Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to The Customized Option Pricing Service, 28319-28322 [2015-11877]

Download as PDF Federal Register / Vol. 80, No. 95 / Monday, May 18, 2015 / Notices become operative immediately upon filing. The Exchange notes that such waiver would accommodate the timing of the effectiveness under the Delaware General Corporation Law of the Second Amended and Restated Certificate of Incorporation of ICE, which the Exchange represents will be filed in Delaware upon approval by the stockholders of ICE at the annual meeting of stockholders scheduled for May 2015. The Exchange believes that waiving the 30-day operative delay would permit the modifications to occur at an earlier time and thereby reduce the potential for confusion among persons reading the Constituent Documents. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the operative delay and designates the proposed rule change operative upon filing.21 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– NYSEMKT–2015–32 on the subject line. asabaliauskas on DSK5VPTVN1PROD with NOTICES Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEMKT–2015–32. This file number should be included on the 21 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). VerDate Sep<11>2014 18:52 May 15, 2015 Jkt 235001 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– NYSEMKT–2015–32, and should be submitted on or before June 8, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Robert W. Errett, Deputy Secretary. [FR Doc. 2015–11872 Filed 5–15–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–74937; File No. SR–CBOE– 2015–046] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to The Customized Option Pricing Service May 12, 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 May 1, 2015, Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and 22 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 28319 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 Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) proposes to amend the terms of the Customized Option Pricing Service (‘‘COPS’’). 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 purpose of the proposed rule change is to amend the terms of the Exhange’s COPS,3 specifically, the COPS data revenue-sharing plan. The Exchange is not proposing to change the fees for COPS data. 3 See Securities Exchange Act Release No. 67813 (September 10, 2012), 77 FR 56903 (September 14, 2012) (SR–CBOE–2012–083), Securities Exchange Act Release No. 67928 (September 26, 2012), 77 FR 60161 (October 2, 2012) (SR–CBOE–2012–090), Securities Exchange Act Release No. 70705 (October 17, 2013), 78 FR 63265 (October 23, 2013) (SR– CBOE–2013–097), Securities Exchange Act Release No. 70845 (November 12, 2013), 78 FR 69168 (November 18, 2013) (SR–CBOE–2013–104), Securities Exchange Act Release No. 72621 (July 16, 2014), 79 FR 42616 (July 22, 2014) (SR–CBOE– 2014–057) and Securities Exchange Act Release No. 74159 (January 28, 2015), 80 FR 5863 (February 23, 2015) (SR–CBOE–2015–007). E:\FR\FM\18MYN1.SGM 18MYN1 28320 Federal Register / Vol. 80, No. 95 / Monday, May 18, 2015 / Notices asabaliauskas on DSK5VPTVN1PROD with NOTICES Background COPS provides market participants with an ‘‘end-of-day’’ 4 file and ‘‘historical’’ 5 files of valuations for Flexible Exchange (‘‘FLEX’’) 6 options and certain over-the-counter (‘‘OTC’’) options (collectively, ‘‘COPS Data’’). Market Data Express, LLC (‘‘MDX’’), an affiliate of CBOE, offers COPS Data for sale to all market participants. COPS Data is available to ‘‘Subscribers’’ for internal use and internal distribution only, and to ‘‘Customers’’ who, pursuant to a written vendor agreement between MDX and a Customer, may distribute the Data externally (i.e., act as a vendor) and/or use and distribute the Data internally. COPS Data consists of indicative 7 values for four categories of ‘‘customized’’ options. The first category of options is all open series of FLEX options listed on any exchange that offers FLEX options for trading.8 The second category is OTC options that have the same degree of customization as FLEX options. The third category includes options with strike prices expressed in percentage terms. Values for such options are expressed in percentage terms and are theoretical values.9 The fourth category includes ‘‘exotic’’ options.10 The Exchange uses values produced by CBOE Trading Permit Holders (‘‘TPHs’’) to produce COPS Data. Participating CBOE TPHs submit values to MDX on options series specified by MDX on a daily basis. These values are generated by the TPH’s internal pricing models. The valuations that MDX ultimately publishes are an average of multiple contributions of values from 4 ‘‘End of day’’ refers to data that is distributed prior to the opening of the next trading day. 5 ‘‘Historical’’ COPS data consists of COPS data that is over one month old (i.e., copies of the ‘‘endof-day’’ COPS file that are over one month old). 