83 FR 31810 - Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule With Respect to Expiring Fee Waivers and Remove the FLEX Trader Incentive Program

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 131 (July 9, 2018)

[Federal Register Volume 83, Number 131 (Monday, July 9, 2018)]
[Notices]
[Pages 31810-31812]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-14666]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83587; File No. SR-CBOE-2018-051]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fees Schedule With Respect to Expiring Fee Waivers and Remove the 
FLEX Trader Incentive Program

July 3, 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 July 2, 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 and II 
below, which Items have been prepared by the Exchange. The Exchange 
filed the proposal as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Fees Schedule relating to 
various fee waivers and the Flex Trader Incentive Program that are set 
to expire June 30, 2018.
    The text of the proposed rule change is 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fees Schedule relating to 
various fee waivers and the Flex Trader Incentive Program that are set 
to expire June 30, 2018.
VIX and Select Sector License Index Surcharge
    The Exchange first proposes to extend the current waiver of the VIX 
and Select Sector Index License Surcharge of $0.10 per contract for 
Clearing Trading Permit Holder Proprietary (``Firm'') (origin codes 
``F'' or ``L'') VIX and Select Sector orders that have a premium of 
$0.10 or lower and have series with an expiration of seven (7) calendar 
days or less. The Exchange adopted the current waiver to reduce 
transaction costs on expiring, low-priced VIX and Select Sector 
options, which the Exchange believed would encourage Firms to seek to 
close and/or roll over such positions close to expiration at low 
premium levels, including facilitating customers to do so, in order to 
free up capital and encourage additional trading. The Exchange had 
proposed to waive the surcharge through June 30, 2018, at which time 
the Exchange had stated that it would evaluate whether the waiver has 
in fact prompted Firms to close and roll over these positions close to 
expiration as intended. The Exchange believes the waiver encourages 
Firms to do so and as such, proposes to extend the waiver of the 
surcharge through December 31, 2018, at which time the Exchange will 
again reevaluate whether the waiver has continued to prompt Firms to 
close and roll over positions close to expiration at low premium 
levels. Accordingly, the Exchange proposes to delete the reference to 
the current waiver period of June 30, 2018 from the Fees Schedule and 
replace it with December 31, 2018.
Extended Trading Hour Fees
    In order to promote and encourage trading during the Extended 
Trading Hours (``ETH'') session, the Exchange currently waives ETH 
Trading Permit and Bandwidth Packet fees for one (1) of each initial 
Trading Permits and one (1) of each initial Bandwidth Packet, per 
affiliated TPH. The Exchange notes that waiver is set to expire June 
30, 2018. The Exchange also waives fees through June 30, 2018 for a CMI 
and FIX login

[[Page 31811]]

