Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fees Schedule, 5182-5188 [2015-01753]
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Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Notices
• Rule 11, Section 1 is revised to take
into account the fact that SBO Trades
are novated upon comparison and are,
therefore, legally between MBSD
clearing members and FICC after
comparison.
• Rule 15 is revised to clarify the
current process with respect to
transactions submitted to and compared
by FICC, whereby in the event a
member’s original counterparty becomes
insolvent, such member cannot
unilaterally modify its obligations with
respect to transactions originally
entered with such counterparty.
• Rule 16 is revised to clarify the
current process with respect to
transactions submitted to and compared
by FICC, whereby in the event a
member’s original counterparty becomes
insolvent, such member cannot
unilaterally modify its obligations with
respect to transactions originally
entered with such counterparty.
• Rule 17, Section 2 is revised to
clarify the current process whereby
when FICC ceases to act for a clearing
member, such member’s Trade-forTrade Transactions 16 may be disposed
of based upon their generic terms such
as agency, product, coupon rate and
maturity. The other changes are
typographical corrections.
• Rule 17A is revised to clarify that
in the event of FICC’s default, novation
is deemed to have occurred with respect
to all transactions at the time such
transactions are compared, whether or
not such transactions are SBO-Destined
Trades that would otherwise have been
novated at comparison. The other
changes to this provision are
grammatical corrections.
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III. Discussion
Section 19(b)(2)(C) of the Act 17
directs the Commission to approve a
proposed rule change of a selfregulatory organization if it finds that
such proposed rule change is consistent
with the requirements of the Act and the
rules and regulations thereunder
applicable to such organization. Section
17A(b)(3)(F) of the Act 18 requires,
among other things, that the rules of a
clearing agency be designed to achieve
several goals, including promoting the
prompt and accurate clearance and
settlement of securities transactions
and, to the extent applicable, derivative
agreements, contracts, and transactions.
The Commission concludes that the
proposed rule change is consistent with
the requirements of Section 17A(b)(3)(F)
16 Including ‘‘stip’’ trades and any other TBA
transactions not intended for TBA Netting.
17 15 U.S.C. 78s(b)(2)(C).
18 15 U.S.C. 78q–1(b)(3)(F).
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of the Act, and the rules and regulations
thereunder, because by moving novation
for trades that enter GSD’s Netting
system and MBSD’s TBA Netting
system, the rule change, as approved,
should clarify FICC’s responsibilities to
its members and remove potential
uncertainty that previously existed due
to a mismatch between the time of
guaranty and the time of novation. As a
result, such clarity should further
facilitate the prompt and accurate
clearance and settlement of securities
transactions.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act, particularly
those set forth in Section 17A,19 and the
rules and regulations thereunder.
IT IS THEREFORE ORDERED,
pursuant to Section 19(b)(2) of the
Act,20 that the proposed rule change
(SR–FICC–2014–11) be, and hereby is,
APPROVED.21
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Brent J. Fields,
Secretary.
[FR Doc. 2015–01747 Filed 1–29–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74134; File No. SR–CBOE–
2015–005]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the Fees
Schedule
January 26, 2015.
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
14, 2015, Chicago Board Options
Exchange, Incorporated (the ‘‘Exchange’’
or ‘‘CBOE’’) 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
19 15
U.S.C. 78q–1.
U.S.C. 78s(b)(2).
21 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
22 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
20 15
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prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Fees Schedule. The text of the proposed
rule change is available on the
Exchange’s Web site (https://
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 make a
number of changes to its Fees
Schedule.3
COB Taker Surcharge
The Exchange proposes to implement
a Complex Order Book (‘‘COB’’) Taker
Surcharge. Specifically, the Exchange
proposes to adopt a $0.05 per contract
per side surcharge for non-customer
complex order executions that take
liquidity from the COB in all underlying
classes except OEX, XEO, SPX
(including SPXW), SPXpm, SRO, VIX,
VXST, Volatility Indexes and binary
options (‘‘Underlying Symbol List A’’)
and mini-options. Additionally, the
Exchange proposes to provide that the
COB Taker Surcharge will not be
assessed on non-customer complex
order executions in the Complex Order
Auction (‘‘COA’’), the Automated Aim
Mechanism (‘‘AIM’’), orders originating
from a Floor Broker PAR, or electronic
3 The Exchange initially filed the proposed fee
changes on December 31, 2014 (SR–CBOE–2014–
097). On January 14, 2015, the Exchange withdrew
that filing and submitted this filing.
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executions against single leg markets.
The purpose of the COB Taker
Surcharge is to help offset the rebate
given to complex orders under the
Volume Incentive Program (‘‘VIP’’). The
Exchange notes that even with the
additional surcharge, the amount of
Exchange fees assessed for noncustomer complex order-to-complex
order executions that take liquidity are
less than those assessed for similar
transactions on certain other
exchanges.4
CBOE Proprietary Products Sliding
Scale
The CBOE Proprietary Products
Sliding Scale table provides that
Clearing Trading Permit Holder
Proprietary transaction fees and
transaction fees for Non-Clearing
Trading Permit Holder Affiliates in
OEX, XEO, SPX, SPXpm, VIX, VXST,
and VOLATILITY INDEXES are reduced
provided a Clearing Trading Permit
Holder (‘‘Clearing TPH’’) reaches certain
average daily volume (‘‘ADV’’)
thresholds in all underlying symbols
excluding Underlying Symbol List A
and mini-options on the Exchange in a
month. The Exchange proposes to
implement two changes to the CBOE
Proprietary Products Sliding Scale.
First, the Exchange proposes to increase
the current qualifying ADV thresholds.
Specifically, the threshold 18,000 ADV
to 71,999 ADV would be changed to
20,000 ADV to 79,999 ADV, and the
threshold 72,000 ADV and above would
be changed to 80,000 ADV and above.
The purpose of the proposed change is
to account for increased trading volume
in multi-listed products across the
industry. The Exchange also proposes to
make corresponding changes related to
the ADV thresholds to Footnote 23,
which Footnote relates to the CBOE
Proprietary Products Sliding Scale. The
Exchange next proposes to increase the
rates set forth in the B3 and B2 tiers (for
Proprietary Product Volume from 0.00%
to 8.50% of total Monthly Proprietary
Product Firm (F) volume) by 2 cents and
5 cents, respectively, and the rate in the
A2 tier (for Proprietary Product Volume
from 0.00% to 6.50% of total Monthly
Proprietary Product Firm (F) volume) by
1 cent. The proposed changes are
further detailed below.
Current
Proposed
Proprietary product volume
thresholds
Tier
Transaction fee
per contract
≥18,000 ADV ≤71,999 ADV in multi list products
B3 .............
B2 .............
B1 .............
Proprietary product volume
thresholds
Tier
Transaction fee
per contract
≥20,000 ADV ≤79,999 ADV in multi list products
0.00%–6.50% ...........................
6.51%–8.50% ...........................
Above 8.50% ............................
$0.18
0.05
0.02
≥72,000 ADV in multi list products
A2 .............
A1 .............
5183
B3 ................
B2 ................
B1 ................
0.00%–6.50% ...........................
6.51%–8.50% ...........................
Above 8.50% ............................
$0.20
0.10
0.02
≥80,000 ADV in multi list products
0.00%–6.50% ...........................
Above 6.50% ............................
0.15
0.01
A2 ................
A1 ................
0.00%–6.50% ...........................
Above 6.50% ............................
0.16
0.01
The Exchange next proposes to amend
the VIP rebate schedule. By way of
background, under VIP, the Exchange
credits each Trading Permit Holder
(‘‘TPH’’) the per contract amount set
forth in the VIP table resulting from
each public customer (‘‘C’’ origin code)
order transmitted by that TPH (with
certain exceptions) which is executed
electronically on the Exchange in all
underlying symbols excluding
Underlying Symbol List A, RUT, DJX,
XSP, XSPAM, credit default options,
credit default basket options and minioptions, provided the TPH meets certain
volume thresholds in a month.5
The Exchange first proposes to reduce
the VIP credit for complex orders in
Tiers 2 and 3 from $0.17 per contract to
$0.16. The purpose of this change is to
adjust the incentive tiers accordingly as
competition requires while maintaining
an incremental incentive for TPH’s to
strive for the highest tier level.
The Exchange next proposes to
implement a cap on VIP credits at 1,000
contracts per simple order executed
electronically in AIM and 1,000
contracts per leg per complex order
executed electronically in AIM.6 The
Exchange also proposes to cap orders
executed electronically in the Hybrid
Agency Liaison (‘‘HAL’’) mechanism at
1,000 contracts per auction quantity.7
The Exchange is proposing to
implement the cap on executions via
AIM because the vast majority of orders
over 1,000 contracts executed via AIM
are traded primarily against the
submitting contra party, for which the
Exchange collects minimal revenue.