6 FLEX options are exchange traded options that provide investors with the ability to customize basic option features including size, expiration date, exercise style, and certain exercise prices. 7 ‘‘Indicative’’ values are indications of potential market prices only and as such are neither firm nor the basis for a transaction. 8 Current FLEX options open interest spans over 2,000 series on over 300 different underlying securities. 9 These values are theoretical in that they are indications of potential market prices for options that have not traded (i.e. do not yet exist). Market participants sometimes express option values in percentage terms rather than in dollar terms because they find it is easier to assess the change, or lack of change, in the marketplace from one day to the next when values are expressed in percentage terms. 10 Exotic options are options which are generally traded OTC and are more complex than standard options, usually relating to determination of payoff. An exotic option may also include a non-standard underlying instrument, developed for a particular client or for a particular market. VerDate Sep<11>2014 18:52 May 15, 2015 Jkt 235001 participating CBOE TPHs. For each value provided by MDX through COPS, MDX includes a corresponding indication of the number of TPH contributors that factored into that value. CBOE TPHs that meet the following objective qualification criteria are allowed to contribute values to MDX for purposes of producing COPS Data. Interested CBOE TPHs must be approved by the Exchange, have the ability to provide valuations to MDX in a timely manner each day after the close of trading, and sign a services agreement with CBOE. Interested CBOE TPHs must also have the ability to provide both indicative and implied volatility valuations on several different types of options, including (i) options on all open FLEX series traded on any exchange that offers FLEX options for trading, (ii) options on any potential new FLEX options series, (iii) OTC options that have the same degree of customization as FLEX options, (iv) customized options where the strike price is expressed in percentage terms (the valuations provided to MDX must also be expressed in percentage terms), and (v) exotic options. In addition, interested CBOE TPHs must participate in a testing phase with MDX. The values submitted by a TPH during the testing phase and in live production must meet MDX’s quality control standards designed to ensure the integrity and accuracy of COPS Data. MDX has implemented procedures including monthly performance reviews to help ensure the integrity and accuracy of COPS Data. To help ensure that MDX receives numerous values from multiple TPHs on a consistent basis, MDX shares revenue from the sale of COPS Data with participating CBOE TPHs.11 The amount of revenue that MDX shares with participating TPHs is a percentage of the total revenue received by MDX from the sale of COPS Data. The revenue sharing is based on the following table: No. of participating TPHs Total revenue share (percent) 3 .................... 4 .................... 21 24 Revenue share per TPH 7%. 6%. 11 The fees that MDX charges for COPS Data are set forth on the Price List on the MDX Web site (www.marketdataexpress.com). MDX currently charges a fee per option per day for ‘‘end-of-day’’ COPS data. The amount of the fee is reduced based on the number of options valuations purchased. PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 No. of participating TPHs 5 or more ...... Total revenue share (percent) 30 Revenue share per TPH 30% divided by the number of participating TPHs. If only three TPHs participate, MDX shares 21% of total revenue with each TPH receiving a 7% share. If four TPHs participate, MDX shares 24% of total revenue with each TPH receiving a 6% share. If five or more TPHs participate, MDX shares 30% of total revenue divided equally among the TPHs. There are currently five participating TPHs. In July 2014, the Exchange submitted a proposed rule change to, among other things, temporarily change the COPS contributor compensation structure from a revenue sharing plan to a fixed payment structure for a six month period (‘‘Fixed Payment Period’’).12 MDX has now transitioned back to the revenue sharing plan described herein. If COPS revenue exceeds $2,000,000 in a calendar year, the percentage of total COPS revenue shared with TPH contributors will increase from 30% to 32% if a new contributor is added to COPS.13 In subsequent years, if the previous calendar year’s COPS revenue increases by $1,000,000 or more, the percentage of total COPS revenue shared with contributors will increase by 2% if an additional contributor is added to COPS. The total number of COPS contributors is limited to