83 FR 6662 - Self-Regulatory Organizations; Cboe 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		6662-6663
FR Document		2018-02979
Federal Register, Volume 83 Issue 31 (Wednesday, February 14, 2018)
[Federal Register Volume 83, Number 31 (Wednesday, February 14, 2018)]
[Notices]
[Pages 6662-6663]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-02979]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82664; File No. SR-CBOE-2018-014]


Self-Regulatory Organizations; Cboe 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 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 seeks to amend its Fees Schedule. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to decrease the Options Regulatory Fee 
(``ORF'') from $.0081 per contract to $.0049 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 Cboe 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, Cboe Options reimburses its routing broker providing 
Routing Services pursuant to Cboe Options Rule 6.14B 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 
10% of Cboe Options' total regulatory costs for 2018. Thus, direct 
expenses are estimated to be approximately 90% of total regulatory 
costs for 2018. In addition, it is Cboe 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

[[Page 6663]]

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.
    The Exchange also proposes a minor clean up change to the Fees 
Schedule. Specifically, currently the ORF description mistakenly 
references footnote 45. The description will be amended to reference 
footnote 46, which was the Exchange's original intention.
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 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

    Cboe 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-CBOE-2018-014 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-CBOE-2018-014. 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-CBOE-2018-014, 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. 2018-02979 Filed 2-13-18; 8:45 am]
 BILLING CODE 8011-01-P
6662 Federal Register / Vol. 83, No. 31 / Wednesday, February 14, 2018 / Notices