Additionally, in HAL, the Exchange
provides a HAL Step-Up Rebate 8 which
reduces the collected net Exchange
4 See e.g., NYSE Arca, Inc. (‘‘Arca’’) Options Fees
Schedule, page 7 (Electronic Complex Order
Executions) which provides that for complex orderto-complex order transactions, non-customers are
assessed $0.50 in penny pilot options and $0.85 in
non-penny pilot options. Depending upon the type
of market participant a CBOE TPH is, non-customer
CBOE TPHs would be assessed between $0.08 and
$0.65 (which includes the proposed surcharge) for
such transactions (see CBOE Fees Schedule).
5 Excluded from the VIP credit are options in
Underlying Symbol List A, RUT, DJX, XSP,
XSPAM, credit default options, credit default basket
options, mini-options, QCC trades, public customer
to public customer electronic complex order
executions, and executions related to contracts that
are routed to one or more exchanges in connection
with the Options Order Protection and Locked/
Crossed Market Plan referenced in Rule 6.80 (see
CBOE Fees Schedule, Volume Incentive Program).
6 For example, a 750-lot butterfly spread would
total 3,000 contracts. As each leg of the order is
below 1,000 contracts, the Exchange would pay
credits for each contract of each leg, totaling 3,000
contacts. If for example leg 1 of a complex order
was for 600 contracts and leg 2 of the order was for
1,200 contracts, the Exchange would pay a VIP
credit for a total of 1,600 contracts (i.e., all 600
contracts on leg 1 and 1,000 contracts on leg 2).
7 To demonstrate this cap, consider the following:
a TPH submits an order for 1500 contracts. Of the
1500 contracts, 400 contracts execute electronically
against a Market-Maker quote. The remaining 1,100
contracts are executed via HAL. The Exchange
would pay credits for a total of 1,400 contracts (i.e.,
the 400 contracts executed outside of HAL and
1,000 contracts executed in HAL).
8 See CBOE Fees Schedule, Hybrid Agency
Liaison (‘‘HAL’’) Step Up Rebate.
The purpose of increasing the
Transaction Fee Per Contract rates (and
thereby reducing the amount of the
discount Clearing TPHs may receive on
proprietary products) is to moderate the
discount levels for these products in
view of their growth and performance.
Particularly, the Exchange does not
believe it’s necessary to maintain the
existing discounted rates for these tiers,
but seeks to maintain an incremental
incentive for Clearing TPHs to strive for
the highest tier level.
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Volume Incentive Program
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Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Notices
transaction fees to those market
participants that qualify. The Exchange
notes that generally, the parties which
collect this credit have greater
participation in larger orders. As such,
it would not be viable for the Exchange
to pay credits on contracts that do not
create corresponding and offsetting
revenue for the Exchange. The Exchange
notes that all contracts executed in AIM
(including complex AIM) and all
contracts executed in HAL will continue
to be counted towards the qualifying
percentage thresholds, as the Exchange
would like to continue to encourage the
use of these price improvement
mechanisms.
Finally with respect to VIP, the
Exchange proposes to provide that
multiple simple orders from the same
TPH in the same series on the same side
of the market that are received within
three hundred (300) seconds and
executed in AIM or HAL will be
aggregated for purposes of determining
the order quantity subject to the cap
discussed above. For this aggregation,
activity in AIM and HAL will be
aggregated separately. The AIM
aggregation timer will begin with an
order entered into AIM and continue for
300 seconds, aggregating any other
orders entered into AIM in the same
series on the same side of the market by
the same affiliated TPH. The HAL
aggregation timer will begin at the start
of a HAL auction and continue for 300
seconds, aggregating any other orders
executed in HAL in the same series on
the same side of the market for the same
affiliated TPH. Any portion of the
original order quantity that is executed
outside of HAL will not be part of the
aggregation or counted towards the
1,000 contract threshold. The Exchange
believes this change should prevent
TPHs from breaking up their orders in
order to avoid the fee cap.
Finally, the Exchange proposes to
relocate the language currently set forth
in the Notes section of the VIP table to
a new footnote (Footnote 36). In light of
the additional language being added to
the current Notes section of the VIP
table, the Exchange believes the
relocation of the existing language to a
new and separate footnote will make the
Fees Schedule easier to read. No
substantive changes to the relocated
language are being made.
SPX Customer Large Trade Discount
The Customer Large Trade Discount
program (the ‘‘Discount’’) provides a
discount in the form of a cap on the
quantity of customer (‘‘C’’ origin code’’)
contracts that are assessed transactions
fees in certain options classes. The
Discount table in the Fees Schedule sets
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forth the quantity of contracts necessary
for a large customer trade to qualify for
the Discount, which varies by product.
Currently, under the ‘‘Products’’ section
in the Discount table, the following S&P
products for which the Discount is in
effect are listed: ‘‘SPX, SPXw, SPXpm,
SRO.’’ Customer transaction fees for
each of these products are currently
only charged up to the first 10,000
contracts. The Exchange proposes to
raise the quantity of SPX, SPXw,
SPXpm, and SRO contracts necessary
for a large customer trade to qualify for
the Discount from 10,000 contracts per
order to 15,000 contracts per order. The
purpose of the proposed rule change is
to moderate the discount level for
Customer (C) orders in the SPX product
group in view of its mature and
established position in the industry.
Facility Fees Communications
The Exchange proposes to increase
the Exchangefone relocation fee from
$116 to $129. The Exchange contracts
with a vendor to provide the
Exchangefone relocations, and this
vendor has increased its fees, so the
Exchange proposes to increase the
Exchangefone relocation fee to reflect
the increased vendor cost.
The Exchange also proposes to
eliminate certain telecommunication
fees. The Exchange currently assesses
monthly fees for three types of services
the Exchange offers related to
PhoneMail: (i) Basic Service, (ii)
PhoneMail with Outcall and (iii)
PhoneMail with Outcall & Pager. The
Exchange notes that no TPHs have
availed themselves of these services in
a number of years. As such, the
Exchange believes offering such services
is no longer necessary and proposes to
accordingly delete all fees for and
references to such services from the
Fees Schedule.
Floor Broker Workstation and PULSe
Workstation
The Exchange proposes raising the
Floor Broker Workstation (‘‘FBW’’) fee
from $350 per month (per login ID) to
$400 per month (per login ID). The
Exchange’s vendor that provides the
FBW charges the Exchange more than
$350 per month (per login ID) for the
FBW (actually, more than $350 per
month (per login ID), and the Exchange
had been subsidizing those costs for
FBW users. However, it is no longer
economically feasible to subsidize those
costs to that great an extent. As such,
the Exchange proposes increasing the
FBW fee to $400 per month (per login
ID), which still includes a subsidy for
FBW users (though smaller).
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Additionally, the Exchange proposes
to establish a FBW fee for an updated
version of FBW (‘‘FBW2’’), which will
be made available shortly to all TPHs.
The fee for FBW2 will be the same as
the existing FBW fee (i.e., $400 per
month (per login ID). The Exchange also
proposes adopting a fee waiver for the
months of January and February 2015.
Additionally, the Exchange proposes to
provide that, after March 1, 2015 the
monthly fee for FBW2 login IDs will be
waived for the first month.9 The
purpose of the proposed fee waivers is
to give new users time to become
familiar with and fully acclimated to the
new FBW workstation functionality.
The Exchange notes that after February
2015 (and absent an applicable fee
waiver noted above), TPHs will be
charged each of $400 for FBW and
FBW2 (i.e., total of $800) if such users
continue to use both FBW and FBW2.
The Exchange also proposes raising
the PULSe On-Floor Workstation
(‘‘PULSe’’) fee. Currently, the Exchange
charges a fee of $350 per month for the
first 10 users of a TPH workstation and
$100 per month for all subsequent users.
TPHs may also make the workstation
available to their customers, which may
include non-broker dealer public
customers and non-TPH broker dealers
(referred to herein as ‘‘non-TPHs’’). For
such non-TPH workstations, the
Exchange charges a fee of $350 per
month per workstation. The Exchange
proposes raising the PULSe On-Floor
Workstation fee from $350 per month to
$400 per month for both TPH and nonTPH workstations. The Exchange
expended significant resources
developing PULSe, and intends to
recoup some of those costs. Further,
because PULSe and FBW serve similar
functions, the Exchange desires to
assess equivalent fees for each so as not
to offer a pricing advantage for one over
the other.
Proprietary Registration Fees
The Exchange next proposes to raise
the Initial Proprietary Registration fee
from $50 to $65 and the Annual
Proprietary Registration fee from $25 to
$40. The Initial Proprietary Registration
fee is payable by any TPH organization
for the registration of any associated
person on WebCRD 10 with the
Proprietary Trader registration. The
Annual Proprietary Registration fee is
payable annually by any TPH
organization for each associated person
9 For example, if a user adds a new login ID in
March 2015, the user will receive a fee waiver for
that login ID for March 2015.
10 WebCRD is the Central Registration Depository
system which is operated by the Financial Industry
Regulatory Authority, Incorporated (‘‘FINRA’’).
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that the TPH organization maintains
registered on WebCRD with the
Proprietary Trader registration. By way
of background, the Exchange adopted
these fees in conjunction with the
implementation of the then new
Proprietary Trading registration
requirement (the ‘‘Proprietary Trading
Registration Program’’ or ‘‘Program’’).
