83 FR 18612 - Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Concerning the VIX Large Trade Discount Program

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 82 (April 27, 2018)

[Federal Register Volume 83, Number 82 (Friday, April 27, 2018)]
[Notices]
[Pages 18612-18614]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-08851]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83093; File No. SR-CBOE-2018-031]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Concerning 
the VIX Large Trade Discount Program

April 23, 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 April 16, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the VIX Large Trade Discount 
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.

[[Page 18613]]

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to amend its Fees Schedule. Specifically, the 
Exchange proposes to amend its VIX Large Trade Discount Program. By way 
of background the Exchange provides a discount in the form of a cap on 
transaction fees for Market-Maker, Broker-Dealer, Non-Trading Permit 
Holder Market-Maker, Professional/Voluntary Professional and Joint 
Back-Office (i.e., ``M'', ``B'', ``N'', ``W'' and ``J'' origin codes) 
executions in VIX (the '' VIX Large Trade Discount''). Particularly, 
regular transaction fees are currently only charged for up to 250,000 
VIX options contracts per order for Market-Makers, Broker-Dealers, Non-
Trading Permit Holder Market-Makers, Professional/Voluntary 
Professionals and Joint Back-Offices.\3\ The Exchange proposes to amend 
the VIX Large Trade Discount Program to provide that regular 
transaction fees will only be charged for up to 175,000 VIX options 
contracts per order. The Exchange believes the proposed amendment will 
incentivize the sending of large VIX orders. The greater liquidity and 
trading volume that the proposed amended cap encourages would benefit 
all market participants trading VIX options.
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    \3\ The discount applies to transaction fees only. Other fees, 
such as the Index License Surcharge, are not discounted.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\4\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \5\ 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. The Exchange 
also believes the proposed rule change is consistent with Section 
6(b)(4) of the Act,\6\ which provides that Exchange rules may provide 
for the equitable allocation of reasonable dues, fees, and other 
charges among its Trading Permit Holders.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that lowering the VIX Large Trade Discount 
cap is reasonable because Market-Makers, Broker-Dealers, Non-Trading 
Permit Holder Market-Makers, Professional/Voluntary Professionals and 
Joint Back-Offices participants (i.e., non-Customer, non-Firm market 
participants) will receive a further discount for very large trades 
that they would not otherwise receive, which promotes and encourages 
larger VIX executions on the Exchange. This change is equitable and not 
unfairly discriminatory because the amendment will apply to all non-
Customer, non-Firm market participants whose large trades qualify for 
the discount in VIX. The Exchange notes that other VIX trading 
incentive programs already exist for Customer and Firm market 
participants.\7\
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    \7\ See Cboe Options Fees Schedule, Customer Large Trade 
Discount program and the Cboe Options Clearing Trading Permit Holder 
Proprietary Products Sliding Scale.
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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 cap does 
not apply to Customers and Firms, other incentive programs already 
exist for those market participants with respect to VIX trading.\8\ 
Additionally, the proposed change is designed to encourage increased 
VIX options volume, which provides greater trading opportunities for 
all market participants. The Exchange believes that the proposed rule 
change will not cause an unnecessary burden on intermarket competition 
because VIX is only traded 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.
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    \8\ Id.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

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

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \9\ and paragraph (f) of Rule 19b-4 \10\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CBOE-2018-031 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-2018-031. 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

[[Page 18614]]

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-2018-031 and should be submitted on 
or before May 18, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-08851 Filed 4-26-18; 8:45 am]
BILLING CODE 8011-01-P