83 FR 6664 - Self-Regulatory Organizations; Cboe BZX 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		6664-6665
FR Document		2018-02975
Federal Register, Volume 83 Issue 31 (Wednesday, February 14, 2018)
[Federal Register Volume 83, Number 31 (Wednesday, February 14, 2018)]
[Notices]
[Pages 6664-6665]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-02975]



[[Page 6664]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82660; File No. SR-CboeBZX--2018-008]


Self-Regulatory Organizations; Cboe BZX 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 BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange. The 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. 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)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the fee schedule related to 
the Options Regulatory Fee. The text of the proposed rule change is 
available at the Exchange's website at www.markets.cboe.com, at the 
principal office of the Exchange, 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 parts 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 modify the fee schedule applicable to the 
Exchange's options platform (``BZX Options'') to amend the rate of its 
Options Regulatory Fee (``ORF''). Currently, the Exchange charges an 
ORF in the amount of $0.0009 per contract side. The Exchange proposes 
to decrease the amount of ORF from $0.0009 per contract side to $0.0005 
per contract side. The proposed change to ORF should continue to 
balance the Exchange's regulatory expenses against the anticipated 
revenue. The proposed fee change will be operative on February 1, 2018.
    The per-contract ORF is assessed by the Exchange on each Member for 
all options transactions executed and cleared, or simply cleared, by 
the Member, that are cleared by OCC in the ``customer'' range, 
regardless of the exchange on which the transaction occurs. The ORF is 
collected indirectly from Members through their clearing firms by OCC 
on behalf of the Exchange. The ORF is also charged for transactions 
that are not executed by a Member but are ultimately cleared by a 
Member. Thus, in the case where a non-Member executes a transaction and 
a Member clears the transaction, the ORF is assessed to the Member who 
clears the transaction. Similarly, in the case where a Member executes 
a transaction and another Member clears the transaction, the ORF is 
assessed to the Member who clears the transaction.
    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 BZX 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 BZX 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. 
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.\5\
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    \5\ The Exchange notes that its regulatory responsibilities with 
respect to compliance with options sales practice rules has been 
allocated to the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') under a 17d-2 Agreement. The ORF is not designed to 
cover the cost of options sales practice regulation.
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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 Trading Permit Holders of adjustments to the ORF via 
regulatory circular. The Exchange endeavors to provide Trading Permit 
Holders with such notice at least 30 calendar days prior to the 
effective date of the change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder that are applicable to a national securities exchange, and, 
in particular, with the requirements of Section 6 of the Act.\6\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\7\ in that it provides for 
the equitable allocation of reasonable dues, fees and other charges 
among members and other persons using its facilities. The Exchange 
notes that it operates in a highly competitive market in which market 
participants can readily direct order flow to competing venues or 
providers of routing services if they deem fee levels to be excessive.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the decreased ORF is equitable and not 
unfairly discriminatory because it would be objectively allocated to 
Members in that

[[Page 6665]]

it would be charged to all Members on all their transactions that clear 
as customer transactions at the OCC. The Exchange believes that 
decreasing the ORF is reasonable because the Exchange's collection of 
ORF needs to be balanced against the amount of regulatory revenue 
collected by the Exchange. The Exchange believes that the proposed 
adjustment noted herein will serve to continue to balance the 
Exchange's regulatory revenue against its anticipated regulatory costs.
    The Exchange has designed the ORF to generate revenues that, when 
combined with all of the Exchange's other regulatory fees, will be less 
than or equal to the Exchange's regulatory costs, which is consistent 
with the Commission's view that regulatory fees be used for regulatory 
purposes and not to support the Exchange's business side. In this 
regard, the Exchange believes that the decreased level of the fee is 
reasonable and appropriate.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. The ORF is not intended to have 
any impact on competition. Rather, it is designed to enable the 
Exchange to recover a material portion of the Exchange's cost related 
to its regulatory activities. The Exchange is obligated to ensure that 
the amount of regulatory revenue collected from the ORF, in combination 
with its other regulatory fees and fines, does not exceed regulatory 
costs.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be excessive, or rebate 
opportunities available at other venues to be more favorable. In such 
an environment, the Exchange must continually adjust its fees to remain 
competitive with other exchanges. Because competitors are free to 
modify their own fees in response, and because market participants may 
readily adjust their order routing practices, the Exchange believes 
that the degree to which fee changes in this market may impose any 
burden on competition is extremely limited. The decreased ORF continues 
to also be comparable to ORFs charged by other options exchanges.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