fifteen. Proposal The Exchange proposes to change the COPS contributor compensation structure for the remainder of 2015.14 All revenue from the sale of COPS Data would be paid to COPS contributors for the remainder of 2015 (including accrued revenue during the now expired Fixed Payment Period). The revenue would be divided equally among COPS contributors. The Exchange had hoped that at the conclusion of the Fixed Payment Period, COPS revenue would be at a level such that the COPS contributors would receive a revenue share roughly in line with the fixed payments they received during the Fixed Payment Period. This has not yet 12 See Securities Exchange Act Release No. 72621 (July 16, 2014), 79 FR 42616 (July 22, 2014) (SR– CBOE–2014–057) (‘‘COPS Enhancements Rule Filing’’). 13 The addition of new contributors is accomplished through a try out mechanism. See COPS Enhancements Rule Filing. 14 The Exchange is not proposing to eliminate the revenue share plan, only to suspend it temporarily as described herein. E:\FR\FM\18MYN1.SGM 18MYN1 Federal Register / Vol. 80, No. 95 / Monday, May 18, 2015 / Notices occurred. The proposed payments are intended to, at a minimum, help COPS contributors cover their costs of producing valuations for COPS while the Exchange continues to grow the COPS business. MDX would transition back to the revenue share plan described above on January 1, 2016. asabaliauskas on DSK5VPTVN1PROD with NOTICES 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.15 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 16 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 facilitating 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 the Section 6(b)(5) 17 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes the proposed rule change is not designed to permit unfair discrimination between CBOE TPHs because all COPS data revenue would be divided equally among TPH contributors for the remainder of 2015. The Exchange believes the proposed rule change is consistent with the protection of investors and the public interest in that it would provide incentive for all of the COPS contributors to continue to participate in COPS while the Exchange continues to grow the COPS business, thereby helping to maintain the quality of COPS Data. B. Self-Regulatory Organization’s Statement on Burden on Competition CBOE 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. To the contrary, the Exchange believes the proposal is procompetitive in that it will 15 15 16 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 17 Id. VerDate Sep<11>2014 20:06 May 15, 2015 Jkt 235001 incentivize COPS TPH contributors to continue producing quality valuations to help keep COPS competitive with other similar market data products.18 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing rule does not (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, provided that the selfregulatory organization has given the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change or such shorter time as designated by the Commission,19 the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 20 and Rule 19b–4(f)(6) thereunder.21 A proposed rule change filed under Rule 19b–4(f)(6) 22 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),23 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange believes that the proposal is consistent with the protection of investors and the public interest because it help COPS contributors cover their costs of producing valuations for COPS while the Exchange continues to grow the COPS business, and thereby assist the Exchange with maintaining its current roster of TPH contributors. The Commission agrees and has determined 18 Market data vendors including SuperDerivatives, Markit, Prism, and Bloomberg’s BVAL service produce option value data that is similar to COPS Data. The Options Clearing Corporation (‘‘OCC’’) also produces FLEX option value data that is similar to the FLEX option value data that is included in COPS. 19 The Exchange has fulfilled this requirement. 20 15 U.S.C. 78s(b)(3)(A). 21 17 CFR 240.19b–4(f)(6). 22 17 CFR 240.19b–4(f)(6). 23 17 CFR 240.19b–4(f)(6)(iii). PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 28321 to waive the 30-day operative date so that the proposal may take effect upon filing.24 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. 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–2015–046 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–CBOE–2015–046. 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., 24 For purposes only of accelerating the operative date of this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). E:\FR\FM\18MYN1.SGM 18MYN1 28322 Federal Register / Vol. 80, No. 95 / Monday, May 18, 2015 / Notices 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– 2015–046 and should be submitted on or before June 8, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 Robert W. Errett, Deputy Secretary. [FR Doc. 2015–11877 Filed 5–15–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–74938; File No. SR–BATS– 2015–35] Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of BATS Exchange, Inc. asabaliauskas on DSK5VPTVN1PROD with NOTICES May 12, 2015. