Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend the Order Cancellation Fee, 5476-5479 [2014-01964]
Download as PDF
<![CDATA[
5476
Federal Register / Vol. 79, No. 21 / Friday, January 31, 2014 / Notices
Section 15A(b)(9) of the Act provides
that ‘‘[t]he rules of the association do
not impose any burden on competition
not necessary or appropriate in
furtherance of the purposes of this
title.’’ 51 NSX argues that FINRA fails to
adequately address whether the
Proposal imposes a burden on
competition for other self-regulatory
organization (‘‘SRO’’s) such as NSX.52
According to NSX, the Proposal is an
unfair subsidy of FINRA’s trading
facility and that by charging ‘‘below cost
or subsidized rates to ADF Market
Participants, FINRA would have an
unfair advantage against other
exchanges that are offering competitive
alternatives.’’53 NSX argues that ADF
users should be required to self-fund the
ADF platform.54 In addition, NSX
claims that the ADF Deposit Amount
and the requirement to send at least
75% of quotes and trades to FINRA
amount to an unprecedented burden on
competition because the ADF Quoting
Requirement would make it
economically unfeasible for any other
SRO that provides order delivery
functionality to compete with FINRA.55
FINRA responds that NSX’s assertion
that FINRA is either subsidizing the
operation of the ADF or operating at a
loss and that this results in an unfair
competitive advantage against
exchanges attempting to offer order
delivery alternatives to the ADF is
misleading.56 FINRA states that the ADF
Deposit Amount is not an unfair
subsidy; rather it is designed to recoup
expenses it incurs in connection with
the addition of new ADF Market
Participants and the ADF Migration.57
FINRA notes that the Proposal is
‘‘intended to avoid the need for FINRA
to subsidize all of the costs associated
with’’ the ADF.58 Moreover, FINRA
notes that the ADF Quoting
Requirement is not an unnecessary or
appropriate burden on competition
because it is not a requirement to use
the ADF, and is only a means to earn
back the ADF Deposit Amount.59
According to FINRA, therefore, meeting
the ADF Quoting Requirement is
voluntary and at the discretion of an
ADF Market Participant.60
The Commission does not believe that
the Proposal constitutes an unnecessary
51 15
U.S.C. 78o–3(b)(9).
Letter at 5.
53 NSX Letter II at 3.
54 Id. at 3–4.
55 Id. at 4.
56 FINRA Response II at 2–3.
57 See FINRA Response at 6 and FINRA Response
II at 3.
58 FINRA Response II at 3.
59 FINRA Response at 6.
60 Id. at 6–7 and FINRA Response II at 3.
tkelley on DSK3SPTVN1PROD with NOTICES
52 NSX
VerDate Mar<15>2010
17:23 Jan 30, 2014
Jkt 232001
or inappropriate burden on competition.
In addition, the Commission does not
agree with NSX’s argument that the
Quoting Requirement would make it
economically unfeasible for any other
SRO that provides order delivery
functionality to compete. To the extent
that ECNs choose to use the ADF
Platform because the ADF offers better
facilities and a more favorable price
structure, such a result is not an
unnecessary or inappropriate burden on
competition.
