83 FR 6650 - Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Options Regulatory Fee

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 31 (February 14, 2018)

Page Range		6650-6651
FR Document		2018-02980
Federal Register, Volume 83 Issue 31 (Wednesday, February 14, 2018)
[Federal Register Volume 83, Number 31 (Wednesday, February 14, 2018)]
[Notices]
[Pages 6650-6651]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-02980]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82665; File No. SR-C2-2018-003]


Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to the Options Regulatory Fee

February 8, 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 January 31, 2018, Cboe C2 Exchange, Inc. (the ``Exchange'' or 
``C2 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 seeks to amend its Fees Schedule. The text of the 
proposed rule change is available on the Exchange's website (http://www.c2exchange.com/Legal/), 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
    The Exchange proposes to decrease the Options Regulatory Fee 
(``ORF'') from $.0015 per contract to $.0014 per contract in order to 
help ensure that revenue collected from the ORF, in combination with 
other regulatory fees and fines, meets the Exchange's total regulatory 
costs. The proposed fee change will be operative on February 1, 2018.
    The ORF is assessed by C2 Options to each Trading Permit Holder 
(``TPH'') for options transactions cleared by the TPH that are cleared 
by the Options Clearing Corporation (OCC) in the customer range, 
regardless of the exchange on which the transaction occurs.\3\ In other 
words, the Exchange imposes the ORF on all customer-range transactions 
cleared by a TPH, even if the transactions do not take place on the 
Exchange. The ORF is collected by OCC on behalf of the Exchange from 
the Clearing Trading Permit Holder (``CTPH'') or non-CTPH that 
ultimately clears the transaction. With respect to linkage 
transactions, C2 Options reimburses its routing broker providing 
Routing Services pursuant to C2 Options Rule 6.36 for options 
regulatory fees it incurs in connection with the Routing Services it 
provides.
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    \3\ The ORF also applies to customer-range transactions executed 
during Extended Trading Hours.
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    Revenue generated from ORF, when combined with all of the 
Exchange's other regulatory fees and fines, is designed to recover a 
material portion of the regulatory costs to the Exchange of the 
supervision and regulation of TPH customer options business. Regulatory 
costs include direct regulatory expenses and certain indirect expenses 
for work allocated in support of the regulatory function. The direct 
expenses include in-house and third party service provider costs to 
support the day to day regulatory work such as surveillances, 
investigations and examinations. The indirect expenses include support 
from such areas as human resources, legal, information technology and 
accounting. These indirect expenses are estimated to be approximately 
6% of C2 Options' total regulatory costs for 2018. Thus, direct 
expenses are estimated to be approximately 94% of total regulatory 
costs for 2018. In addition, it is C2 Options' practice that revenue 
generated from ORF not exceed more than 75% of total annual regulatory 
costs. These expectations are estimated, preliminary and may change. 
These expectations are estimated, preliminary and may change. [sic] 
There can be no assurance that our final costs for 2018 will not differ 
materially from these expectations and prior practice; however, the 
Exchange believes that revenue generated from the ORF, when combined 
with all of the Exchange's other regulatory fees and fines, will cover 
a material portion, but not all, of the Exchange's regulatory costs.
    The Exchange also notes that its regulatory responsibilities with 
respect to TPH compliance with options sales practice rules have 
largely been allocated to FINRA under a 17d-2 agreement.\4\ The ORF is 
not designed to cover the cost of that options sales practice 
regulation.
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    \4\ See Securities Exchange Act Release No. 76309 (October 29, 
2015), 80 FR 68361 (November 4, 2015).
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    The Exchange will continue to monitor the amount of revenue 
collected from the ORF to ensure that it, in combination with its other 
regulatory fees and fines, does not exceed the Exchange's total 
regulatory costs. The Exchange monitors its regulatory costs and 
revenues at a minimum on a semi-annual basis. If the Exchange 
determines regulatory revenues exceed or are insufficient to cover a 
material portion of its regulatory costs, the Exchange will adjust the 
ORF by submitting a fee change filing to the Commission. The Exchange 
notifies TPHs of adjustments to the ORF via regulatory circular. The 
Exchange endeavors to provide TPHs with such notice at least 30 
calendar days prior to the effective date of the change.
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 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 TPHs and other persons using its facilities. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \7\ requirement that the rules of 
an exchange not be designed