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on May 1, 2015, BATS Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BATS’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Exchange has designated the proposed rule change as one establishing or changing a member due, fee, or other charge imposed by the Exchange under Section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b–4(f)(2) thereunder,4 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 25 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 1 15 VerDate Sep<11>2014 18:52 May 15, 2015 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend the fee schedule applicable to Members 5 and non-members of the Exchange pursuant to BATS Rules 15.1(a) and (c). Changes to the fee schedule pursuant to this proposal are effective upon filing. The text of the proposed rule change is available at the Exchange’s Web site at www.batstrading.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to modify its fee schedule in order to: (1) Amend the rebate associated with fee code BY; (2) eliminate the NBBO Setter and Joiner Tiers; (3) establish a Single MPID Investor Tier; and (4) simplify pricing related to Physical Connection Fees. Fee Code BY The Exchange currently provides a rebate of $0.0016 per share for Members’ orders that yield fee code BY, which routes to BYX and removes liquidity using Destination Specific, TRIM, TRIM2, TRIM3, or SLIM routing strategies. The Exchange proposes to amend its Fee Schedule to decrease the rebate for orders that yield fee code BY to $0.0015 per share. The proposed change represents a pass through of the rate BATS Trading, Inc. (‘‘BATS Trading’’), the Exchange’s affiliated routing broker-dealer, is provided for routing orders to BYX that remove liquidity. The proposed change is in 5 The term ‘‘Member’’ is defined as ‘‘any registered broker or dealer that has been admitted to membership in the Exchange.’’ See Exchange Rule 1.5(n). Jkt 235001 PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 response to BYX’s May 2015 fee change where BYX decreased its rebate from $0.0016 per share to $0.0015 per share.6 When BATS Trading routes to and removes liquidity from BYX, it will now receive a standard rebate of $0.0015 per share. BATS Trading will pass through the rebate provided by BYX to the Exchange and the Exchange, in turn, will pass through this rate to its Members. NBBO Setter and Joiner Tiers The Exchange currently offers an additional rebate per share for certain orders that establish a new NBBO or that join the NBBO when the Exchange is not already at the NBBO. Such additional rebates range from $0.0001 per share to $0.0005 per share. The Exchange is proposing to eliminate these additional rebates because the rebates have not achieved the desired effect, despite being designed to incentivize Members to add liquidity that sets or joins the Exchange to the NBBO. As such, the Exchange is proposing to eliminate the text in footnote four related to the NBBO Setter and Joiner Tiers. Single MPID Investor Tier The Exchange proposes to add new text to footnote four to establish a new Investor Tier under which a Member can qualify for a rebate of $0.0031 per share on an MPID by MPID basis if they meet the following criteria: (i) The MPID’s ADAV 7 as a percentage of TCV 8 is equal to or greater than 0.35%; and (ii) the MPID’s ADAV as a percentage of ADV 9 is equal to or greater than 90%. The Exchange notes that this proposal is substantively identical to the ‘‘Investor Tier’’ rebate offered on EDGX Exchange, Inc. (‘‘EDGX’’).10 Physical Connection Fees The Exchange currently maintains a presence in two third-party data centers: (i) The primary data center where the Exchange’s business is primarily conducted on a daily basis, and (ii) a 6 See BYX Exchange Fee Schedule Changes Effective May 1, 2015 available at https:// cdn.batstrading.com/resources/fee_schedule/2015/ BATS-BYX-Exchange-BZX-Exchange-EDGAExchange-and-EDGX-Exchange-Fee-ScheduleChanges-Effective-May-1-2015.pdf. 7 ‘‘ADAV’’ means average daily volume calculated as the number of shares added per day. 8 ‘‘TCV’’ means total consolidated volume calculated as the volume reported by all exchanges to the consolidated transaction reporting plan for the month for which the fees apply. 9 ‘‘ADV’’ means average daily volume calculated as the number of shares added or removed, combined, per day. 10 See EDGX Exchange, Inc. Fee Schedule available at https://www.batstrading.com/support/ fee_schedule/edgx/. E:\FR\FM\18MYN1.SGM 18MYN1