In its comment letter, NYSE suggests
that the combination of FINRA’s
existing ADF fee schedule contained in
Rule 7510—in which the Quotation
Update Charge to be paid by an ADF
Market Participant varies commensurate
with the number of trades reported
through the ADF by that ADF Market
Participant—and the fees contained in
the Proposal is inconsistent with
Section 15A(b)(9) because they make it
economically prohibitive for an ADF
Participant to quote on the ADF but
trade report elsewhere.61
FINRA responds by reiterating that
the proposed ADF Deposit Amount is
designed to reasonably and equitably
allow FINRA to recoup costs related to
the ADF migration and the addition of
a new ADF Market Participant that the
provision by which an ADF Market
Participant may earn back some or all of
its ADF Deposit Amount is designed to
provide an incentive for an ADF Market
Participant to remain active on the ADF
and to utilize the ADF capacity that
FINRA has incurred costs to provide.62
FINRA states that this, in turn, will
reduce the likelihood that FINRA will
incur unnecessary expenditures in
connection with the ADF migration, and
will increase the probability of FINRA
recouping a reasonable amount of the
costs involved with launching a new
ADF Market Participant from that ADF
Market Participant rather than recover
those costs from fees paid by all FINRA
members.63 FINRA believes the only
new issue raised by NYSE relates to
FINRA’s existing quotation fee structure
in Rule 7510(b) rather than the Proposal
itself.64 As an initial matter, FINRA
believes that such comments are not
appropriately directed to this filing, as
Rule 7510 has been previously filed and
made effective under the Act.65 FINRA
further argues that both the proposed
and existing fee structure fairly impose
costs on those members whose
quotation and trading activity creates
system capacity demands, as well as
provide incentives to quote and trade
report to the ADF, which also generates
revenue for FINRA to support the costs
of operating the ADF.66 FINRA believes
that an ADF Market Participant
currently would consider both its
quoting and trading activity when
determining its desired level of activity
on the ADF, and the Proposal, pursuant
to which an ADF Market Participant
would ascertain its ability to earn back
some or all of its ADF Deposit Amount,
is consistent with this analysis.67 The
Commission believes that FINRA has
satisfied its burden to demonstrate that
the Proposal is consistent with the Act.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,68 that the
proposed rule change (SR–FINRA–
2013–031), is hereby approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.69
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–01967 Filed 1–30–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71404; File No. SR–CHX–
2014–01]
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change to Amend
the Order Cancellation Fee
January 27, 2014.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on January
15, 2014, the Chicago Stock Exchange,
Inc. (‘‘CHX’’ or ‘‘Exchange’’) 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 selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
66 Id.
67 Id.
61 NYSE
Letter at 1–2.
62 FINRA Response III at 3.
63 Id.
64 Id.
65 Id.
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
68 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
69 17
E:\FR\FM\31JAN1.SGM
31JAN1
Federal Register / Vol. 79, No. 21 / Friday, January 31, 2014 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CHX proposes to amend Section E.8
of its Schedule of Fees and Assessments
(the ‘‘Fee Schedule’’) to amend the
Order Cancellation Fee. The text of this
proposed rule change is available on the
Exchange’s Web site at https://
www.chx.com/rules/proposed_
rules.htm, at the principal office of the
Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Section E.8 of the Fee Schedule to
amend the Order Cancellation Fee.
Specifically, the Exchange proposes to
adopt proposed Section E.8(c) to
provide an exemption from Order
Cancellation Fees for a given month if
an Account Symbol 4 meets an Average
Daily Volume (‘‘ADV’’) requirement for
that month. The Exchange does not
propose to substantively amend the
Order Cancellation Fee in any other
way.
tkelley on DSK3SPTVN1PROD with NOTICES
Current Order Cancellation Fee
Under SR–CHX–2012–15,5 the
Exchange adopted the current formulabased Order Cancellation Fee detailed
under Section E.8 of the Fee Schedule,
amended under SR–CHX–2013–11 6 and
4 An ‘‘Account Symbol’’ identifies a specific
‘‘Trading Account,’’ as defined under CHX Article
1, Rule 1(ll). The terms are used interchangeably
throughout this filing.
5 See Securities Exchange Act Release No. 68219
(November 13, 2012), 77 FR 69673 (November 20,
2012) (SR–CHX–2012–15) (‘‘Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
To Amend Its Order Cancellation Fee’’).
6 See Securities Exchange Act Release No. 69701
(June 5, 2013), 78 FR 35082 (June 11, 2013) (SR–
CHX–2013–11) (‘‘Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Amend
the Order Cancellation Fee’’).
VerDate Mar<15>2010
17:23 Jan 30, 2014
Jkt 232001
SR–CHX–2013–12,7 which assesses a
daily cancellation fee per Account
Symbol and security, if the order
cancellation ratio exceeds a designated
threshold. In sum, the formula subtracts
from the total daily number of ‘‘Wide’’
or ‘‘W’’ orders 8 in a given security the
product of ‘‘Near’’ or ‘‘N’’ orders 9 in the
same security submitted by the
Participant in the Regular Trading
Session in a given day and its
corresponding ‘‘N’’ order multiplier or
‘‘Nmult.’’ 10 The difference is then
divided by ‘‘E,’’ which is defined as the
greater of the number one (1) or the sum
of all Wide and Near orders in a given
security that are submitted and executed
(in whole or in part) in the Regular
Trading Session (excluding cross
transactions) on a given day.