These fees were adopted to recoup some
of the costs expended to maintain the
Program. The Exchange notes that the
Proprietary Trading Registration
Program continues to require on-going
work, including testing and monitoring
of the WebCRD system, as well as
consideration of new applicants. In
order to offset these increasing costs, the
Exchange proposes to increase the
Initial Proprietary Registration fee and
the Annual Proprietary Registration fee.
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CBOE Command Connectivity Changes
Next, the Exchange proposes to
increase Network Access Port fees. By
way of background, CBOE market
participants can access the Exchange’s
trading systems via Network Access
Ports, and can elect for a Network
Access Port (or Ports) of either 1 gigabit
per second (‘‘Gbps’’) or 10 Gbps.
Currently, the Exchange assesses a fee of
$500 per month for a 1 Gbps Network
Access Port and a fee of $3,000 per
month for a 10 Gbps Network Access
Port. The Exchange has expended
significant resources setting up,
providing and maintaining this
connectivity, and the costs related to
such provision and maintenance has
increased. The Exchange desires to
recoup such increased costs. Therefore,
the Exchange proposes to amend its
Network Access Port fees to increase the
fee for a 1 Gbps Network Access Port to
$750 per month and for a 10 Gbps
Network Access Port to $3,500 per
month. These new fee amounts are still
within the range of, and in some cases
less than, similar fees assessed by other
exchanges.11
The ‘‘Notes’’ section that describes the
Network Access Port fees provides
detail which states that ‘‘Separate
Network Access Port fees are assessed
for unicast (orders, quotes) and
multicast (market data) connectivity
(i.e., if a TPH uses the 1 Gbps Network
Access Port for unicast and multicast
connectivity, the TPH will be charged
11 See International Securities Exchange, LLC
(‘‘ISE’’) Schedule of Fees, Section VIII.B., which
lists Network Ethernet fees of $750 per month for
1 Gigabit and $4,000 per month for 10 Gigabits, and
a Network Ethernet—Low Latency fee of $7,000 per
month for 10 Gigabits, and see also Miami
International Securities Exchange LLC (‘‘MIAX’’)
Options Fees Schedule, Section 5(a), which lists
connectivity fees of $1,000 per month for 1 Gbps
and $5,000 per month for 10 Gbps.
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$1,000 per month and if a TPH uses the
1 Gbps Disaster Recovery Network
Access Port for unicast and multicast
connectivity, the TPH will be charged
$500 per month.)’’. The example
provided above that states that, if a TPH
uses the 1 Gbps Network Access Port for
unicast and multicast connectivity, the
TPH will be charged $1,000 per month,
is based on the current 1 Gbps Network
Access Port fee of $500 per month.
Because the Exchange herein proposes
to increase the fee for a 1 Gbps Network
Access Port to $750 per month, the
Exchange needs to also update the
example to state that ‘‘if a TPH uses the
1 Gbps Network Access Port for unicast
and multicast connectivity, the TPH
will be charged $1,500 per month . . .’’
The proposed change will accurately
reflect the proposed new fee amount
and provide correct guidance to market
participants reading 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.12 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 13 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 facilitation 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,14 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.
The Exchange believes that the
proposal to adopt a $0.05 per contract
per side surcharge for noncustomer
complex order executions that remove
liquidity from the COB is reasonable
because although a surcharge is being
added, the total amount assessed to
these transactions is still within the
range of fees paid by other market
12 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
14 15 U.S.C. 78f(b)(4).
13 15
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5185
participants for similar transactions.15
Further, other exchanges assess higher
fees for complex orders than for
noncomplex ones.16 Applying the COB
Taker Surcharge to all market
participants except customers is
equitable and not unfairly
discriminatory because other market
participants generally prefer to execute
their orders against customer orders. By
exempting customer orders, the COB
Taker Surcharge will not discourage the
sending of customer orders, and
therefore there should still be plenty of
customer orders for other market
participants to trade with. Further, the
options industry has a long-standing
practice of assessing preferable fee
structures to customers. Excluding from
the COB Taker Surcharge options in
Underlying Symbol List A is equitable
and not unfairly discriminatory because
the Exchange has devoted a lot of
resources to develop its proprietary
options classes, and therefore does not
desire to risk discouraging the trading of
such proprietary singly-listed options
classes. Excluding mini-options from
the COB Taker Surcharge is reasonable
because the Exchange does not currently
pay VIP credit for mini-options, so the
economic differential which the COB
taker fee is addressing (i.e., offsetting the
VIP complex order credits) is not
present for mini-options. Excluding
mini-options from the COB Taker
Surcharge is not unfairly discriminatory
because it will apply to all TPHs.
Limiting the COB Taker Surcharge to
orders entered electronically is
equitable and not unfairly
discriminatory because the Exchange
has expended considerable resources to
develop its electronic trading platforms
and seeks to recoup the costs of such
expenditures. The Exchange believes it
is reasonable and not unfairly
discriminatory to exclude complex
orders that originate from a Floor Broker
PAR station because such transactions
are already subject to Floor Brokerage
fees.17 Additionally, Floor Brokers
ensure that the difficult-to-execute
orders (such as large and complex
15 See e.g., NYSE Arca, Inc. (‘‘Arca’’) Options Fees
Schedule, page 7 (Electronic Complex Order
Executions) which provides that for complex orderto-complex order transactions, non-customers are
assessed $0.50 in penny pilot options and $0.85 in
non-penny pilot options. Depending upon the type
of market participant a CBOE TPH is, non-customer
CBOE TPHs would be assessed between $0.08 and
$0.65 (which includes the proposed surcharge) for
such transactions (see CBOE Fees Schedule).
16 See ISE Schedule of Fees, Section I (which lists
regular Maker rebates and fees and Taker fees for
Select Symbols) as compared to Section II (which
lists complex order fees and rebates for Select
Symbols). Market participants are assessed higher
fees for executing complex orders.
17 See CBOE Fees Schedule, Floor Brokerage Fees.
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orders) are able to be executed manually
by accessing the CBOE’s in-person
market-maker crowds, while also
helping to achieve price improvement
and the Exchange does not want to
discourage this activity. The Exchange
notes that a similar exemption exists for
the Hybrid 3.0 Surcharge. The Exchange
believes that it is equitable and not
unfairly discriminatory to only assess
this surcharge to those removing
liquidity from the market (‘‘Takers’’)
and not Makers because the Exchange
wants to continue to encourage market
participation and price improvement.
The Exchange next notes that when a
Market-Maker submits a quote, the
Market-Maker does not know whether it
will trade with a simple or complex
order. As such, the Exchange believes it
is reasonable, equitable and not unfairly
discriminatory to exclude electronic
executions against single leg markets
because it wants to encourage MarketMakers to continue to provide trading
opportunities and tight spreads, which
they may be discouraged to do if there
is a possibility they will be assessed a
surcharge if and when their quotes fills
against a complex order. Finally, the
Exchange believes it’s reasonable,
equitable and not unfairly
discriminatory to exclude from the COB
Taker Surcharge executions in COA and
AIM because the Exchange wants to
continue to encourage price
improvement via these functionalities
and because this exclusion is applicable
to all TPHs.
The Exchange believes the proposal to
change the qualifying volume
thresholds for the reduced fees in the
CBOE Proprietary Products Sliding
Scale is reasonable because the changes
account for the increase in multi-listed
trading volumes since the ADV
thresholds were established. The
Exchange believes it is equitable and not
unfairly discriminatory because the
proposed changes to the qualifying
volume thresholds apply to all Clearing
TPHs.
The Exchange believes increasing the
rates in the B3, B2 and A2 tiers of the
CBOE Proprietary Products Sliding
Scale (and thereby reducing the overall
discount) is reasonable because it still
provides Clearing TPHs an opportunity
to receive notable discounted rates on
classes in Underlying Symbol list A for
reaching certain qualifying volume
thresholds that they would not
otherwise receive (now just a smaller
discount). Additionally, the Exchange
notes that lower fees for executing more
contracts is equitable and not unfairly
discriminatory because it provides
market participants with an incentive to
execute more contracts on the Exchange.
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This brings greater liquidity and trading
opportunity, which benefits all market
participants. The Exchange believes that
the proposed change is not unfairly
discriminatory because it will apply to
all Clearing TPHs that meet the
qualifying volume thresholds. The
Exchange also believes offering lower
fees under the CBOE Proprietary
Products Sliding Scale to Clearing TPHs
and not other CBOE market participants
is equitable and not unfairly
discriminatory because Clearing TPHs
must take on certain obligations and
responsibilities, such as clearing and
membership with the Options Clearing
Corporation, as well as significant
regulatory burdens and financial
obligations, that other market
participants are not required to
undertake.
The Exchange believes it’s reasonable
to reduce the VIP credit for complex
orders in Tiers 2 and 3 from $0.17 per
contract to $0.16 because it is
decreasing a mere $0.01 and it still
provides an opportunity for TPHs to
receive credits for complex orders for
reaching certain qualifying volume
thresholds that they would not
otherwise receive (now just a smaller
discount). The Exchange believes the
proposed change is equitable and not
unfairly discriminatory because it
applies to all TPHs that meet the
qualifying volume thresholds.