[[Page 6651]]

to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed fee change is reasonable because 
it would help ensure that revenue collected from the ORF, in 
combination with other regulatory fees and fines, does not exceed the 
Exchange's total regulatory costs. Moreover, the Exchange believes the 
ORF ensures fairness by assessing higher fees to those TPHs that 
require more Exchange regulatory services based on the amount of 
customer options business they conduct. Regulating customer trading 
activity is much more labor intensive and requires greater expenditure 
of human and technical resources than regulating non-customer trading 
activity, which tends to be more automated and less labor-intensive. As 
a result, the costs associated with administering the customer 
component of the Exchange's overall regulatory program are materially 
higher than the costs associated with administering the non-customer 
component (e.g., TPH proprietary transactions) of its regulatory 
program.\8\ The Exchange believes the proposed fee change is equitable 
and not unfairly discriminatory in that it is charged to all TPHs on 
all their transactions that clear in the customer range at the OCC.
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    \8\ If the Exchange changes its method of funding regulation or 
if circumstances otherwise change in the future, the Exchange may 
decide to modify the ORF or assess a separate regulatory fee on TPH 
proprietary transactions if the Exchange deems it advisable.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    C2 Options 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 it applies to all 
TPHs. The proposed ORF is comparable to fees charged by other options 
exchanges for the same or similar service. The Exchange believes any 
burden on competition imposed by the proposed rule change is outweighed 
by the need to help the Exchange adequately fund its regulatory 
activities to ensure compliance with the Exchange Act.

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 No. SR-C2-2018-003 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 No. SR-C2-2018-003. 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 No. SR-C2-2018-003, and should be submitted on or 
before March 7, 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. 2018-02980 Filed 2-13-18; 8:45 am]
BILLING CODE 8011-01-P
Federal Register / Vol. 83, No. 31 / Wednesday, February 14, 2018 / Notices 6651

to permit unfair discrimination between III. Date of Effectiveness of the Reference Room, 100 F Street NE,
customers, issuers, brokers, or dealers. Proposed Rule Change and Timing for Washington, DC 20549, on official
The Exchange believes the proposed Commission Action business days between the hours of
fee change is reasonable because it The foregoing rule change has become 10:00 a.m. and 3:00 p.m. Copies of the
would help ensure that revenue effective pursuant to Section 19(b)(3)(A) filing also will be available for
collected from the ORF, in combination of the Act 9 and paragraph (f) of Rule inspection and copying at the principal
with other regulatory fees and fines, 19b–4 10 thereunder. At any time within office of the Exchange. All comments
does not exceed the Exchange’s total 60 days of the filing of the proposed rule received will be posted without change.
regulatory costs. Moreover, the change, the Commission summarily may Persons submitting comments are
Exchange believes the ORF ensures temporarily suspend such rule change if cautioned that we do not redact or edit
fairness by assessing higher fees to those it appears to the Commission that such personal identifying information from
TPHs that require more Exchange action is necessary or appropriate in the comment submissions. You should
regulatory services based on the amount public interest, for the protection of submit only information that you wish
investors, or otherwise in furtherance of to make available publicly. All
of customer options business they
the purposes of the Act. If the submissions should refer to File No.
conduct. Regulating customer trading
Commission takes such action, the SR–C2–2018–003, and should be
activity is much more labor intensive Commission will institute proceedings
and requires greater expenditure of submitted on or before March 7, 2018.
to determine whether the proposed rule
human and technical resources than change should be approved or For the Commission, by the Division of
regulating non-customer trading disapproved. Trading and Markets, pursuant to delegated
activity, which tends to be more authority.11
automated and less labor-intensive. As a IV. Solicitation of Comments
Eduardo A. Aleman,
result, the costs associated with Interested persons are invited to Assistant Secretary.
administering the customer component submit written data, views, and
[FR Doc. 2018–02980 Filed 2–13–18; 8:45 am]
of the Exchange’s overall regulatory arguments concerning the foregoing,
program are materially higher than the including whether the proposed rule BILLING CODE 8011–01–P