If the resulting value is equal to or
greater than the corresponding
‘‘Cancellation Ratio’’ for that security,
found under paragraph (b), a
corresponding Order Cancellation Fee
would apply to the Participant for that
day’s activity in that security. If,
however, the value is less than the
corresponding Cancellation Ratio, the
Participant would not be assessed a fee.
7 See Securities Exchange Act Release No. 69903
(July 1, 2013), 78 FR 40788 (July 8, 2013) (SR–CHX–
2013–12) (‘‘Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Amend
the Single-Sided Order Fees and Credits and the
Order Cancellation Fee’’).
8 Section E.8(a) of the Fee Schedule provides that
‘‘‘W’ equals the number of Wide orders in a security
priced at $1.00/share or more, that is submitted
during the Regular Trading Session, through an
Account Symbol, on a given day. An order shall be
considered Wide if any one of the following
conditions are met:
The order price of the security is inferior to the
National Best Bid (‘‘NBB’’) for a buy order or
National Best Offer (‘‘NBO’’) for a sell order at the
time the order is received by the Matching System
and the difference between the order price and the
NBB or NBO is equal to or greater than the
corresponding Threshold Away Amount of the
particular security; or
The order is voluntarily cancelled by the order
sender prior to the expiration of its corresponding
Minimum Duration (expressed in milliseconds)
after acceptance by the Matching System, without
any executions; or
An order marked ‘‘Do Not Display,’’ pursuant to
Article 1, Rule 2(c)(2).’’
9 Section E.8(a) of the Fee Schedule provides that
‘‘‘N’ equals the number of Near orders (which must
be display eligible) in a security priced at $1.00/
share or more submitted in the Regular Trading
Session, through an Account Symbol, on a given
day. A Near order is:
An order where the difference between the order
price and the NBB or NBO is less than the
corresponding Threshold Away Amount of the
particular security; and
Where the order is not voluntarily cancelled by
the order sender prior to either (1) the expiration
of the Minimum Duration of the particular security
or (2) a partial execution of the order, whichever
is earlier.’’
10 Section E.8(a) of the Fee Schedule provides that
‘‘ ‘Nmult’ is the corresponding multiplier value to
be applied against ‘N’.’’
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
5477
Currently, the Cancellation Ratio and
other values listed under paragraph (b)
are consistent for Tape A, B, and C
securities. Although the fee is assessed
daily, Account Symbols are only billed
after the end of the month.
The purpose of the Order Cancellation
Fee is to recoup some of the costs
associated with administering and
processing large numbers of cancelled
orders and to incent Participants to post
marketable orders and, thereby, promote
liquidity and single-sided order
executions on the Exchange.11
Proposed ADV Exemption
Since the Order Cancellation Fee
became operative on November 1, 2012,
the Exchange has observed that some
Account Symbols have been billed
Order Cancellation Fees
notwithstanding exceptionally high
ADV in securities subject to the Order
Cancellation Fee. That is, despite
consistent order sending and
cancellation activity throughout the
course of the month, some high ADV
Trading Accounts exhibited unusually
low ADV on one or two trading days
and were consequently billed Order
Cancellation Fees for the month because
the Order Cancellation Fee is assessed
daily. The Exchange submits that the
need for an Order Cancellation Fee for
a Trading Account is obviated if it
provides valuable single-sided order
executions and revenue to the
Exchange. This is because such
exceptionally high ADV Trading
Accounts support the purpose of the
Order Cancellation Fee (e.g., to promote
single-sided order executions),
regardless of order cancellation activity.
The current Order Cancellation Fee
does not permit Trading Accounts to
leverage exceptionally high ADV
attained over the course of a month to
eliminate the Order Cancellation Fee
assessed due to unusually weak trading
days. Thus, in order to more equitably
apply the current Order Cancellation
Fee, the Exchange now proposes to
adopt proposed Section E.8(c), which
provides that all Order Cancellation
Fees assessed to an Account Symbol in
a given month shall be waived if the
ADV attributable to the Account Symbol
for the month is equal to or greater than
100,000 shares from single-sided orders
executed at or greater than $1.00/
share.12 Trades resulting from cross
orders and single-sided orders executed
below $1.00/share shall not be included
in the ADV calculation because such
11 See
supra note 5.