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 \8\ and paragraph (f) of Rule 19b-4 
thereunder.\9\ 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.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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 rule-comments@sec.gov. Please include 
File No. SR-CboeBZX-2018-008 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-CboeBZX-2018-008. 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-CboeBZX-2018-008, and should be submitted 
on or before March 7, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-02975 Filed 2-13-18; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 83, No. 31 / Wednesday, February 14, 2018 / Notices 6665

it would be charged to all Members on C. Self-Regulatory Organization’s Commission and any person, other than
all their transactions that clear as Statement on Comments on the those that may be withheld from the
customer transactions at the OCC. The Proposed Rule Change Received From public in accordance with the
Exchange believes that decreasing the Members, Participants, or Others provisions of 5 U.S.C. 552, will be
ORF is reasonable because the The Exchange has not solicited, and available for website viewing and
Exchange’s collection of ORF needs to does not intend to solicit, comments on printing in the Commission’s Public
be balanced against the amount of this proposed rule change. The Reference Room, 100 F Street NE,
regulatory revenue collected by the Exchange has not received any written Washington, DC 20549, on official
Exchange. The Exchange believes that comments from members or other business days between the hours of
the proposed adjustment noted herein interested parties. 10:00 a.m. and 3:00 p.m. Copies of the
will serve to continue to balance the III. Date of Effectiveness of the filing also will be available for
Exchange’s regulatory revenue against Proposed Rule Change and Timing for inspection and copying at the principal
its anticipated regulatory costs. Commission Action office of the Exchange. All comments
The Exchange has designed the ORF received will be posted without change.
The foregoing rule change has become
to generate revenues that, when Persons submitting comments are
effective pursuant to Section 19(b)(3)(A)
combined with all of the Exchange’s of the Act 8 and paragraph (f) of Rule cautioned that we do not redact or edit
other regulatory fees, will be less than 19b–4 thereunder.9 At any time within personal identifying information from
or equal to the Exchange’s regulatory 60 days of the filing of the proposed rule comment submissions. You should
costs, which is consistent with the change, the Commission summarily may submit only information that you wish
Commission’s view that regulatory fees temporarily suspend such rule change if to make available publicly. All
be used for regulatory purposes and not it appears to the Commission that such submissions should refer to File No.
to support the Exchange’s business side. action is necessary or appropriate in the SR–CboeBZX–2018–008, and should be
In this regard, the Exchange believes public interest, for the protection of submitted on or before March 7, 2018.
that the decreased level of the fee is investors, or otherwise in furtherance of For the Commission, by the Division of
reasonable and appropriate. the purposes of the Act. Trading and Markets, pursuant to delegated
IV. Solicitation of Comments authority.10
B. Self-Regulatory Organization’s
Interested persons are invited to Eduardo A. Aleman,
Statement on Burden on Competition
submit written data, views, and Assistant Secretary.
The Exchange does not believe that arguments concerning the foregoing, [FR Doc. 2018–02975 Filed 2–13–18; 8:45 am]
the proposed rule change will impose including whether the proposed rule BILLING CODE 8011–01–P
any burden on competition not change is consistent with the Act.
necessary or appropriate in furtherance Comments may be submitted by any of
of the purposes of the Act. The ORF is the following methods:
not intended to have any impact on Electronic Comments SMALL BUSINESS ADMINISTRATION
competition. Rather, it is designed to
enable the Exchange to recover a • Use the Commission’s internet Surrender of License of Small
material portion of the Exchange’s cost comment form (http://www.sec.gov/ Business Investment Company
related to its regulatory activities. The rules/sro.shtml); or
• Send an email to rule-comments@ Pursuant to the authority granted to
Exchange is obligated to ensure that the sec.gov. Please include File No. SR–
amount of regulatory revenue collected the United States Small Business
CboeBZX–2018–008 on the subject line. Administration under the Small
from the ORF, in combination with its
other regulatory fees and fines, does not Paper Comments Business Investment Act of 1958, as
exceed regulatory costs. • Send paper comments in triplicate amended, under Section 309 of the Act
to Secretary, Securities and Exchange and Section 107.1900 of the Small
The Exchange notes that it operates in Business Administration Rules and
a highly competitive market in which Commission, 100 F Street NE,
Washington, DC 20549–1090. Regulations (13 CFR 107.1900) to
market participants can readily favor function as a small business investment
competing venues if they deem fee All submissions should refer to File No.
SR–CboeBZX–2018–008. This file company under the Small Business
levels at a particular venue to be Investment Company License No. 01/
excessive, or rebate opportunities number should be included on the
subject line if email is used. To help the 01–0344 issued to First New England
available at other venues to be more Capital, LP said license is hereby
favorable. In such an environment, the Commission process and review your
comments more efficiently, please use declared null and void.
Exchange must continually adjust its
only one method. The Commission will United States Small Business
fees to remain competitive with other
post all comments on the Commission’s Administration.
exchanges. Because competitors are free
internet website (http://www.sec.gov/ Dated: January 3, 2018.
to modify their own fees in response, rules/sro.shtml). Copies of the
and because market participants may submission, all subsequent A. Joseph Shepard,
readily adjust their order routing amendments, all written statements Associate Administrator, Office of Investment
practices, the Exchange believes that the with respect to the proposed rule and Innovation.
daltland on DSKBBV9HB2PROD with NOTICES

degree to which fee changes in this change that are filed with the [FR Doc. 2018–03089 Filed 2–13–18; 8:45 am]
market may impose any burden on Commission, and all written BILLING CODE P
competition is extremely limited. The communications relating to the
decreased ORF continues to also be proposed rule change between the
comparable to ORFs charged by other
options exchanges. 8 15 U.S.C. 78s(b)(3)(A).
9 17 CFR 240.19b–4(f). 10 17 CFR 200.30–3(a)(12).

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Document Created: 2018-02-14 03:59:42
Document Modified: 2018-02-14 03:59:42
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 6664