The Exchange believes that the
proposal to implement a cap on VIP
credits at 1,000 contracts per simple
order and 1,000 contracts per leg per
complex order for orders executed
electronically in AIM and a cap of 1,000
contracts per auction quantity for orders
executed in HAL is reasonable because
in both cases the exchange collects little
or no net transaction fees from the
contra parties, and as such, the
Exchange does not wish to also provide
a credit on these transactions as it
would result in the Exchange paying for
such transactions without collecting any
revenue (a net negative), which would
not be economically prudent.
Additionally, the Exchange believes the
proposed cap is equitable and not
unfairly discriminatory because it
applies to all TPHs.
The Exchange believes it’s reasonable,
equitable and not unfairly
discriminatory to provide that all
contracts executed in AIM (including
complex AIM) and all contracts
executed in HAL will continue to be
counted towards the percentage
thresholds because the Exchange would
like to continue to encourage the use of
these price improvement mechanisms
and because the proposed change would
apply to all TPHs. The Exchange also
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Fmt 4703
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believes its reasonable, equitable and
not unfairly discriminatory to provide
that multiple simple orders from the
same TPH in the same series on the
same side of the market that are
received within three hundred (300)
seconds will be aggregated for purposes
of determining the order quantity
subject to the cap, as the Exchange
believes this should prevent TPHs from
breaking up their orders in order to
avoid the fee cap and it would apply to
all TPHs.
The Exchange believes the relocation
of the current language in the Notes
section of the VIP table to a new
Footnote of the Fees Schedule will make
the Fees Schedule easier to read and
avoid potential confusion, thereby
removing impediments to and
perfecting the mechanism of a free and
open market and a national market
system, and, in general, protecting
investors and the public interest.
The Exchange believes that raising the
discount threshold for SPX (including
SPXw), SPXPM and SROs is reasonable
because customers will still be receiving
a discount for large trades that they
would not otherwise receive. This
change is equitable and not unfairly
discriminatory because all customers
whose large trades qualify for the
Discount will still receive it and the
SPX product group has reached a
mature and established level since its
introduction while other products, such
as VIX, have not.
The Exchange believes that the
increased Exchangefone relocation fee is
reasonable because the increase is being
enacted to reflect an increase in the
amount that a vendor charges the
Exchange to provide the Exchangefone
relocations. The Exchange believes that
this change is equitable and not unfairly
discriminatory because the increased
Exchangefone relocation fee will apply
to all market participants who request
an Exchangefone relocation.
Additionally, the Exchange believes the
deletion of the PhoneMail services and
fees is reasonable, equitable and not
unfairly discriminatory because it
merely removes fees associated with
outdated services that have not been
used by TPHs in a number of years.
Increasing the PULSe fee from $350
per month to $400 per month for the
first 10 users of a TPH workstation and
from $350 to $400 per month per
workstation for non-TPH workstations is
reasonable because the Exchange
expended significant resources
developing PULSe and desires to recoup
some of those costs. Moreover, the
Exchange will be assessing the same
amount for the FBW, which is a similar
product. This change is equitable and
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not unfairly discriminatory because all
market participants who desire to use
PULSe will be assessed the same fee,
and because the same amount is being
assessed for use of a similar product, the
FBW.
Increasing the FBW fee from $350 per
month (per login ID) to $400 per month
(per login ID) is reasonable because the
Exchange is charged by the vendor that
provides the FBW more than $350 per
month (per login ID) and simply wants
to reduce the extent to which the
Exchange subsidizes such costs. This
change is equitable and not unfairly
discriminatory because all market
participants who desire to use the FBW
will be assessed the same fee.
Implementing a $400 per month (per
login ID) for FBW2 is reasonable
because the Exchange will be charged
by the vendor that provides FBW2 more
than $400 per month (per login ID) and
again simply wants to reduce the extent
to which the Exchange subsidizes these
costs. This change is equitable and not
unfairly discriminatory because all
market participants who desire to use
FBW2 will be assessed the same fee.
The Exchange believes it is reasonable
to provide a waiver for the months of
January 2015 and February 2015
because it allows new users time to
become familiar with and fully
acclimated to the new FBW
functionality and incentivizes the users
to begin this process as soon as the new
functionality becomes available. The
Exchange believes it is reasonable to
provide a waiver for the first month for
a new login ID beginning March 1, 2015,
because it allows a new user after
February 2015 to fully acclimate to the
new FBW functionality. The Exchange
believes that the proposed changes
regarding the fee waivers are equitable
and not unfairly discriminatory because
it applies to all new users of FBW2.
Increasing the Initial Proprietary
Registration Fee from $50 to $65 and the
Annual Proprietary Registration fee
from $25 to $40 is reasonable because
the Exchange continually expends
resources in maintaining the Proprietary
Trading Registration Program and
desires to recoup some of the increasing
costs. This change is equitable and not
unfairly discriminatory because all
market participants who register for the
Proprietary Trader registration will be
assessed the same fee.
The Exchange believes that the
proposed changes to the Network
Access Port fees are reasonable because
the Exchange has expended significant
resources setting up, providing and
maintaining this connectivity, and the
costs related to such provision and
maintenance have increased. The
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18:50 Jan 29, 2015
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Exchange merely desires to recoup such
increased costs. The Exchange believes
that the proposed changes to the
Network Access Port fees are equitable
and not unfairly discriminatory because
the newly-increased fees will, as before,
be applied in the same manner to all
CBOE market participants (in that all
CBOE market participants who seek a 1
Gbps Network Access Port will be
assessed the new $750 per port per
month fee, and all CBOE market
participants who seek a 10 Gbps
Network Access Port will be assessed
the new $3,500 per port per month fee).
Assessing a higher fee for 10 Gbps
connectivity than for 1 Gbps
connectivity is equitable and not
unfairly discriminatory because 10 Gbps
connectivity is more robust than 1 Gbps
connectivity, and requires more costly
equipment and maintenance, and the
Exchange must recoup the costs related
to providing such connectivity. Further,
these new fee amounts are still within
the range of, and in some cases less
than, similar fees assessed by other
exchanges.18
The Exchange believes that the
proposed change to the example
provided in the Notes section that
describes the Network Access Port fees
serves 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 by
preventing any potential confusion
regarding the application of the Network
Access Port fees and the proposed new
fee amounts.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule changes will impose
any burden on competition that are not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed rule change will impose any
burden on intramarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
because, while different fees and rebates
are assessed to different market
participants in some circumstances,
these different market participants have
different obligations and different
circumstances (as described in the
‘‘Statutory Basis’’ section above). For
18 See ISE Schedule of Fees, Section VIII.B.,
which lists Network Ethernet fees of $750 per
month for 1 Gigabit and $4,000 per month for 10
Gigabits, and a Network Ethernet—Low Latency fee
of $7,000 per month for 10 Gigabits, and see also
MIAX Options Fees Schedule, Section 5(a), which
lists connectivity fees of $1,000 per month for 1
Gbps and $5,000 per month for 10 Gbps.
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5187
example, Clearing TPHs have clearing
obligations that other market
participants do not have. Market-Makers
have quoting obligations that other
market participants do not have. There
is a history in the options markets of
providing preferential treatment to
Customers, as they often do not have as
sophisticated trading operations and
systems as other market participants,
which often makes other market
participants prefer to trade with
Customers. Further, the Exchange fees
and rebates, both current and those
proposed to be changed, are intended to
encourage market participants to bring
increased volume to the Exchange
(which benefits all market participants),
while still covering Exchange costs
(including those associated with the
upgrading and maintenance of Exchange
systems).
The Exchange does not believe that
the proposed rule changes will impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act
because the proposed changes are
intended to promote competition and
better improve the Exchange’s
competitive position and make CBOE a
more attractive marketplace in order to
encourage market participants to bring
increased volume to the Exchange
(while still covering costs as necessary).
Further, the proposed changes only
affect trading on CBOE. To the extent
that the proposed changes make CBOE
a more attractive marketplace for market
participants at other exchanges, such
market participants are welcome to
become CBOE market participants.
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 written 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 19 and paragraph (f) of Rule
19b–4 20 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
19 15
20 17
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Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
[FR Doc. 2015–01753 Filed 1–29–15; 8:45 am]
IV. Solicitation of Comments
BILLING CODE 8011–01–P
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2015–005 on the subject line.
Paper Comments
asabaliauskas on DSK5VPTVN1PROD with NOTICES
• 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–2015–005. 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 Web site (https://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 Web site 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;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–CBOE–
2015–005 and should be submitted on
or before February 20, 2015.
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18:50 Jan 29, 2015
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Jill M. Peterson,
Assistant Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74142; File Nos. SR–FICC–
2014–810; SR–NSCC–2014–811; SR–DTC–
2014–812]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; National
Securities Clearing Corporation; the
Depository Trust Company; Notice of
No Objection to Advance Notices, as
Amended, To Amend and Restate the
Third Amended and Restated
Shareholders Agreement, Dated as of
December 7, 2005
January 27, 2015.