100,000 shares value was determined
based on historical trading activity on the Exchange
and shall only be modified by a proposed rule filing
pursuant to Rule 19b-4 under the Act.
12 The
E:\FR\FM\31JAN1.SGM
31JAN1
5478
Federal Register / Vol. 79, No. 21 / Friday, January 31, 2014 / Notices
orders are not subject to the Order
Cancellation Fee.13 Moreover, the
proposed exemption will be applied at
the Account Symbol level and not at a
security-specific level. That is, if a
Trading Account meets the 100,000
shares ADV requirement for a given
month, all Order Cancellation Fees
assessed under the Account Symbol for
the month will be waived.
Correspondingly, the Exchange
proposes to amend the first paragraph of
current Section E.8(a) to provide that
the Order Cancellation Fee is subject to
the proposed exemption as stated under
proposed paragraph (c). The following
example illustrates this exemption.
Example. Assume that a Participant
Trading Permit 14 holder has two Trading
Accounts with Account Symbols ‘‘A’’ and
‘‘B.’’ For the month of December 2013, the
Participant was billed $3,000 in Order
Cancellation Fees. Specifically, Account
Symbol A was assessed $1,000 in Order
Cancellation Fees for activity in five different
securities and had an ADV of 90,000 shares
from qualified orders, whereas Account
Symbol B was assessed $2,000 in Order
Cancellation Fees for activity in three
different securities and had an ADV of
110,000 shares from qualified orders.
tkelley on DSK3SPTVN1PROD with NOTICES
Given that Account Symbol B had an
ADV of 110,000 shares from qualified
orders in December 2013, the entire
$2,000 in Order Cancellation Fees
assessed to Account Symbol B would be
waived pursuant to proposed Section
E.8(c). However, given that Account
Symbol A had an ADV of 90,000 shares
from qualified orders, the Trading
Account would not qualify for the
proposed exemption and would be
billed $1,000 in Order Cancellation
Fees. For the purposes of the proposed
ADV exemption, the Order Cancellation
Fee assessed to specific securities and
ADV in specific securities is irrelevant.
The Exchange proposes to make these
amendments to Section E.8 operative
February 3, 2014. The Order
Cancellation Fee shall continue to be
calculated daily and billed after the end
of the month. If an Account Symbol
meets the requirements of proposed
paragraph (c), the Account Symbol will
not be billed an Order Cancellation Fee
for that month.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act 15 in general, and
furthers the objectives of Section 6(b)(4)
of the Act 16 in particular, in that it
13 Section E.8(a) provides, in pertinent part, that
‘‘a cancellation fee shall apply for all cancellation
messages relating to orders in each security priced
at $1.00/share or more.’’
14 See Article 1, Rule 1(aa).
15 15 U.S.C. 78f.
16 15 U.S.C. 78f(b)(4).
VerDate Mar<15>2010
22:34 Jan 30, 2014
Jkt 232001
provides for the equitable allocation of
reasonable dues, fees and other charges
among members and other persons
using its facilities. The Exchange
believes that the proposed ADV
exemption from the Order Cancellation
Fee described herein promotes the
equitable allocation of the Order
Cancellation Fee as it will more fairly
allocate costs among Participants
according to their respective trading
activity. A Participant with a Trading
Account that has exceptionally high
ADV provides additional revenue to the
Exchange (e.g., Liquidity Removing Fee
under Section E.1 of the Fee Schedule
and market data revenue), which may be
used to recoup some of the costs of
administering and processing cancelled
orders. Thus, Participants with Trading
Accounts that meet the proposed ADV
threshold for a given month should not
be billed Order Cancellation Fees
assessed to such Trading Accounts for
that month.
