IXV), S&P Utilities Select Sector Index (IXU), in Footnote 34 and represents the following 12 See Cboe Options Fees Schedule, Footnote 22.
S&P Consumer Staples Select Sector Index (IXR), proprietary products: OEX, XEO, RUT, RLG, RLV, 13 See Cboe Options Fees Schedule, Order Router
daltland on DSKBBV9HB2PROD with NOTICES
S&P Industrials Select Sector Index (IXI), S&P RUI, AWDE, FTEM, FXTM, UKXM, SPX (including Subsidy Program and Complex Order Router
Consumer Discretionary Select Sector Index (IXY), SPXW), VIX, VOLATILITY INDEXES and binary Subsidy Program table and Footnotes 29 and 30.
14 See Cboe Options Fees Schedule, Footnote 35.
S&P Materials Select Sector Index (IXB), and S&P options.
15 See Cboe Options Fees Schedule, Footnote 25.
Real Estate Select Sector Index (IXRE). The options 6 See Cboe Options Fees Schedule, Volume
16 See Cboe Options Fees Schedule, Specified
listing symbols for options overlying these indexes Incentive Program (VIP) table and Footnote 36.
will be: SIXM, SIXE, SIXT, SIXV, SIXU, SIXR, SIXI, 7 See Cboe Options Fees Schedule, Footnote 6.
Proprietary Index Options Rate Table—Underlying
SIXY, SIXB, and SIXRE, respectively. Symbol List A and Sector Indexes.
8 See Cboe Options Fees Schedule, Footnote 11.
17 See id.
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![Federal Register / Vol. 83, No. 52 / Friday, March 16, 2018 / Notices 11805
The Exchange also proposes to apply proposed rule change is consistent with discriminatory to, [sic] assess lower fees
to Sector Index options the CFLEX the Section 6(b)(5) 23 requirement that to Market-Makers pursuant to the
Surcharge Fee of $0.10 per contract for the rules of an exchange not be designed Liquidity Provider Sliding Scale as
all Sector Index option orders executed to permit unfair discrimination between compared to other market participants
electronically on CFLEX, capped at customers, issuers, brokers, or dealers. because Market-Makers, unlike other
$250 per trade (i.e., first 2,500 contracts The Exchange also believes the market participants, take on a number of
per trade).19 The CFLEX Surcharge Fee proposed rule change is consistent with obligations, including quoting
assists the Exchange in recouping the Section 6(b)(4) of the Act,24 which obligations, that other market
cost of developing and maintaining the requires that Exchange rules provide for participants do not have. Further, these
CFLEX system. The Exchange notes that the equitable allocation of reasonable lower fees offered to Market-Makers are
the CFLEX Surcharge Fee (and $250 dues, fees, and other charges among its intended to incent Market-Makers to
cap) also applies to other proprietary Trading Permit Holders and other quote and trade more on the Exchange,
index options, including products in persons using its facilities. thereby providing more trading
Underlying Symbol List A. Particularly, the Exchange believes it opportunities for all market
The Exchange currently assesses an is reasonable to charge different fee participants. Additionally, the proposed
Index License Surcharge of $0.10 per amounts to different user types in the fee for Market-Makers will be applied
contract for all non-customer orders for manner proposed because the proposed equally to all Market-Makers (meaning
products in Underlying Symbol A fees are consistent with the price that all Market-Makers will be subject to
except RUT and SPX. The Exchange differentiation that exists today for other the Liquidity Provider Sliding Scale).
proposes to assess a Surcharge of $0.10 index products, including those in This concept also applies to orders from
per contract in order to recoup the costs Underlying Symbol A. The Exchange all other origins. It should also be noted
associated with the Sector Index license. also believes that the proposed fee that all fee amounts described herein are
In order to promote and encourage amounts for Sector Index option orders intended to attract greater order flow to
trading of Sector Index options, the are reasonable because the proposed fee the Exchange in Sector Index options,
Exchange proposes to waive the Index amounts are the same already assessed which should therefore serve to benefit
License Surcharge for Sector Index for other proprietary products (i.e. OEX all Exchange market participants.