Agencies

[Federal Register Volume 80, Number 95 (Monday, May 18, 2015)]
[Notices]
[Pages 28319-28322]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-11877]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74937; File No. SR-CBOE-2015-046]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to The Customized Option Pricing Service

May 12, 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 May 1, 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 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.
---------------------------------------------------------------------------

    \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

    Chicago Board Options Exchange, Incorporated (the ``Exchange'' or 
``CBOE'') proposes to amend the terms of the Customized Option Pricing 
Service (``COPS''). 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 purpose of the proposed rule change is to amend the terms of 
the Exhange's COPS,\3\ specifically, the COPS data revenue-sharing 
plan. The Exchange is not proposing to change the fees for COPS data.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 67813 (September 10, 
2012), 77 FR 56903 (September 14, 2012) (SR-CBOE-2012-083), 
Securities Exchange Act Release No. 67928 (September 26, 2012), 77 
FR 60161 (October 2, 2012) (SR-CBOE-2012-090), Securities Exchange 
Act Release No. 70705 (October 17, 2013), 78 FR 63265 (October 23, 
2013) (SR-CBOE-2013-097), Securities Exchange Act Release No. 70845 
(November 12, 2013), 78 FR 69168 (November 18, 2013) (SR-CBOE-2013-
104), Securities Exchange Act Release No. 72621 (July 16, 2014), 79 
FR 42616 (July 22, 2014) (SR-CBOE-2014-057) and Securities Exchange 
Act Release No. 74159 (January 28, 2015), 80 FR 5863 (February 23, 
2015) (SR-CBOE-2015-007).

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[[Page 28320]]

Background
    COPS provides market participants with an ``end-of-day'' \4\ file 
and ``historical'' \5\ files of valuations for Flexible Exchange 
(``FLEX'') \6\ options and certain over-the-counter (``OTC'') options 
(collectively, ``COPS Data''). Market Data Express, LLC (``MDX''), an 
affiliate of CBOE, offers COPS Data for sale to all market 
participants. COPS Data is available to ``Subscribers'' for internal 
use and internal distribution only, and to ``Customers'' who, pursuant 
to a written vendor agreement between MDX and a Customer, may 
distribute the Data externally (i.e., act as a vendor) and/or use and 
distribute the Data internally.
---------------------------------------------------------------------------

    \4\ ``End of day'' refers to data that is distributed prior to 
the opening of the next trading day.
    \5\ ``Historical'' COPS data consists of COPS data that is over 
one month old (i.e., copies of the ``end-of-day'' COPS file that are 
over one month old).
    \6\ FLEX options are exchange traded options that provide 
investors with the ability to customize basic option features 
including size, expiration date, exercise style, and certain 
exercise prices.
---------------------------------------------------------------------------