In addition, these changes to the Fee
Schedule would equitably allocate
reasonable fees among Participants in a
non-discriminatory manner by assessing
cancellation fees on all Trading
Accounts that exceed a fixed
Cancellation Ratio and by waiving
cancellation fees on all Trading
Accounts that satisfy the requirements
of the proposed ADV exemption. Since
all Participants are subject to the Order
Cancellation Fee and given that the
proposed ADV exemption is available to
all Participants, the Exchange submits
that the amended Order Cancellation
Fee is non-discriminatory.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed ADV exemption to the Order
Cancellation Fee burdens competition,
but instead, enhances competition, as it
is intended to increase the
competitiveness of, and draw additional
volume to, the Exchange. The Exchange
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels set by the
Exchange to be excessive. The proposed
ADV exemption provides relief from the
Order Cancellation Fee to Participants
that execute a requisite number of
certain single-sided orders submitted to
the Exchange, which is intended to
increase revenue derived from trades
and to draw additional liquidity to the
Exchange. Thus, the proposed rule
PO 00000
Frm 00111
Fmt 4703
Sfmt 4703
change is a competitive proposal that is
intended to add additional liquidity and
order executions to the Exchange, which
will, in turn, benefit the Exchange and
all Participants.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A)(ii) of the Act 17 and
subparagraph(f)(2) of Rule 19b–4
thereunder 18 because it establishes or
changes a due, fee or other charge
imposed by the Exchange.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SRCHX–2014–01 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR- CHX–2014–01. This file
number should be included on the
17 15
18 17
E:\FR\FM\31JAN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
31JAN1
Federal Register / Vol. 79, No. 21 / Friday, January 31, 2014 / Notices
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 such
filing also will be available for
inspection and copying at the principal
offices 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-CHX–
2014–01, and should be submitted on or
before February 21, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–01964 Filed 1–30–14; 8:45 am]
BILLING CODE 8011–01–P
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The 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 the
bylaws of its parent company, CBOE
Holdings, Inc. (‘‘CBOE Holdings’’). 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
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71402; File No. SR–CBOE–
2014–006]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change to Amend the Bylaws of
its Parent Company
tkelley on DSK3SPTVN1PROD with NOTICES
January 27, 2014.
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
17, 2014, Chicago Board Options
Exchange, Incorporated (the ‘‘Exchange’’
or ‘‘CBOE’’) filed with the Securities
19 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
VerDate Mar<15>2010
22:34 Jan 30, 2014
Jkt 232001
The Exchange is proposing to make
certain amendments to the Bylaws (the
‘‘Bylaws’’) of its parent company, CBOE
Holdings, Inc. (‘‘CBOE Holdings’’) to
make improvements in its governance.
Currently, CBOE Holdings’ Bylaws
provide that ‘‘when a quorum is present
at any meeting, a plurality of the votes
properly cast for the election of
directors shall be sufficient to elect
directors.’’ This applies to both
contested and uncontested elections.
The Exchange proposes to change the
manner in which uncontested elections
occur. Specifically, the Exchange is
proposing to move from a plurality
voting standard to a majority voting
standard for uncontested elections
where ‘‘each nominee for director shall
be elected to the Board of Directors if a
majority of the votes properly cast are in
favor of such nominee’s election (i.e., if
the number of votes properly cast ‘‘for’’
PO 00000
Frm 00112
Fmt 4703
Sfmt 4703
5479
a nominee’s election exceeds the
number of votes properly cast ‘‘against’’
that nominee’s election); provided,
however, that, if, as of the last date by
which stockholders of the Corporation
may submit notice to nominate a person
for election as a director pursuant to
Section 2.11 of these Bylaws or
pursuant to any rule or regulation of the
Securities and Exchange Commission,
the number of nominees for director
exceeds the number of directors to be
elected at any such meeting (a
‘‘Contested Election’’), a plurality of the
votes properly cast for the election of
directors shall be sufficient to elect
directors.’’ As such, there will be no
change to the voting process for
contested elections.
Under the majority voting standard
that will apply to uncontested elections,
a nominee who fails to receive the
requisite vote would not be duly elected
to the Board; however, because a
director holds office until his or her
successor is duly elected and qualified,
any incumbent director-nominee who
fails to receive the requisite vote does
not automatically cease to be a director.