On November 5, 2014, Fixed Income
Clearing Corporation (‘‘FICC’’), National
Securities Clearing Corporation
(‘‘NSCC’’), and The Depository Trust
Company (‘‘DTC,’’ together with FICC
and NSCC, ‘‘Clearing Agencies’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) advance
notices SR–FICC–2014–810, SR–NSCC–
2014–811 and SR–DTC–2014–812
(‘‘Advance Notices’’), pursuant to
Section 806(e)(1) of the Payment,
Clearing, and Settlement Supervision
Act of 2010 (‘‘Clearing Supervision
Act’’) 1 and Rule 19b–4(n)(1)(i) under
the Securities Exchange Act of 1934.2
On November 17, 2014, the Clearing
Agencies each filed Amendments No. 1
to the Advance Notices.3 On November
17, 2014 FICC withdrew Amendment
No. 1 and filed Amendment No. 2 to
advance notice SR–FICC–2014–810.4
The Advance Notices, as amended, were
published for comment in the Federal
Register on December 11, 2014.5 On
December 31, 2014, the Commission
published notice of its extension of the
review period for the Advance Notices.6
21 17
CFR 200.30–3(a)(12).
U.S.C. 5465(e)(1).
2 17 CFR 240.19b–4(n)(1)(i).
3 NSCC and DTC filed Amendment Nos. 1 to
provide additional description of the changes
proposed in advance notices SR–NSCC–2014–811
and SR–DTC–2014–812, respectively.
4 FICC withdrew Amendment No. 1 to advance
notice SR–FICC–2014–810 due to an error in filing
the amendment. FICC filed Amendment No. 2 to
advance notice SR–FICC–2014–810 in order to
provide additional description of the changes
proposed in the advance notice.
5 Release No. 34–73755 (Dec. 5, 2014), 79 FR
73665 (Dec. 11, 2014).
6 Release No. 34–73975 (Dec. 31, 2014), 80 FR 918
(Jan. 7, 2015).
The Commission did not receive any
comments on the Advance Notices. This
publication serves as notice of no
objection to the Advance Notices, as
amended.
I. Description of the Advance Notices
The Advance Notices are a proposal
by the Clearing Agencies, which are
wholly owned subsidiaries of the
Depository Trust and Clearing
Corporation (‘‘DTCC’’), to amend and
restate their Third Amended and
Restated Shareholders Agreement, dated
as of December 7, 2005 (‘‘Existing
Shareholders Agreement’’) 7 — a single
agreement covering all of the Clearing
Agencies and their respective members
and participants (‘‘Members’’). The
Clearing Agencies state that the
proposed revisions to the Existing
Shareholders Agreement (‘‘Revised
Shareholders Agreement’’) are the
product of a comprehensive review by
DTCC of its ownership, governance, and
capital structure, undertaken for the
purposes of increasing the financial
resources available to support the
conduct of the businesses of the
Clearing Agencies and enhancing
regulatory risk management.
With the Advance Notices of the
Revised Shareholders Agreement, the
Clearing Agencies propose: (1) To issue
new common stock of DTCC (‘‘Common
Shares’’), which mandatory common
shareholders (‘‘Mandatory
Shareholders’’) 8 will be required to
purchase, upon approval by the DTCC
Board of Directors (‘‘Board’’) and twothirds of Mandatory Shareholders; (2) to
buyback such newly issued Common
Shares From Mandatory Shareholders,
at the Board’s discretion and approval;
(3) to modify the formula for allocating
Common Shares among shareholders
(‘‘Common Shareholders’’); (4) to
modify the formula for pricing the
Common Shares; (5) to remove
restrictions on the frequency with
which DTCC can reallocate Common
Shares; and (6) make other conforming
and technical changes. Details of these
proposed changes are summarized
below.
1 12
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7 When the changes proposed in the Advance
Notices become effective, the title of the Existing
Shareholders Agreement will become the ‘‘Fourth
Amended and Restated Shareholders Agreement.’’
8 Pursuant to the Existing Shareholders
Agreement and the rules of each of the Clearing
Agencies, some Members, generally full-service
Members, are required to own Common Shares (i.e.,
Mandatory Shareholders) while other Members,
generally limited-service Members, are permitted
but not required to own such shares (‘‘Voluntary
Shareholders’’). Further, certain Members are not
permitted to purchase and own Common Shares or
become parties to the Existing Shareholders
Agreement.
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]]>Agencies
[Federal Register Volume 80, Number 20 (Friday, January 30, 2015)]
[Notices]
[Pages 5182-5188]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-01753]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74134; File No. SR-CBOE-2015-005]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend the Fees Schedule
January 26, 2015.
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 14, 2015, Chicago Board Options Exchange, Incorporated
(the ``Exchange'' or ``CBOE'') 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Fees Schedule. The text of the
proposed rule change is available on the Exchange's Web site (https://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 make a number of changes to its Fees
Schedule.\3\
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed fee changes on
December 31, 2014 (SR-CBOE-2014-097). On January 14, 2015, the
Exchange withdrew that filing and submitted this filing.
---------------------------------------------------------------------------
COB Taker Surcharge
The Exchange proposes to implement a Complex Order Book (``COB'')
Taker Surcharge. Specifically, the Exchange proposes to adopt a $0.05
per contract per side surcharge for non-customer complex order
executions that take liquidity from the COB in all underlying classes
except OEX, XEO, SPX (including SPXW), SPXpm, SRO, VIX, VXST,
Volatility Indexes and binary options (``Underlying Symbol List A'')
and mini-options. Additionally, the Exchange proposes to provide that
the COB Taker Surcharge will not be assessed on non-customer complex
order executions in the Complex Order Auction (``COA''), the Automated
Aim Mechanism (``AIM''), orders originating from a Floor Broker PAR, or
electronic
[[Page 5183]]
executions against single leg markets. The purpose of the COB Taker
Surcharge is to help offset the rebate given to complex orders under
the Volume Incentive Program (``VIP''). The Exchange notes that even
with the additional surcharge, the amount of Exchange fees assessed for
non-customer complex order-to-complex order executions that take
liquidity are less than those assessed for similar transactions on
certain other exchanges.\4\
---------------------------------------------------------------------------
\4\ See e.g., NYSE Arca, Inc. (``Arca'') Options Fees Schedule,
page 7 (Electronic Complex Order Executions) which provides that for
complex order-to-complex order transactions, non-customers are
assessed $0.50 in penny pilot options and $0.85 in non-penny pilot
options. Depending upon the type of market participant a CBOE TPH
is, non-customer CBOE TPHs would be assessed between $0.08 and $0.65
(which includes the proposed surcharge) for such transactions (see
CBOE Fees Schedule).
---------------------------------------------------------------------------
CBOE Proprietary Products Sliding Scale
The CBOE Proprietary Products Sliding Scale table provides that
Clearing Trading Permit Holder Proprietary transaction fees and
transaction fees for Non-Clearing Trading Permit Holder Affiliates in
OEX, XEO, SPX, SPXpm, VIX, VXST, and VOLATILITY INDEXES are reduced
provided a Clearing Trading Permit Holder (``Clearing TPH'') reaches
certain average daily volume (``ADV'') thresholds in all underlying
symbols excluding Underlying Symbol List A and mini-options on the
Exchange in a month. The Exchange proposes to implement two changes to
the CBOE Proprietary Products Sliding Scale. First, the Exchange
proposes to increase the current qualifying ADV thresholds.
Specifically, the threshold 18,000 ADV to 71,999 ADV would be changed
to 20,000 ADV to 79,999 ADV, and the threshold 72,000 ADV and above
would be changed to 80,000 ADV and above. The purpose of the proposed
change is to account for increased trading volume in multi-listed
products across the industry. The Exchange also proposes to make
corresponding changes related to the ADV thresholds to Footnote 23,
which Footnote relates to the CBOE Proprietary Products Sliding Scale.
The Exchange next proposes to increase the rates set forth in the B3
and B2 tiers (for Proprietary Product Volume from 0.00% to 8.50% of
total Monthly Proprietary Product Firm (F) volume) by 2 cents and 5
cents, respectively, and the rate in the A2 tier (for Proprietary
Product Volume from 0.00% to 6.50% of total Monthly Proprietary Product
Firm (F) volume) by 1 cent. The proposed changes are further detailed
below.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current Proposed
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proprietary product Transaction fee Proprietary product Transaction fee
Tier volume thresholds per contract Tier volume thresholds per contract
--------------------------------------------------------------------------------------------------------------------------------------------------------
>=18,000 ADV <=71,999 ADV in multi list products >=20,000 ADV <=79,999 ADV in multi list products
-------------------------------------- ---------------------------------------------
B3............................... 0.00%-6.50%............. $0.18 B3 0.00%-6.50%............ $0.20
B2............................... 6.51%-8.50%............. 0.05 B2 6.51%-8.50%............ 0.10
B1............................... Above 8.50%............. 0.02 B1 Above 8.50%............ 0.02
---------------------------------------------------------------- ---------------------------------------------------
>=72,000 ADV in multi list products >=80,000 ADV in multi list products
-------------------------------------- ---------------------------------------------
A2............................... 0.00%-6.50%............. 0.15 A2 0.00%-6.50%............ 0.16
A1............................... Above 6.50%............. 0.01 A1 Above 6.50%............ 0.01
--------------------------------------------------------------------------------------------------------------------------------------------------------
The purpose of increasing the Transaction Fee Per Contract rates
(and thereby reducing the amount of the discount Clearing TPHs may
receive on proprietary products) is to moderate the discount levels for
these products in view of their growth and performance. Particularly,
the Exchange does not believe it's necessary to maintain the existing
discounted rates for these tiers, but seeks to maintain an incremental
incentive for Clearing TPHs to strive for the highest tier level.