    COPS Data consists of indicative \7\ values for four categories of 
``customized'' options. The first category of options is all open 
series of FLEX options listed on any exchange that offers FLEX options 
for trading.\8\ The second category is OTC options that have the same 
degree of customization as FLEX options. The third category includes 
options with strike prices expressed in percentage terms. Values for 
such options are expressed in percentage terms and are theoretical 
values.\9\ The fourth category includes ``exotic'' options.\10\
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    \7\ ``Indicative'' values are indications of potential market 
prices only and as such are neither firm nor the basis for a 
transaction.
    \8\ Current FLEX options open interest spans over 2,000 series 
on over 300 different underlying securities.
    \9\ These values are theoretical in that they are indications of 
potential market prices for options that have not traded (i.e. do 
not yet exist). Market participants sometimes express option values 
in percentage terms rather than in dollar terms because they find it 
is easier to assess the change, or lack of change, in the 
marketplace from one day to the next when values are expressed in 
percentage terms.
    \10\ Exotic options are options which are generally traded OTC 
and are more complex than standard options, usually relating to 
determination of payoff. An exotic option may also include a non-
standard underlying instrument, developed for a particular client or 
for a particular market.
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    The Exchange uses values produced by CBOE Trading Permit Holders 
(``TPHs'') to produce COPS Data. Participating CBOE TPHs submit values 
to MDX on options series specified by MDX on a daily basis. These 
values are generated by the TPH's internal pricing models. The 
valuations that MDX ultimately publishes are an average of multiple 
contributions of values from participating CBOE TPHs. For each value 
provided by MDX through COPS, MDX includes a corresponding indication 
of the number of TPH contributors that factored into that value.
    CBOE TPHs that meet the following objective qualification criteria 
are allowed to contribute values to MDX for purposes of producing COPS 
Data. Interested CBOE TPHs must be approved by the Exchange, have the 
ability to provide valuations to MDX in a timely manner each day after 
the close of trading, and sign a services agreement with CBOE. 
Interested CBOE TPHs must also have the ability to provide both 
indicative and implied volatility valuations on several different types 
of options, including (i) options on all open FLEX series traded on any 
exchange that offers FLEX options for trading, (ii) options on any 
potential new FLEX options series, (iii) OTC options that have the same 
degree of customization as FLEX options, (iv) customized options where 
the strike price is expressed in percentage terms (the valuations 
provided to MDX must also be expressed in percentage terms), and (v) 
exotic options. In addition, interested CBOE TPHs must participate in a 
testing phase with MDX. The values submitted by a TPH during the 
testing phase and in live production must meet MDX's quality control 
standards designed to ensure the integrity and accuracy of COPS Data. 
MDX has implemented procedures including monthly performance reviews to 
help ensure the integrity and accuracy of COPS Data.
    To help ensure that MDX receives numerous values from multiple TPHs 
on a consistent basis, MDX shares revenue from the sale of COPS Data 
with participating CBOE TPHs.\11\ The amount of revenue that MDX shares 
with participating TPHs is a percentage of the total revenue received 
by MDX from the sale of COPS Data. The revenue sharing is based on the 
following table:
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    \11\ The fees that MDX charges for COPS Data are set forth on 
the Price List on the MDX Web site (www.marketdataexpress.com). MDX 
currently charges a fee per option per day for ``end-of-day'' COPS 
data. The amount of the fee is reduced based on the number of 
options valuations purchased.

------------------------------------------------------------------------
                                        Total
                                       revenue      Revenue  share per
     No. of participating TPHs          share               TPH
                                      (percent)
------------------------------------------------------------------------
3..................................           21  7%.
4..................................           24  6%.
5 or more..........................           30  30% divided by the
                                                   number of
                                                   participating TPHs.
------------------------------------------------------------------------