Instead, such director continues as a
‘‘holdover director’’ until such director’s
death, resignation or removal, or until
his or her successor is duly elected and
qualified. For this reason, the majority
voting standard under consideration
requires that any incumbent nominee,
as a condition to his or her nomination
for election, must submit in writing an
irrevocable resignation, the effectiveness
of which is conditioned upon the
director’s failure to receive a majority of
the votes properly cast in favor of such
nominee’s election and the Board’s
acceptance of the resignation.3 The
Exchange is proposing to amend the
language in Section 3.4 of the Bylaws to
delete the statement that a resignation,
unless specifically contingent upon its
acceptance, will be effective as of its
date or of the date specified therein, and
replace that language with the statement
that a resignation ‘‘will be effective
when delivered unless the resignation
specifies a later effective date or an
effective date determined upon the
happening of an event or events.’’ This
would allow Directors to submit
resignations that are contingent upon
both the Director not receiving majority
vote in an uncontested election and the
Board accepting such resignation (or
some other event that could lead to the
Director no longer intending to act as a
Director at some point in the future due
3 Pursuant to the ‘‘Board Election Process’’
section of CBOE Holdings’ Corporate Governance
Guidelines (available at https://ir.cboe.com/
documentdisplay.cfm?DocumentID=7090).
E:\FR\FM\31JAN1.SGM
31JAN1
]]>Agencies
[Federal Register Volume 79, Number 21 (Friday, January 31, 2014)]
[Notices]
[Pages 5476-5479]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01964]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71404; File No. SR-CHX-2014-01]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to
Amend the Order Cancellation Fee
January 27, 2014.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on January 15, 2014, the Chicago Stock Exchange, Inc. (``CHX'' or
``Exchange'') 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 self-regulatory
organization. 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\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
[[Page 5477]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CHX proposes to amend Section E.8 of its Schedule of Fees and
Assessments (the ``Fee Schedule'') to amend the Order Cancellation Fee.
The text of this proposed rule change is available on the Exchange's
Web site at https://www.chx.com/rules/proposed_rules.htm, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Section E.8 of the Fee Schedule to
amend the Order Cancellation Fee. Specifically, the Exchange proposes
to adopt proposed Section E.8(c) to provide an exemption from Order
Cancellation Fees for a given month if an Account Symbol \4\ meets an
Average Daily Volume (``ADV'') requirement for that month. The Exchange
does not propose to substantively amend the Order Cancellation Fee in
any other way.
---------------------------------------------------------------------------
\4\ An ``Account Symbol'' identifies a specific ``Trading
Account,'' as defined under CHX Article 1, Rule 1(ll). The terms are
used interchangeably throughout this filing.
---------------------------------------------------------------------------
Current Order Cancellation Fee
Under SR-CHX-2012-15,\5\ the Exchange adopted the current formula-
based Order Cancellation Fee detailed under Section E.8 of the Fee
Schedule, amended under SR-CHX-2013-11 \6\ and SR-CHX-2013-12,\7\ which
assesses a daily cancellation fee per Account Symbol and security, if
the order cancellation ratio exceeds a designated threshold. In sum,
the formula subtracts from the total daily number of ``Wide'' or ``W''
orders \8\ in a given security the product of ``Near'' or ``N'' orders
\9\ in the same security submitted by the Participant in the Regular
Trading Session in a given day and its corresponding ``N'' order
multiplier or ``Nmult.'' \10\ The difference is then divided by ``E,''
which is defined as the greater of the number one (1) or the sum of all
Wide and Near orders in a given security that are submitted and
executed (in whole or in part) in the Regular Trading Session
(excluding cross transactions) on a given day.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 68219 (November 13,
2012), 77 FR 69673 (November 20, 2012) (SR-CHX-2012-15) (``Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Its Order Cancellation Fee'').
\6\ See Securities Exchange Act Release No. 69701 (June 5,
2013), 78 FR 35082 (June 11, 2013) (SR-CHX-2013-11) (``Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
the Order Cancellation Fee'').
\7\ See Securities Exchange Act Release No. 69903 (July 1,
2013), 78 FR 40788 (July 8, 2013) (SR-CHX-2013-12) (``Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
the Single-Sided Order Fees and Credits and the Order Cancellation
Fee'').