Volume Incentive Program
The Exchange next proposes to amend the VIP rebate schedule. By way
of background, under VIP, the Exchange credits each Trading Permit
Holder (``TPH'') the per contract amount set forth in the VIP table
resulting from each public customer (``C'' origin code) order
transmitted by that TPH (with certain exceptions) which is executed
electronically on the Exchange in all underlying symbols excluding
Underlying Symbol List A, RUT, DJX, XSP, XSPAM, credit default options,
credit default basket options and mini-options, provided the TPH meets
certain volume thresholds in a month.\5\
---------------------------------------------------------------------------
\5\ Excluded from the VIP credit are options in Underlying
Symbol List A, RUT, DJX, XSP, XSPAM, credit default options, credit
default basket options, mini-options, QCC trades, public customer to
public customer electronic complex order executions, and executions
related to contracts that are routed to one or more exchanges in
connection with the Options Order Protection and Locked/Crossed
Market Plan referenced in Rule 6.80 (see CBOE Fees Schedule, Volume
Incentive Program).
---------------------------------------------------------------------------
The Exchange first proposes to reduce the VIP credit for complex
orders in Tiers 2 and 3 from $0.17 per contract to $0.16. The purpose
of this change is to adjust the incentive tiers accordingly as
competition requires while maintaining an incremental incentive for
TPH's to strive for the highest tier level.
The Exchange next proposes to implement a cap on VIP credits at
1,000 contracts per simple order executed electronically in AIM and
1,000 contracts per leg per complex order executed electronically in
AIM.\6\ The Exchange also proposes to cap orders executed
electronically in the Hybrid Agency Liaison (``HAL'') mechanism at
1,000 contracts per auction quantity.\7\ The Exchange is proposing to
implement the cap on executions via AIM because the vast majority of
orders over 1,000 contracts executed via AIM are traded primarily
against the submitting contra party, for which the Exchange collects
minimal revenue. Additionally, in HAL, the Exchange provides a HAL
Step-Up Rebate \8\ which reduces the collected net Exchange
[[Page 5184]]
transaction fees to those market participants that qualify. The
Exchange notes that generally, the parties which collect this credit
have greater participation in larger orders. As such, it would not be
viable for the Exchange to pay credits on contracts that do not create
corresponding and offsetting revenue for the Exchange. The Exchange
notes that all contracts executed in AIM (including complex AIM) and
all contracts executed in HAL will continue to be counted towards the
qualifying percentage thresholds, as the Exchange would like to
continue to encourage the use of these price improvement mechanisms.
---------------------------------------------------------------------------
\6\ For example, a 750-lot butterfly spread would total 3,000
contracts. As each leg of the order is below 1,000 contracts, the
Exchange would pay credits for each contract of each leg, totaling
3,000 contacts. If for example leg 1 of a complex order was for 600
contracts and leg 2 of the order was for 1,200 contracts, the
Exchange would pay a VIP credit for a total of 1,600 contracts
(i.e., all 600 contracts on leg 1 and 1,000 contracts on leg 2).
\7\ To demonstrate this cap, consider the following: a TPH
submits an order for 1500 contracts. Of the 1500 contracts, 400
contracts execute electronically against a Market-Maker quote. The
remaining 1,100 contracts are executed via HAL. The Exchange would
pay credits for a total of 1,400 contracts (i.e., the 400 contracts
executed outside of HAL and 1,000 contracts executed in HAL).
\8\ See CBOE Fees Schedule, Hybrid Agency Liaison (``HAL'') Step
Up Rebate.
---------------------------------------------------------------------------
Finally with respect to VIP, the Exchange proposes to provide that
multiple simple orders from the same TPH in the same series on the same
side of the market that are received within three hundred (300) seconds
and executed in AIM or HAL will be aggregated for purposes of
determining the order quantity subject to the cap discussed above. For
this aggregation, activity in AIM and HAL will be aggregated
separately. The AIM aggregation timer will begin with an order entered
into AIM and continue for 300 seconds, aggregating any other orders
entered into AIM in the same series on the same side of the market by
the same affiliated TPH. The HAL aggregation timer will begin at the
start of a HAL auction and continue for 300 seconds, aggregating any
other orders executed in HAL in the same series on the same side of the
market for the same affiliated TPH. Any portion of the original order
quantity that is executed outside of HAL will not be part of the
aggregation or counted towards the 1,000 contract threshold. The
Exchange believes this change should prevent TPHs from breaking up
their orders in order to avoid the fee cap.
Finally, the Exchange proposes to relocate the language currently
set forth in the Notes section of the VIP table to a new footnote
(Footnote 36). In light of the additional language being added to the
current Notes section of the VIP table, the Exchange believes the
relocation of the existing language to a new and separate footnote will
make the Fees Schedule easier to read. No substantive changes to the
relocated language are being made.
SPX Customer Large Trade Discount
The Customer Large Trade Discount program (the ``Discount'')
provides a discount in the form of a cap on the quantity of customer
(``C'' origin code'') contracts that are assessed transactions fees in
certain options classes. The Discount table in the Fees Schedule sets
forth the quantity of contracts necessary for a large customer trade to
qualify for the Discount, which varies by product. Currently, under the
``Products'' section in the Discount table, the following S&P products
for which the Discount is in effect are listed: ``SPX, SPXw, SPXpm,
SRO.'' Customer transaction fees for each of these products are
currently only charged up to the first 10,000 contracts. The Exchange
proposes to raise the quantity of SPX, SPXw, SPXpm, and SRO contracts
necessary for a large customer trade to qualify for the Discount from
10,000 contracts per order to 15,000 contracts per order. The purpose
of the proposed rule change is to moderate the discount level for
Customer (C) orders in the SPX product group in view of its mature and
established position in the industry.
Facility Fees Communications
The Exchange proposes to increase the Exchangefone relocation fee
from $116 to $129. The Exchange contracts with a vendor to provide the
Exchangefone relocations, and this vendor has increased its fees, so
the Exchange proposes to increase the Exchangefone relocation fee to
reflect the increased vendor cost.
The Exchange also proposes to eliminate certain telecommunication
fees. The Exchange currently assesses monthly fees for three types of
services the Exchange offers related to PhoneMail: (i) Basic Service,
(ii) PhoneMail with Outcall and (iii) PhoneMail with Outcall & Pager.
The Exchange notes that no TPHs have availed themselves of these
services in a number of years. As such, the Exchange believes offering
such services is no longer necessary and proposes to accordingly delete
all fees for and references to such services from the Fees Schedule.
Floor Broker Workstation and PULSe Workstation
The Exchange proposes raising the Floor Broker Workstation
(``FBW'') fee from $350 per month (per login ID) to $400 per month (per
login ID). The Exchange's vendor that provides the FBW charges the
Exchange more than $350 per month (per login ID) for the FBW (actually,
more than $350 per month (per login ID), and the Exchange had been
subsidizing those costs for FBW users. However, it is no longer
economically feasible to subsidize those costs to that great an extent.
As such, the Exchange proposes increasing the FBW fee to $400 per month
(per login ID), which still includes a subsidy for FBW users (though
smaller).
Additionally, the Exchange proposes to establish a FBW fee for an
updated version of FBW (``FBW2''), which will be made available shortly
to all TPHs. The fee for FBW2 will be the same as the existing FBW fee
(i.e., $400 per month (per login ID). The Exchange also proposes
adopting a fee waiver for the months of January and February 2015.
Additionally, the Exchange proposes to provide that, after March 1,
2015 the monthly fee for FBW2 login IDs will be waived for the first
month.\9\ The purpose of the proposed fee waivers is to give new users
time to become familiar with and fully acclimated to the new FBW
workstation functionality. The Exchange notes that after February 2015
(and absent an applicable fee waiver noted above), TPHs will be charged
each of $400 for FBW and FBW2 (i.e., total of $800) if such users
continue to use both FBW and FBW2.
---------------------------------------------------------------------------
\9\ For example, if a user adds a new login ID in March 2015,
the user will receive a fee waiver for that login ID for March 2015.
---------------------------------------------------------------------------
The Exchange also proposes raising the PULSe On-Floor Workstation
(``PULSe'') fee. Currently, the Exchange charges a fee of $350 per
month for the first 10 users of a TPH workstation and $100 per month
for all subsequent users. TPHs may also make the workstation available
to their customers, which may include non-broker dealer public
customers and non-TPH broker dealers (referred to herein as ``non-
TPHs''). For such non-TPH workstations, the Exchange charges a fee of
$350 per month per workstation. The Exchange proposes raising the PULSe
On-Floor Workstation fee from $350 per month to $400 per month for both
TPH and non-TPH workstations. The Exchange expended significant
resources developing PULSe, and intends to recoup some of those costs.