    If only three TPHs participate, MDX shares 21% of total revenue 
with each TPH receiving a 7% share. If four TPHs participate, MDX 
shares 24% of total revenue with each TPH receiving a 6% share. If five 
or more TPHs participate, MDX shares 30% of total revenue divided 
equally among the TPHs. There are currently five participating TPHs.
    In July 2014, the Exchange submitted a proposed rule change to, 
among other things, temporarily change the COPS contributor 
compensation structure from a revenue sharing plan to a fixed payment 
structure for a six month period (``Fixed Payment Period'').\12\ MDX 
has now transitioned back to the revenue sharing plan described herein. 
If COPS revenue exceeds $2,000,000 in a calendar year, the percentage 
of total COPS revenue shared with TPH contributors will increase from 
30% to 32% if a new contributor is added to COPS.\13\ In subsequent 
years, if the previous calendar year's COPS revenue increases by 
$1,000,000 or more, the percentage of total COPS revenue shared with 
contributors will increase by 2% if an additional contributor is added 
to COPS. The total number of COPS contributors is limited to fifteen.
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    \12\ See Securities Exchange Act Release No. 72621 (July 16, 
2014), 79 FR 42616 (July 22, 2014) (SR-CBOE-2014-057) (``COPS 
Enhancements Rule Filing'').
    \13\ The addition of new contributors is accomplished through a 
try out mechanism. See COPS Enhancements Rule Filing.
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Proposal
    The Exchange proposes to change the COPS contributor compensation 
structure for the remainder of 2015.\14\ All revenue from the sale of 
COPS Data would be paid to COPS contributors for the remainder of 2015 
(including accrued revenue during the now expired Fixed Payment 
Period). The revenue would be divided equally among COPS contributors. 
The Exchange had hoped that at the conclusion of the Fixed Payment 
Period, COPS revenue would be at a level such that the COPS 
contributors would receive a revenue share roughly in line with the 
fixed payments they received during the Fixed Payment Period. This has 
not yet

[[Page 28321]]

occurred. The proposed payments are intended to, at a minimum, help 
COPS contributors cover their costs of producing valuations for COPS 
while the Exchange continues to grow the COPS business. MDX would 
transition back to the revenue share plan described above on January 1, 
2016.
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    \14\ The Exchange is not proposing to eliminate the revenue 
share plan, only to suspend it temporarily as described herein.
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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.\15\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \16\ 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 facilitating 
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 the 
Section 6(b)(5) \17\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ Id.
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change is not designed to 
permit unfair discrimination between CBOE TPHs because all COPS data 
revenue would be divided equally among TPH contributors for the 
remainder of 2015. The Exchange believes the proposed rule change is 
consistent with the protection of investors and the public interest in 
that it would provide incentive for all of the COPS contributors to 
continue to participate in COPS while the Exchange continues to grow 
the COPS business, thereby helping to maintain the quality of COPS 
Data.

B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE 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. To the contrary, the Exchange 
believes the proposal is procompetitive in that it will incentivize 
COPS TPH contributors to continue producing quality valuations to help 
keep COPS competitive with other similar market data products.\18\
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    \18\ Market data vendors including SuperDerivatives, Markit, 
Prism, and Bloomberg's BVAL service produce option value data that 
is similar to COPS Data. The Options Clearing Corporation (``OCC'') 
also produces FLEX option value data that is similar to the FLEX 
option value data that is included in COPS.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing rule does not (i) significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest, provided that the self-regulatory organization 
has given the Commission written notice of its intent to file the 
proposed rule change at least five business days prior to the date of 
filing of the proposed rule change or such shorter time as designated 
by the Commission,\19\ the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \20\ and Rule 19b-4(f)(6) 
thereunder.\21\
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    \19\ The Exchange has fulfilled this requirement.
    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \22\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\23\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Exchange believes 
that the proposal is consistent with the protection of investors and 
the public interest because it help COPS contributors cover their costs 
of producing valuations for COPS while the Exchange continues to grow 
the COPS business, and thereby assist the Exchange with maintaining its 
current roster of TPH contributors. The Commission agrees and has 
determined to waive the 30-day operative date so that the proposal may 
take effect upon filing.\24\
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    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \24\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

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-2015-046 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2015-046. 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.,

[[Page 28322]]

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-2015-046 and should be 
submitted on or before June 8, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-11877 Filed 5-15-15; 8:45 am]
 BILLING CODE 8011-01-P
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