ID if the CMI and/or FIX login ID is related to a waived ETH Trading 
Permit and/or waived Bandwidth packet. In order to continue to promote 
trading during ETH, the Exchange wishes to extend these waivers through 
December 31, 2018.
RLG, RLV, RUI, AWDE, FTEM, FXTM and UKXM Transaction Fees
    In order to promote and encourage trading of seven new FTSE Russell 
Index products (i.e., Russell 1000 Growth Index (``RLG''), Russell 1000 
Value Index (``RLV''), Russell 1000 Index (``RUI''), FTSE Developed 
Europe Index (``AWDE''), FTSE Emerging Markets Index (``FTEM''), China 
50 Index ``(FXTM'') and FTSE 100 Index (``UKXM'')), the Exchange waives 
all transaction fees (including the Floor Brokerage Fee, Index License 
Surcharge and CFLEX Surcharge Fee) for each of these products. This 
waiver however, is set to expire June 30, 2018. In order to continue to 
promote trading of these options classes, the Exchange proposes to 
extend the fee waiver through December 31, 2018.
FLEX Asian and Cliquet Flex Trader Incentive Program
    By way of background, a FLEX Trader is entitled to a pro-rata share 
of the monthly compensation pool based on the customer order fees 
collected from customer orders traded against that FLEX Trader's orders 
with origin codes other than ``C'' in FLEX Broad-Based Index Options 
with Asian or Cliquet style settlement (``Exotics'') each month (``Flex 
Trader Incentive Program''). The Fees Schedule provides that the Flex 
Trader Incentive Program is set to expire either by June 30, 2018 or 
until total average daily volume in Exotics exceeds 15,000 contracts 
for three consecutive months, whichever comes first. The Exchange notes 
that total average daily volume in Exotics has not yet exceeded 15,000 
contracts for three consecutive months. The Exchange also has 
determined that it no longer wishes to maintain this program and as 
such does not intend to extend the program past June 30, 2018. As such, 
the Exchange proposes to remove the program (currently set forth in 
Footnote 42) from the Fees Schedule.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\5\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \6\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Additionally, 
the Exchange believes the proposed rule change is consistent with 
Section 6(b)(4) of the Act,\7\ 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.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes it's appropriate to continue to waive the VIX 
and Select Sector Index License Surcharge for Clearing Trading Permit 
Holder Proprietary VIX and Select Sector orders that have a premium of 
$0.10 or lower and have series with an expiration of 7 calendar days or 
less because the Exchange wants to continue encouraging Firms to roll 
and close over positions close to expiration at low premium levels. 
Particularly, the Exchange believes it's reasonable to waive the entire 
$0.10 per contract surcharge because without the waiver of the 
surcharge, firms are less likely to engage in these transactions, as 
opposed to other VIX and Select Sector transactions, due to the 
associated transaction costs. The Exchange believes it's equitable and 
not unfairly discriminatory to limit the waiver to Clearing Trading 
Permit Holder Proprietary orders because they contribute capital to 
facilitate the execution of VIX and Select Sector customer orders with 
a premium of $0.10 or lower and series with an expiration of 7 calendar 
days or less. Finally, the Exchange believes it's reasonable, equitable 
and not unfairly discriminatory to provide that the surcharge will be 
waived through December 2018, as it gives the Exchange additional time 
to evaluate if the waiver is continuing to have the desired effect of 
encouraging these transactions.
    The Exchange believes extending the waiver of ETH Trading Permit 
and Bandwidth Packet fees for one of each type of Trading Permit and 
Bandwidth Packet, per affiliated TPH through December 31, 2018 is 
reasonable, equitable and not unfairly discriminatory, because those 
respective fees are being waived in their entirety, which promotes and 
encourages trading during the ETH session and applies to all ETH TPHs. 
The Exchange believes it's also reasonable, equitable and not unfairly 
discriminatory to waive fees for Login IDs related to waived Trading 
Permits and/or Bandwidth Packets in order to promote and encourage 
ongoing participation in ETH and also applies to all ETH TPHs.
    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to extend the waiver of all transaction fees for RLG, 
RLV, RUI, AWDE, FTEM, FXTM and UKXM transactions, including the Floor 
Brokerage fee, the License Index Surcharge and CFLEX Surcharge Fee, 
because the respective fees are being waived in their entirety, which 
promotes and encourages trading of these products which are still 
relatively new and applies to all TPHs.
    The Exchange believes eliminating the FLEX Asian and Cliquet Flex 
Trading Incentive Program is reasonable, equitable and not unfairly 
discriminatory because the program is not providing the desired result 
of incentivizing FLEX Traders to trade FLEX Asian and Cliquet options. 
The Exchange believes the proposed change is not unfairly 
discriminatory because it will apply equally to all Flex Traders.

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 intramarket or intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. The 
proposed changes are intended to either extend existing fee waivers or 
eliminate from the Fees Schedule a program that is expiring on June 30, 
2018 and apply to all TPHs uniformly. The proposed changes only affect 
trading on Cboe Options. The Exchange believes the proposed change 
therefore does not raise any competitive issues.

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.

[[Page 31812]]

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \8\ and 
subparagraph (f)(6) Rule 19b-4 thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \10\ normally 
does not become operative for 30 days after the date of filing. However 
Rule 19b-4(f)(6)(iii) \11\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay to permit the applicable 
fee waivers to be extended on a timely basis and without interruption 
and to update its rule text to reflect the sunsetting of the FLEX 
Trader Incentive Program as scheduled. The Commission believes that 
waiver of the 30-day operative delay is consistent with the protection 
of investors and the public interest because the proposal to extend to 
December 31, 2018 temporary incentives designed to encourage trading in 
the above-discussed products and trading sessions, and to remove 
obsolete text concerning the FLEX Trader Incentive Program, does not 
raise any new or novel issues. Therefore, the Commission hereby waives 
the 30-day operative delay and designates the proposed rule change 
operative upon filing.\12\
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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 shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

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-2018-051 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-2018-051. 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-2018-051 and should be submitted on 
or before July 30, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-14666 Filed 7-6-18; 8:45 am]
BILLING CODE 8011-01-P