Further, because PULSe and FBW serve similar functions, the Exchange
desires to assess equivalent fees for each so as not to offer a pricing
advantage for one over the other.
Proprietary Registration Fees
The Exchange next proposes to raise the Initial Proprietary
Registration fee from $50 to $65 and the Annual Proprietary
Registration fee from $25 to $40. The Initial Proprietary Registration
fee is payable by any TPH organization for the registration of any
associated person on WebCRD \10\ with the Proprietary Trader
registration. The Annual Proprietary Registration fee is payable
annually by any TPH organization for each associated person
[[Page 5185]]
that the TPH organization maintains registered on WebCRD with the
Proprietary Trader registration. By way of background, the Exchange
adopted these fees in conjunction with the implementation of the then
new Proprietary Trading registration requirement (the ``Proprietary
Trading Registration Program'' or ``Program''). These fees were adopted
to recoup some of the costs expended to maintain the Program. The
Exchange notes that the Proprietary Trading Registration Program
continues to require on-going work, including testing and monitoring of
the WebCRD system, as well as consideration of new applicants. In order
to offset these increasing costs, the Exchange proposes to increase the
Initial Proprietary Registration fee and the Annual Proprietary
Registration fee.
---------------------------------------------------------------------------
\10\ WebCRD is the Central Registration Depository system which
is operated by the Financial Industry Regulatory Authority,
Incorporated (``FINRA'').
---------------------------------------------------------------------------
CBOE Command Connectivity Changes
Next, the Exchange proposes to increase Network Access Port fees.
By way of background, CBOE market participants can access the
Exchange's trading systems via Network Access Ports, and can elect for
a Network Access Port (or Ports) of either 1 gigabit per second
(``Gbps'') or 10 Gbps. Currently, the Exchange assesses a fee of $500
per month for a 1 Gbps Network Access Port and a fee of $3,000 per
month for a 10 Gbps Network Access Port. The Exchange has expended
significant resources setting up, providing and maintaining this
connectivity, and the costs related to such provision and maintenance
has increased. The Exchange desires to recoup such increased costs.
Therefore, the Exchange proposes to amend its Network Access Port fees
to increase the fee for a 1 Gbps Network Access Port to $750 per month
and for a 10 Gbps Network Access Port to $3,500 per month. These new
fee amounts are still within the range of, and in some cases less than,
similar fees assessed by other exchanges.\11\
---------------------------------------------------------------------------
\11\ See International Securities Exchange, LLC (``ISE'')
Schedule of Fees, Section VIII.B., which lists Network Ethernet fees
of $750 per month for 1 Gigabit and $4,000 per month for 10
Gigabits, and a Network Ethernet--Low Latency fee of $7,000 per
month for 10 Gigabits, and see also Miami International Securities
Exchange LLC (``MIAX'') Options Fees Schedule, Section 5(a), which
lists connectivity fees of $1,000 per month for 1 Gbps and $5,000
per month for 10 Gbps.
---------------------------------------------------------------------------
The ``Notes'' section that describes the Network Access Port fees
provides detail which states that ``Separate Network Access Port fees
are assessed for unicast (orders, quotes) and multicast (market data)
connectivity (i.e., if a TPH uses the 1 Gbps Network Access Port for
unicast and multicast connectivity, the TPH will be charged $1,000 per
month and if a TPH uses the 1 Gbps Disaster Recovery Network Access
Port for unicast and multicast connectivity, the TPH will be charged
$500 per month.)''. The example provided above that states that, if a
TPH uses the 1 Gbps Network Access Port for unicast and multicast
connectivity, the TPH will be charged $1,000 per month, is based on the
current 1 Gbps Network Access Port fee of $500 per month. Because the
Exchange herein proposes to increase the fee for a 1 Gbps Network
Access Port to $750 per month, the Exchange needs to also update the
example to state that ``if a TPH uses the 1 Gbps Network Access Port
for unicast and multicast connectivity, the TPH will be charged $1,500
per month . . .'' The proposed change will accurately reflect the
proposed new fee amount and provide correct guidance to market
participants reading 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.\12\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \13\ 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 facilitation
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,\14\ 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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
\14\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes that the proposal to adopt a $0.05 per
contract per side surcharge for noncustomer complex order executions
that remove liquidity from the COB is reasonable because although a
surcharge is being added, the total amount assessed to these
transactions is still within the range of fees paid by other market
participants for similar transactions.\15\ Further, other exchanges
assess higher fees for complex orders than for noncomplex ones.\16\
Applying the COB Taker Surcharge to all market participants except
customers is equitable and not unfairly discriminatory because other
market participants generally prefer to execute their orders against
customer orders. By exempting customer orders, the COB Taker Surcharge
will not discourage the sending of customer orders, and therefore there
should still be plenty of customer orders for other market participants
to trade with. Further, the options industry has a long-standing
practice of assessing preferable fee structures to customers. Excluding
from the COB Taker Surcharge options in Underlying Symbol List A is
equitable and not unfairly discriminatory because the Exchange has
devoted a lot of resources to develop its proprietary options classes,
and therefore does not desire to risk discouraging the trading of such
proprietary singly-listed options classes. Excluding mini-options from
the COB Taker Surcharge is reasonable because the Exchange does not
currently pay VIP credit for mini-options, so the economic differential
which the COB taker fee is addressing (i.e., offsetting the VIP complex
order credits) is not present for mini-options. Excluding mini-options
from the COB Taker Surcharge is not unfairly discriminatory because it
will apply to all TPHs. Limiting the COB Taker Surcharge to orders
entered electronically is equitable and not unfairly discriminatory
because the Exchange has expended considerable resources to develop its
electronic trading platforms and seeks to recoup the costs of such
expenditures. The Exchange believes it is reasonable and not unfairly
discriminatory to exclude complex orders that originate from a Floor
Broker PAR station because such transactions are already subject to
Floor Brokerage fees.\17\ Additionally, Floor Brokers ensure that the
difficult-to-execute orders (such as large and complex
[[Page 5186]]
orders) are able to be executed manually by accessing the CBOE's in-
person market-maker crowds, while also helping to achieve price
improvement and the Exchange does not want to discourage this activity.
The Exchange notes that a similar exemption exists for the Hybrid 3.0
Surcharge. The Exchange believes that it is equitable and not unfairly
discriminatory to only assess this surcharge to those removing
liquidity from the market (``Takers'') and not Makers because the
Exchange wants to continue to encourage market participation and price
improvement. The Exchange next notes that when a Market-Maker submits a
quote, the Market-Maker does not know whether it will trade with a
simple or complex order. As such, the Exchange believes it is
reasonable, equitable and not unfairly discriminatory to exclude
electronic executions against single leg markets because it wants to
encourage Market-Makers to continue to provide trading opportunities
and tight spreads, which they may be discouraged to do if there is a
possibility they will be assessed a surcharge if and when their quotes
fills against a complex order. Finally, the Exchange believes it's
reasonable, equitable and not unfairly discriminatory to exclude from
the COB Taker Surcharge executions in COA and AIM because the Exchange
wants to continue to encourage price improvement via these
functionalities and because this exclusion is applicable to all TPHs.
---------------------------------------------------------------------------
\15\ See e.g., NYSE Arca, Inc. (``Arca'') Options Fees Schedule,
page 7 (Electronic Complex Order Executions) which provides that for
complex order-to-complex order transactions, non-customers are
assessed $0.50 in penny pilot options and $0.85 in non-penny pilot
options. Depending upon the type of market participant a CBOE TPH
is, non-customer CBOE TPHs would be assessed between $0.08 and $0.65
(which includes the proposed surcharge) for such transactions (see
CBOE Fees Schedule).
\16\ See ISE Schedule of Fees, Section I (which lists regular
Maker rebates and fees and Taker fees for Select Symbols) as
compared to Section II (which lists complex order fees and rebates
for Select Symbols). Market participants are assessed higher fees
for executing complex orders.
\17\ See CBOE Fees Schedule, Floor Brokerage Fees.
---------------------------------------------------------------------------
The Exchange believes the proposal to change the qualifying volume
thresholds for the reduced fees in the CBOE Proprietary Products
Sliding Scale is reasonable because the changes account for the
increase in multi-listed trading volumes since the ADV thresholds were
established. The Exchange believes it is equitable and not unfairly
discriminatory because the proposed changes to the qualifying volume
thresholds apply to all Clearing TPHs.