costs associated with administering the change is consistent with the Act.
non-customer component (e.g., TPH Comments may be submitted by any of
proprietary transactions) of its the following methods: SECURITIES AND EXCHANGE
regulatory program.8 The Exchange COMMISSION
Electronic Comments
believes the proposed fee change is
equitable and not unfairly • Use the Commission’s internet [Release No. 34–82657; File No. SR–OCC–
discriminatory in that it is charged to all comment form (http://www.sec.gov/ 2018–005]
TPHs on all their transactions that clear rules/sro.shtml); or
• Send an email to rule-comments@ Self-Regulatory Organizations; the
in the customer range at the OCC.
sec.gov. Please include File No. SR–C2– Options Clearing Corporation; Notice
B. Self-Regulatory Organization’s 2018–003 on the subject line. of Filing and Immediate Effectiveness
Statement on Burden on Competition Paper Comments of Proposed Rule Change To Revise
the Options Clearing Corporation’s
C2 Options does not believe that the • Send paper comments in triplicate
Schedule of Fees
proposed rule change will impose any to Secretary, Securities and Exchange
burden on competition that is not Commission, 100 F Street NE, February 8, 2018.
necessary or appropriate in furtherance Washington, DC 20549–1090.
Pursuant to Section 19(b)(1) of the
of the purposes of the Act, because it All submissions should refer to File No.
SR–C2–2018–003. This file number Securities Exchange Act of 1934
applies to all TPHs. The proposed ORF
should be included on the subject line (‘‘Act’’),1 and Rule 19b–4 thereunder,2
is comparable to fees charged by other
if email is used. To help the notice is hereby given that on January
options exchanges for the same or
similar service. The Exchange believes Commission process and review your 29, 2018, The Options Clearing
any burden on competition imposed by comments more efficiently, please use Corporation (‘‘OCC’’) filed with the
the proposed rule change is outweighed only one method. The Commission will Securities and Exchange Commission
by the need to help the Exchange post all comments on the Commission’s (‘‘Commission’’) the proposed rule
adequately fund its regulatory activities internet website (http://www.sec.gov/ change as described in Items I, II, and
to ensure compliance with the Exchange rules/sro.shtml). Copies of the III below. Items I and II have been
Act. submission, all subsequent prepared primarily by OCC. OCC filed
amendments, all written statements the proposed rule change pursuant to
C. Self-Regulatory Organization’s with respect to the proposed rule Section 19(b)(3)(A)(ii) of the Act 3 and
Statement on Comments on the change that are filed with the Rule 19b–4(f)(2) 4 thereunder so that the
Proposed Rule Change Received From Commission, and all written proposal was effective upon filing with
Members, Participants, or Others communications relating to the the Commission. The Commission is
proposed rule change between the publishing this notice to solicit
The Exchange neither solicited nor Commission and any person, other than
received comments on the proposed comments on the proposed rule change
those that may be withheld from the
daltland on DSKBBV9HB2PROD with NOTICES

rule change. from interested persons.
public in accordance with the
provisions of 5 U.S.C. 552, will be
8 If the Exchange changes its method of funding
available for website viewing and 11 17 CFR 200.30–3(a)(12).
regulation or if circumstances otherwise change in
the future, the Exchange may decide to modify the
printing in the Commission’s Public 1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
ORF or assess a separate regulatory fee on TPH
9 15 3 15 U.S.C. 78s(b)(3)(A)(ii).
proprietary transactions if the Exchange deems it U.S.C. 78s(b)(3)(A).
advisable. 10 17 CFR 240.19b–4(f). 4 17 CFR 240.19b–4(f)(2).

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Document Created: 2018-02-14 03:59:43
Document Modified: 2018-02-14 03:59:43
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 6650