option transactions through June 30, Weeklys and XEO Weeklys), as well as Similarly, it is equitable and not
2018.20 are within the range of amounts unfairly discriminatory to assess lower
assessed for the Exchange’s other fees to Clearing Trading Permit Holder
2. Statutory Basis proprietary products.25 Proprietary orders than those of other
The Exchange believes the proposed The Exchange believes that it is market participants (except Market-
rule change is consistent with the equitable and not unfairly Makers) because Clearing Trading
Securities Exchange Act of 1934 (the discriminatory to assess lower fees to Permit Holders also have a number of
‘‘Act’’) and the rules and regulations Customers as compared to certain other obligations (such as membership with
thereunder applicable to the Exchange market participants except Market- the Options Clearing Corporation),
and, in particular, the requirements of Makers and Clearing Trading Permit significant regulatory burdens, and
Section 6(b) of the Act.21 Specifically, Holders because Customer order flow financial obligations, that other market
the Exchange believes the proposed rule enhances liquidity on the Exchange for participants do not need to take on. The
change is consistent with the Section the benefit of all market participants. Exchange also notes that the Sector
6(b)(5) 22 requirements that the rules of Specifically, customer liquidity benefits Index option fee amounts for each
an exchange be designed to prevent all market participants by providing separate type of market participant will
fraudulent and manipulative acts and more trading opportunities, which be assessed equally to all such market
practices, to promote just and equitable attracts Market-Makers. An increase in participants (i.e. all Broker-Dealer
principles of trade, to foster cooperation the activity of these market participants orders will be assessed the same
and coordination with persons engaged in turn facilitates tighter spreads, which amount, all Joint Back-Office orders will
in regulating, clearing, settling, may cause an additional corresponding be assessed the same amount, etc.). The
processing information with respect to, increase in order flow from other market Exchange believes the proposed
and facilitating transactions in participants. The fees offered to transaction fee of $0.25 per contract for
securities, to remove impediments to customers are intended to attract more Clearing Trading Permit Holders is
and perfect the mechanism of a free and customer trading volume to the reasonable, equitable, and not unfairly
open market and a national market Exchange. Moreover, the options discriminatory because is comparable to
system, and, in general, to protect industry has a long history of providing the amount of transaction fees for
investors and the public interest. preferential pricing to Customers, and Clearing Trading Permit Holders in
Additionally, the Exchange believes the the Exchange’s current Fees Schedule other proprietary products.26
currently does so in many places, as do The Exchange believes the proposed
18 Currently, there is one line in the Specified
the fees structures of many other transaction fees for Brokers Dealers,
Proprietary Index Options Rate Table for Clearing exchanges. Finally, all fee amounts
Trading Permit Holder Proprietary, pursuant to
Non-Trading Permit Holder Market-
which all products subject to that table (Underlying listed as applying to Customers will be Makers, Professionals/Voluntary
Symbol List A) were [sic] subject to the Proprietary applied equally to all Customers Professionals, JBOs and Customers are
Products Sliding Scale for Clearing Trading Permit (meaning that all Customers will be reasonable because they are the same as
Holder Proprietary Orders. The proposed rule assessed the same amount).
change divides Clearing Trading Permit Holder
those assessed for transactions in certain
daltland on DSKBBV9HB2PROD with NOTICES
Proprietary line in the transaction rate table into The Exchange believes that it is other proprietary products.27 The
two, indicating that Underlying Symbol List A will equitable and not unfairly
continue to be subject to the sliding scale, and 26 See Cboe Options Fee Schedule, Cboe Options
Sector Indexes will be $0.25. 23 Id.
Clearing Trading Permit Holder Proprietary
19 See id. [sic]. 24 15U.S.C. 78f(b)(4). Products Sliding Scales Table. The maximum
20 See id. [sic]. 25 SeeCboe Options Fees Schedule, Specified transaction fee per contract in the Table B (related
21 15 U.S.C. 78f(b). to the VIX Sliding Scale) part of that table is $0.25.
Proprietary Index Options Rate Table—Underlying
22 15 U.S.C. 78f(b)(5). Symbol A and Sector Indexes. 27 Id.
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![Federal Register / Vol. 83, No. 52 / Friday, March 16, 2018 / Notices 11807
communications relating to the I. Description of the Proposed Rule subsequent implementation of the fee
proposed rule change between the Change change; (ii) increases the risk that by the
Commission and any person, other than time the fee change is implemented, the
A. Background
those that may be withheld from the extended delay in implementation may
public in accordance with the As stated in the Notice, OCC filed the result in revenues that diverge (either
provisions of 5 U.S.C. 552, will be proposed Fee Policy to reduce the higher or lower) further from the target
available for website viewing and permitted implementation time for Buffer; and (iii) increases the impact of
printing in the Commission’s Public proposed changes to its Schedule of fee changes on participants due to the
Reference Room, 100 F Street NE, Fees.4 Under the current Fee Policy, any delayed implementation timing.9 OCC
Washington, DC 20549, on official change to the Schedule of Fees resulting states that the effects of delayed
business days between the hours of from a review by OCC’s Board of implementation described above may
10:00 a.m. and 3:00 p.m. Copies of the Directors (‘‘Board’’) 5 will be result in OCC needing to make more