The Exchange believes increasing the rates in the B3, B2 and A2
tiers of the CBOE Proprietary Products Sliding Scale (and thereby
reducing the overall discount) is reasonable because it still provides
Clearing TPHs an opportunity to receive notable discounted rates on
classes in Underlying Symbol list A for reaching certain qualifying
volume thresholds that they would not otherwise receive (now just a
smaller discount). Additionally, the Exchange notes that lower fees for
executing more contracts is equitable and not unfairly discriminatory
because it provides market participants with an incentive to execute
more contracts on the Exchange. This brings greater liquidity and
trading opportunity, which benefits all market participants. The
Exchange believes that the proposed change is not unfairly
discriminatory because it will apply to all Clearing TPHs that meet the
qualifying volume thresholds. The Exchange also believes offering lower
fees under the CBOE Proprietary Products Sliding Scale to Clearing TPHs
and not other CBOE market participants is equitable and not unfairly
discriminatory because Clearing TPHs must take on certain obligations
and responsibilities, such as clearing and membership with the Options
Clearing Corporation, as well as significant regulatory burdens and
financial obligations, that other market participants are not required
to undertake.
The Exchange believes it's reasonable to reduce the VIP credit for
complex orders in Tiers 2 and 3 from $0.17 per contract to $0.16
because it is decreasing a mere $0.01 and it still provides an
opportunity for TPHs to receive credits for complex orders for reaching
certain qualifying volume thresholds that they would not otherwise
receive (now just a smaller discount). The Exchange believes the
proposed change is equitable and not unfairly discriminatory because it
applies to all TPHs that meet the qualifying volume thresholds.
The Exchange believes that the proposal to implement a cap on VIP
credits at 1,000 contracts per simple order and 1,000 contracts per leg
per complex order for orders executed electronically in AIM and a cap
of 1,000 contracts per auction quantity for orders executed in HAL is
reasonable because in both cases the exchange collects little or no net
transaction fees from the contra parties, and as such, the Exchange
does not wish to also provide a credit on these transactions as it
would result in the Exchange paying for such transactions without
collecting any revenue (a net negative), which would not be
economically prudent. Additionally, the Exchange believes the proposed
cap is equitable and not unfairly discriminatory because it applies to
all TPHs.
The Exchange believes it's reasonable, equitable and not unfairly
discriminatory to provide that all contracts executed in AIM (including
complex AIM) and all contracts executed in HAL will continue to be
counted towards the percentage thresholds because the Exchange would
like to continue to encourage the use of these price improvement
mechanisms and because the proposed change would apply to all TPHs. The
Exchange also believes its reasonable, equitable and not unfairly
discriminatory to provide that multiple simple orders from the same TPH
in the same series on the same side of the market that are received
within three hundred (300) seconds will be aggregated for purposes of
determining the order quantity subject to the cap, as the Exchange
believes this should prevent TPHs from breaking up their orders in
order to avoid the fee cap and it would apply to all TPHs.
The Exchange believes the relocation of the current language in the
Notes section of the VIP table to a new Footnote of the Fees Schedule
will make the Fees Schedule easier to read and avoid potential
confusion, thereby removing impediments to and perfecting the mechanism
of a free and open market and a national market system, and, in
general, protecting investors and the public interest.
The Exchange believes that raising the discount threshold for SPX
(including SPXw), SPXPM and SROs is reasonable because customers will
still be receiving a discount for large trades that they would not
otherwise receive. This change is equitable and not unfairly
discriminatory because all customers whose large trades qualify for the
Discount will still receive it and the SPX product group has reached a
mature and established level since its introduction while other
products, such as VIX, have not.
The Exchange believes that the increased Exchangefone relocation
fee is reasonable because the increase is being enacted to reflect an
increase in the amount that a vendor charges the Exchange to provide
the Exchangefone relocations. The Exchange believes that this change is
equitable and not unfairly discriminatory because the increased
Exchangefone relocation fee will apply to all market participants who
request an Exchangefone relocation. Additionally, the Exchange believes
the deletion of the PhoneMail services and fees is reasonable,
equitable and not unfairly discriminatory because it merely removes
fees associated with outdated services that have not been used by TPHs
in a number of years.
Increasing the PULSe fee from $350 per month to $400 per month for
the first 10 users of a TPH workstation and from $350 to $400 per month
per workstation for non-TPH workstations is reasonable because the
Exchange expended significant resources developing PULSe and desires to
recoup some of those costs. Moreover, the Exchange will be assessing
the same amount for the FBW, which is a similar product. This change is
equitable and
[[Page 5187]]
not unfairly discriminatory because all market participants who desire
to use PULSe will be assessed the same fee, and because the same amount
is being assessed for use of a similar product, the FBW.
Increasing the FBW fee from $350 per month (per login ID) to $400
per month (per login ID) is reasonable because the Exchange is charged
by the vendor that provides the FBW more than $350 per month (per login
ID) and simply wants to reduce the extent to which the Exchange
subsidizes such costs. This change is equitable and not unfairly
discriminatory because all market participants who desire to use the
FBW will be assessed the same fee.
Implementing a $400 per month (per login ID) for FBW2 is reasonable
because the Exchange will be charged by the vendor that provides FBW2
more than $400 per month (per login ID) and again simply wants to
reduce the extent to which the Exchange subsidizes these costs. This
change is equitable and not unfairly discriminatory because all market
participants who desire to use FBW2 will be assessed the same fee. The
Exchange believes it is reasonable to provide a waiver for the months
of January 2015 and February 2015 because it allows new users time to
become familiar with and fully acclimated to the new FBW functionality
and incentivizes the users to begin this process as soon as the new
functionality becomes available. The Exchange believes it is reasonable
to provide a waiver for the first month for a new login ID beginning
March 1, 2015, because it allows a new user after February 2015 to
fully acclimate to the new FBW functionality. The Exchange believes
that the proposed changes regarding the fee waivers are equitable and
not unfairly discriminatory because it applies to all new users of
FBW2.
Increasing the Initial Proprietary Registration Fee from $50 to $65
and the Annual Proprietary Registration fee from $25 to $40 is
reasonable because the Exchange continually expends resources in
maintaining the Proprietary Trading Registration Program and desires to
recoup some of the increasing costs. This change is equitable and not
unfairly discriminatory because all market participants who register
for the Proprietary Trader registration will be assessed the same fee.
The Exchange believes that the proposed changes to the Network
Access Port fees are reasonable because the Exchange has expended
significant resources setting up, providing and maintaining this
connectivity, and the costs related to such provision and maintenance
have increased. The Exchange merely desires to recoup such increased
costs. The Exchange believes that the proposed changes to the Network
Access Port fees are equitable and not unfairly discriminatory because
the newly-increased fees will, as before, be applied in the same manner
to all CBOE market participants (in that all CBOE market participants
who seek a 1 Gbps Network Access Port will be assessed the new $750 per
port per month fee, and all CBOE market participants who seek a 10 Gbps
Network Access Port will be assessed the new $3,500 per port per month
fee). Assessing a higher fee for 10 Gbps connectivity than for 1 Gbps
connectivity is equitable and not unfairly discriminatory because 10
Gbps connectivity is more robust than 1 Gbps connectivity, and requires
more costly equipment and maintenance, and the Exchange must recoup the
costs related to providing such connectivity. Further, these new fee
amounts are still within the range of, and in some cases less than,
similar fees assessed by other exchanges.\18\
---------------------------------------------------------------------------
\18\ See ISE Schedule of Fees, Section VIII.B., which lists
Network Ethernet fees of $750 per month for 1 Gigabit and $4,000 per
month for 10 Gigabits, and a Network Ethernet--Low Latency fee of
$7,000 per month for 10 Gigabits, and see also MIAX Options Fees
Schedule, Section 5(a), which lists connectivity fees of $1,000 per
month for 1 Gbps and $5,000 per month for 10 Gbps.
---------------------------------------------------------------------------
The Exchange believes that the proposed change to the example
provided in the Notes section that describes the Network Access Port
fees serves 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 by preventing any potential
confusion regarding the application of the Network Access Port fees and
the proposed new fee amounts.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition that are not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because, while different fees
and rebates are assessed to different market participants in some
circumstances, these different market participants have different
obligations and different circumstances (as described in the
``Statutory Basis'' section above). For example, Clearing TPHs have
clearing obligations that other market participants do not have.
Market-Makers have quoting obligations that other market participants
do not have. There is a history in the options markets of providing
preferential treatment to Customers, as they often do not have as
sophisticated trading operations and systems as other market
participants, which often makes other market participants prefer to
trade with Customers. Further, the Exchange fees and rebates, both
current and those proposed to be changed, are intended to encourage
market participants to bring increased volume to the Exchange (which
benefits all market participants), while still covering Exchange costs
(including those associated with the upgrading and maintenance of
Exchange systems).
The Exchange does not believe that the proposed rule changes will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
proposed changes are intended to promote competition and better improve
the Exchange's competitive position and make CBOE a more attractive
marketplace in order to encourage market participants to bring
increased volume to the Exchange (while still covering costs as
necessary). Further, the proposed changes only affect trading on CBOE.
To the extent that the proposed changes make CBOE a more attractive
marketplace for market participants at other exchanges, such market
participants are welcome to become CBOE market participants.
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 written 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 \19\ and paragraph (f) of Rule 19b-4 \20\
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
[[Page 5188]]
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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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-CBOE-2015-005 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-2015-005. 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 Web site (https://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 Web site 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; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-CBOE-2015-005 and should be
submitted on or before February 20, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-01753 Filed 1-29-15; 8:45 am]
BILLING CODE 8011-01-P