\8\ Section E.8(a) of the Fee Schedule provides that ```W'
equals the number of Wide orders in a security priced at $1.00/share
or more, that is submitted during the Regular Trading Session,
through an Account Symbol, on a given day. An order shall be
considered Wide if any one of the following conditions are met:
The order price of the security is inferior to the National Best
Bid (``NBB'') for a buy order or National Best Offer (``NBO'') for a
sell order at the time the order is received by the Matching System
and the difference between the order price and the NBB or NBO is
equal to or greater than the corresponding Threshold Away Amount of
the particular security; or
The order is voluntarily cancelled by the order sender prior to
the expiration of its corresponding Minimum Duration (expressed in
milliseconds) after acceptance by the Matching System, without any
executions; or
An order marked ``Do Not Display,'' pursuant to Article 1, Rule
2(c)(2).''
\9\ Section E.8(a) of the Fee Schedule provides that ```N'
equals the number of Near orders (which must be display eligible) in
a security priced at $1.00/share or more submitted in the Regular
Trading Session, through an Account Symbol, on a given day. A Near
order is:
An order where the difference between the order price and the
NBB or NBO is less than the corresponding Threshold Away Amount of
the particular security; and
Where the order is not voluntarily cancelled by the order sender
prior to either (1) the expiration of the Minimum Duration of the
particular security or (2) a partial execution of the order,
whichever is earlier.''
\10\ Section E.8(a) of the Fee Schedule provides that `` `Nmult'
is the corresponding multiplier value to be applied against `N'.''
---------------------------------------------------------------------------
If the resulting value is equal to or greater than the
corresponding ``Cancellation Ratio'' for that security, found under
paragraph (b), a corresponding Order Cancellation Fee would apply to
the Participant for that day's activity in that security. If, however,
the value is less than the corresponding Cancellation Ratio, the
Participant would not be assessed a fee. Currently, the Cancellation
Ratio and other values listed under paragraph (b) are consistent for
Tape A, B, and C securities. Although the fee is assessed daily,
Account Symbols are only billed after the end of the month.
The purpose of the Order Cancellation Fee is to recoup some of the
costs associated with administering and processing large numbers of
cancelled orders and to incent Participants to post marketable orders
and, thereby, promote liquidity and single-sided order executions on
the Exchange.\11\
---------------------------------------------------------------------------
\11\ See supra note 5.
---------------------------------------------------------------------------
Proposed ADV Exemption
Since the Order Cancellation Fee became operative on November 1,
2012, the Exchange has observed that some Account Symbols have been
billed Order Cancellation Fees notwithstanding exceptionally high ADV
in securities subject to the Order Cancellation Fee. That is, despite
consistent order sending and cancellation activity throughout the
course of the month, some high ADV Trading Accounts exhibited unusually
low ADV on one or two trading days and were consequently billed Order
Cancellation Fees for the month because the Order Cancellation Fee is
assessed daily. The Exchange submits that the need for an Order
Cancellation Fee for a Trading Account is obviated if it provides
valuable single-sided order executions and revenue to the Exchange.
This is because such exceptionally high ADV Trading Accounts support
the purpose of the Order Cancellation Fee (e.g., to promote single-
sided order executions), regardless of order cancellation activity.
The current Order Cancellation Fee does not permit Trading Accounts
to leverage exceptionally high ADV attained over the course of a month
to eliminate the Order Cancellation Fee assessed due to unusually weak
trading days. Thus, in order to more equitably apply the current Order
Cancellation Fee, the Exchange now proposes to adopt proposed Section
E.8(c), which provides that all Order Cancellation Fees assessed to an
Account Symbol in a given month shall be waived if the ADV attributable
to the Account Symbol for the month is equal to or greater than 100,000
shares from single-sided orders executed at or greater than $1.00/
share.\12\ Trades resulting from cross orders and single-sided orders
executed below $1.00/share shall not be included in the ADV calculation
because such
[[Page 5478]]
orders are not subject to the Order Cancellation Fee.\13\ Moreover, the
proposed exemption will be applied at the Account Symbol level and not
at a security-specific level. That is, if a Trading Account meets the
100,000 shares ADV requirement for a given month, all Order
Cancellation Fees assessed under the Account Symbol for the month will
be waived. Correspondingly, the Exchange proposes to amend the first
paragraph of current Section E.8(a) to provide that the Order
Cancellation Fee is subject to the proposed exemption as stated under
proposed paragraph (c). The following example illustrates this
exemption.
---------------------------------------------------------------------------
\12\ The 100,000 shares value was determined based on historical
trading activity on the Exchange and shall only be modified by a
proposed rule filing pursuant to Rule 19b-4 under the Act.