22(e)(2) concerning governance I. Self-Regulatory Organization’s regulatory fees it incurs in connection
arrangements that are clear and Statement of the Terms of Substance of with the Routing Services it provides.
transparent and that support the public the Proposed Rule Change Revenue generated from ORF, when
interest requirements of Section 17A of combined with all of the Exchange’s
The Exchange seeks to amend its Fees
the Act applicable to clearing agencies other regulatory fees and fines, is
Schedule. The text of the proposed rule
and the objectives of participants.20 designed to recover a material portion of
change is available on the Exchange’s
the regulatory costs to the Exchange of
IV. Conclusion website (http://www.cboe.com/
the supervision and regulation of TPH
AboutCBOE/CBOELegalRegulatory
customer options business. Regulatory
On the basis of the foregoing, the Home.aspx), at the Exchange’s Office of costs include direct regulatory expenses
Commission finds that the proposal is the Secretary, and at the Commission’s and certain indirect expenses for work
consistent with the requirements of the Public Reference Room. allocated in support of the regulatory
Act and in particular with the II. Self-Regulatory Organization’s function. The direct expenses include
requirements of Section 17A of the Statement of the Purpose of, and in-house and third party service
Act 21 and Rules 17Ad–22(e)(2) and (5) Statutory Basis for, the Proposed Rule provider costs to support the day to day
thereunder. Change regulatory work such as surveillances,
It is therefore ordered pursuant to investigations and examinations. The
In its filing with the Commission, the
Section 19(b)(2) of the Act 22 that the indirect expenses include support from
Exchange included statements
proposed rule change (SR–ICEEU–2017– such areas as human resources, legal,
concerning the purpose of and basis for
011) be, and hereby is, approved.23 information technology and accounting.
the proposed rule change and discussed
These indirect expenses are estimated to
For the Commission, by the Division of any comments it received on the
be approximately 10% of Cboe Options’
Trading and Markets, pursuant to delegated proposed rule change. The text of these
total regulatory costs for 2018. Thus,
authority.24 statements may be examined at the
direct expenses are estimated to be
Eduardo A. Aleman, places specified in Item IV below. The
approximately 90% of total regulatory
Assistant Secretary. Exchange has prepared summaries, set
costs for 2018. In addition, it is Cboe
forth in sections A, B, and C below, of
[FR Doc. 2018–02974 Filed 2–13–18; 8:45 am] Options’ practice that revenue generated
the most significant aspects of such
BILLING CODE 8011–01–P from ORF not exceed more than 75% of
statements.
total annual regulatory costs. These
A. Self-Regulatory Organization’s expectations are estimated, preliminary
SECURITIES AND EXCHANGE Statement of the Purpose of, and the and may change. These expectations are
COMMISSION Statutory Basis for, the Proposed Rule estimated, preliminary and may change.
Change [sic] There can be no assurance that our
[Release No. 34–82664; File No. SR–CBOE– final costs for 2018 will not differ
1. Purpose
2018–014] materially from these expectations and
The Exchange proposes to decrease prior practice; however, the Exchange
Self-Regulatory Organizations; Cboe the Options Regulatory Fee (‘‘ORF’’) believes that revenue generated from the
Exchange, Inc.; Notice of Filing and from $.0081 per contract to $.0049 per ORF, when combined with all of the
Immediate Effectiveness of a Proposed contract in order to help ensure that Exchange’s other regulatory fees and
Rule Change Relating to the Options revenue collected from the ORF, in fines, will cover a material portion, but
Regulatory Fee combination with other regulatory fees not all, of the Exchange’s regulatory
and fines, meets the Exchange’s total costs.
February 8, 2018. regulatory costs. The proposed fee The Exchange also notes that its
Pursuant to Section 19(b)(1) of the change will be operative on February 1, regulatory responsibilities with respect
Securities Exchange Act of 1934 (the 2018. to TPH compliance with options sales
‘‘Act’’),1 and Rule 19b–4 thereunder,2 The ORF is assessed by Cboe Options practice rules have largely been
to each Trading Permit Holder (‘‘TPH’’) allocated to FINRA under a 17d–2
notice is hereby given that on January
for options transactions cleared by the agreement.4 The ORF is not designed to
31, 2018, Cboe Exchange, Inc. (the
TPH that are cleared by the Options cover the cost of that options sales
‘‘Exchange’’ or ‘‘Cboe Options’’) filed
Clearing Corporation (‘‘OCC’’) in the practice regulation.
with the Securities and Exchange The Exchange will continue to
customer range, regardless of the
Commission (the ‘‘Commission’’) the monitor the amount of revenue
exchange on which the transaction
proposed rule change as described in collected from the ORF to ensure that it,
occurs.3 In other words, the Exchange
Items I, II, and III below, which Items in combination with its other regulatory
imposes the ORF on all customer-range
have been prepared by the Exchange. transactions cleared by a TPH, even if fees and fines, does not exceed the
The Commission is publishing this the transactions do not take place on the Exchange’s total regulatory costs. The
notice to solicit comments on the Exchange. The ORF is collected by OCC Exchange monitors its regulatory costs
proposed rule change from interested on behalf of the Exchange from the and revenues at a minimum on a semi-
persons. Clearing Trading Permit Holder annual basis. If the Exchange
(‘‘CTPH’’) or non-CTPH that ultimately determines regulatory revenues exceed
20 Id.
clears the transaction. With respect to or are insufficient to cover a material
21 15 U.S.C. 78q–1.
portion of its regulatory costs, the
daltland on DSKBBV9HB2PROD with NOTICES

22 15
linkage transactions, Cboe Options
U.S.C. 78s(b)(2).
23 In approving the proposed rule change, the reimburses its routing broker providing Exchange will adjust the ORF by
Commission considered the proposal’s impact on Routing Services pursuant to Cboe submitting a fee change filing to the
efficiency, competition, and capital formation. 15 Options Rule 6.14B for options Commission. The Exchange notifies
U.S.C. 78c(f).
24 17 CFR 200.30–3(a)(12). 3 The ORF also applies to customer-range 4 See Securities Exchange Act Release No. 76309
1 15 U.S.C. 78s(b)(1).
transactions executed during Extended Trading (October 29, 2015), 80 FR 68361 (November 4,
2 17 CFR 240.19b–4. Hours. 2015).

VerDate Sep<11>2014 22:07 Feb 13, 2018 Jkt 244001 PO 00000 Frm 00156 Fmt 4703 Sfmt 4703 E:\FR\FM\14FEN1.SGM 14FEN1
Document Created: 2018-02-14 03:59:21
Document Modified: 2018-02-14 03:59:21
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 6662