filing also will be available for implemented no sooner than 60 days frequent and/or more dramatic changes
inspection and copying at the principal after filing the revised Schedule of Fees to its Schedule of Fees in order to
office of the Exchange. All comments with the Commission as a proposed rule maintain its target Buffer, resulting in
received will be posted without change. change. less stability in fees for OCC’s
Persons submitting comments are B. The Proposed Rule Change to OCC’s participants.10 OCC states that reducing
cautioned that we do not redact or edit Fee Policy the 60-day implementation period to
personal identifying information from thirty days would allow for fee
comment submissions. You should OCC’s By-Laws require OCC to set its adjustments that are based on revenue
submit only information that you wish fee structure so that it is sufficient to: (1) and expense data that is more current,
to make available publicly. All Cover OCC’s operating expenses plus a and therefore projections that are more
submissions should refer to File Business Risk Buffer (‘‘Buffer’’); 6 (2) accurate.11 OCC further states that it
Number SR–CBOE–2018–012, and maintain reserves deemed reasonably believes the proposed Fee Policy would
should be submitted on or beforeApril necessary by OCC’s Board; and (3) improve its ability to set fees at the level
6, 2018. accumulate an additional surplus required by the Fee Policy while still
deemed advisable by the Board to providing adequate notice to its
For the Commission, by the Division of permit OCC to meet its obligations to its
Trading and Markets, pursuant to delegated participants of any proposed fee
authority.33
Clearing Members and the public.7 As changes.12
part of the Fee Policy, OCC sets fees at
Eduardo A. Aleman, II. Discussion and Commission
a level that will cover its estimated
Assistant Secretary. operating expenses plus the additional Findings
[FR Doc. 2018–05329 Filed 3–15–18; 8:45 am] 25% Buffer, with OCC conducting Section 19(b)(2)(C) of the Act 13
BILLING CODE 8011–01–P quarterly reviews to manage revenues as directs the Commission to approve a
close to the Buffer as possible. OCC proposed rule change of a self-
stated that the Board may rely on regulatory organization if it finds that
SECURITIES AND EXCHANGE recommendations of OCC staff based on
COMMISSION such proposed rule change is consistent
analyses of year-to-date revenue and with the requirements of the Act and
operating expenses, as well as projected rules and regulations thereunder
[Release No. 34–82856; File No. SR–OCC– clearing volume and operating expenses
2018–001] applicable to such organization. The
to determine the proper level of fees to Commission finds that the proposed Fee
Self-Regulatory Organizations; The achieve the Buffer.8 Policy is consistent with Section
Options Clearing Corporation; Order As stated in the Notice, OCC believes 17A(b)(3)(F) of the Act 14 and Rule
Approving Proposed Rule Change that the current 60-day implementation 17Ad–22(e)(21) 15 thereunder, as
Related to The Options Clearing period under the Fee Policy: (i) described in detail below.
Corporation’s Fee Policy Increases the difficulty of projecting
appropriate fee levels needed to cover A. Consistency With Section
March 12, 2018. its operating expenses and the Buffer 17A(b)(3)(F) of the Act
On January 18, 2018, The Options because of the amount of time that Section 17A(b)(3)(F) of the Act
Clearing Corporation (‘‘OCC’’) filed with passes between OCC’s analysis of the requires that the rules of a clearing
the Securities and Exchange data supporting the fee change and the agency be designed to promote the
Commission (‘‘Commission’’), pursuant prompt and accurate clearance and
4 See Notice at 4324.
to Section 19(b)(1) of the Securities settlement of securities transactions and
5 See Notice at 4325 (stating that the authority to
Exchange Act of 1934 (‘‘Act’’),1 and the protection of investors and the
review and approve changes to OCC’s fees pursuant
Rule 19b–4 thereunder,2 proposed rule to the Capital Plan has been delegated to the public interest.16 As described above,
change SR–OCC–2018–001. The Compensation and Performance Committee of the
proposed rule change was published for Board). See also OCC Compensation and 9 See id. OCC further stated that, because it
comment in the Federal Register on Performance Committee Charter, available at:
generally implements fee changes on the first of the
http://www.optionsclearing.com/components/docs/
January 30, 2018,3 and the Commission about/corporate-information/performance_
month, the actual delay in implementing a
did not receive any comments. This proposed fee change may be significantly longer
committee_charter.pdf.
than 60 days depending on the timing of Board
order approves the proposed rule 6 The Buffer is an amount of fee revenue that OCC
approval of any fee change and subsequent filing of
daltland on DSKBBV9HB2PROD with NOTICES
change. targets above its anticipated operating expenses to the associated proposed rule change.
allow for unexpected fluctuations in operating 10 See id.
expenses, business capital needs, and regulatory 11 See id.
33 17 CFR 200.30–3(a)(12). capital requirements.
1 15 12 See id.
U.S.C. 78s(b)(1). 7 See OCC’s By-Laws, Art. IX, Sec. 9. In the Notice
2 17 CFR 240.19b–4. 13 15 U.S.C. 78s(b)(2)(C).
at 4325, OCC noted that clauses two and three
14 15 U.S.C. 78q–1(b)(3)(F).
3 Securities Exchange Act Release No. 82576 above would be invoked only at the discretion of
(January 24, 2018), 83 FR 4324 (January 30, 2018) OCC’s Board and in extraordinary circumstances. 15 17 CFR 240.17Ad–22(e)(21).
(SR–OOC–2018–001) (‘‘Notice’’). 8 See Notice at 4325. 16 15 U.S.C. 78q–1(b)(3)(F).
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Document Created: 2018-03-16 01:12:23
Document Modified: 2018-03-16 01:12:23
| 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 11803 |
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