\13\ Section E.8(a) provides, in pertinent part, that ``a
cancellation fee shall apply for all cancellation messages relating
to orders in each security priced at $1.00/share or more.''
Example. Assume that a Participant Trading Permit \14\ holder
has two Trading Accounts with Account Symbols ``A'' and ``B.'' For
the month of December 2013, the Participant was billed $3,000 in
Order Cancellation Fees. Specifically, Account Symbol A was assessed
$1,000 in Order Cancellation Fees for activity in five different
securities and had an ADV of 90,000 shares from qualified orders,
whereas Account Symbol B was assessed $2,000 in Order Cancellation
Fees for activity in three different securities and had an ADV of
110,000 shares from qualified orders.
---------------------------------------------------------------------------
\14\ See Article 1, Rule 1(aa).
Given that Account Symbol B had an ADV of 110,000 shares from
qualified orders in December 2013, the entire $2,000 in Order
Cancellation Fees assessed to Account Symbol B would be waived pursuant
to proposed Section E.8(c). However, given that Account Symbol A had an
ADV of 90,000 shares from qualified orders, the Trading Account would
not qualify for the proposed exemption and would be billed $1,000 in
Order Cancellation Fees. For the purposes of the proposed ADV
exemption, the Order Cancellation Fee assessed to specific securities
and ADV in specific securities is irrelevant.
The Exchange proposes to make these amendments to Section E.8
operative February 3, 2014. The Order Cancellation Fee shall continue
to be calculated daily and billed after the end of the month. If an
Account Symbol meets the requirements of proposed paragraph (c), the
Account Symbol will not be billed an Order Cancellation Fee for that
month.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act \15\ in general, and furthers the
objectives of Section 6(b)(4) of the Act \16\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and other persons using its facilities. The
Exchange believes that the proposed ADV exemption from the Order
Cancellation Fee described herein promotes the equitable allocation of
the Order Cancellation Fee as it will more fairly allocate costs among
Participants according to their respective trading activity. A
Participant with a Trading Account that has exceptionally high ADV
provides additional revenue to the Exchange (e.g., Liquidity Removing
Fee under Section E.1 of the Fee Schedule and market data revenue),
which may be used to recoup some of the costs of administering and
processing cancelled orders. Thus, Participants with Trading Accounts
that meet the proposed ADV threshold for a given month should not be
billed Order Cancellation Fees assessed to such Trading Accounts for
that month.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f.
\16\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
In addition, these changes to the Fee Schedule would equitably
allocate reasonable fees among Participants in a non-discriminatory
manner by assessing cancellation fees on all Trading Accounts that
exceed a fixed Cancellation Ratio and by waiving cancellation fees on
all Trading Accounts that satisfy the requirements of the proposed ADV
exemption. Since all Participants are subject to the Order Cancellation
Fee and given that the proposed ADV exemption is available to all
Participants, the Exchange submits that the amended Order Cancellation
Fee is non-discriminatory.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed ADV exemption to the Order Cancellation Fee
burdens competition, but instead, enhances competition, as it is
intended to increase the competitiveness of, and draw additional volume
to, the Exchange. The Exchange operates in a highly competitive market
in which market participants can readily direct order flow to competing
venues if they deem fee levels set by the Exchange to be excessive. The
proposed ADV exemption provides relief from the Order Cancellation Fee
to Participants that execute a requisite number of certain single-sided
orders submitted to the Exchange, which is intended to increase revenue
derived from trades and to draw additional liquidity to the Exchange.
Thus, the proposed rule change is a competitive proposal that is
intended to add additional liquidity and order executions to the
Exchange, which will, in turn, benefit the Exchange and all
Participants.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A)(ii) of the Act \17\ and subparagraph(f)(2) of Rule
19b-4 thereunder \18\ because it establishes or changes a due, fee or
other charge imposed by the Exchange.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78s(b)(3)(A)(ii).
\18\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR- CHX-2014-01 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR- CHX-2014-01. This file
number should be included on the
[[Page 5479]]
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
such filing also will be available for inspection and copying at the
principal offices 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-CHX-2014-01, and should be submitted on or before
February 21, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01964 Filed 1-30-14; 8:45 am]
BILLING CODE 8011-01-P
