Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule To Amend the Fees Schedule, 19653-19656 [2016-07686]
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Federal Register / Vol. 81, No. 65 / Tuesday, April 5, 2016 / Notices
these proceedings (Public
Representative).
3. Comments are due no later than
April 6, 2016.
4. The Secretary shall arrange for
publication of this order in the Federal
Register.
By the Commission.
Stacy L. Ruble,
Secretary.
[FR Doc. 2016–07680 Filed 4–4–16; 8:45 am]
BILLING CODE 7710–FW–P
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
POSTAL SERVICE
Product Change—Priority Mail and
Parcel Select Negotiated Service
Agreement
Postal ServiceTM.
Notice.
AGENCY:
ACTION:
notice is hereby given that on March 28,
2016, Chicago Board Options Exchange,
Incorporated (the ‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Effective date: April 5, 2016.
FOR FURTHER INFORMATION CONTACT:
Elizabeth A. Reed, 202–268–3179.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on March 29, 2016,
it filed with the Postal Regulatory
Commission a Request of the United
States Postal Service to Add Priority
Mail & Parcel Select Contract 1 to
Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2016–113, CP2016–141.
SUMMARY:
The Exchange proposes to amend the
Fees Schedule. The text of the proposed
rule change is available on the
Exchange’s Web site (https://
www.cboe.com/AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Stanley F. Mires,
Attorney, Federal Compliance.
[FR Doc. 2016–07676 Filed 4–4–16; 8:45 am]
BILLING CODE 7710–P
1. Purpose
Background
SECURITIES AND EXCHANGE
COMMISSION
asabaliauskas on DSK3SPTVN1PROD with NOTICES
[Release No. 34–77479; File No. SR–CBOE–
2016–026]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule To Amend the Fees Schedule
March 30, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Sep<11>2014
17:18 Apr 04, 2016
FLEX Broad-Based Index Options
provide users with the ability to
customize key contract terms, like
exercise prices, exercise styles,
expiration dates and exercise settlement
values. Pursuant to CBOE Rules 24A.5
and 24B.5, to initiate a FLEX
transaction, a Submitting Trading
Permit Holder submits a Request for
Quotes (‘‘RFQs’’) to a FLEX Post Official
or into CBOE’s Hybrid System.3 FLEXparticipating Trading Permit Holders
(‘‘FLEX Traders’’), who have elected to
receive RFQs, may then enter bids and
3 See
Jkt 238001
PO 00000
CBOE Rules 24A.5 and 24B.5.
Frm 00105
Fmt 4703
Sfmt 4703
19653
offers responsive to each RFQ during a
specified Request Response Period.4
On March 21, 2016, the Exchange will
begin offering Asian style settlement
and Cliquet style settlement for certain
FLEX Broad-Based Index Options. In
general, Asian style settlement provides
for payout based on the average of
prices of a broad-based index on predetermined dates over a specified time
period, and Cliquet style settlement
provides for a payout that is the greater
of $0 or the (positive) sum of ‘‘capped’’
monthly returns of a broad-based index
on pre-determined dates over a
specified period of time. These
settlement types are also referred to as
‘‘Exotics’’ due to their untraditional
nature.
After surveying potential FLEX BroadBased Index Options users, the
Exchange learned that indexed annuity
writers (insurance companies)
extensively use over-the-counter
(‘‘OTC’’) options with Asian and Cliquet
style settlement as a crediting method.5
Because of the level of customization
that FLEX Broad-Based Index options
provide, the Exchange is introducing
exchange-traded products that would
provide potential market users with an
alternative to the OTC market in
customized options. The new settlement
types were approved pursuant to a
CBOE rule filing on July 10, 2015.6
Proposed Change
The Exchange proposes an Exotic
Surcharge of $0.25 to be assessed on all
customer (‘‘C’’ origin code) Exotic
contracts executed on CBOE.7 The
Exotic surcharge will be assessed to
those FLEX Traders who trade customer
orders in FLEX Asian and Cliquet
options.
The Exchange also proposes a FLEX
Asian and Cliquet FLEX Trader
Incentive Program (‘‘Program’’). The
Program will provide monthly payments
to FLEX Traders who trade orders with
origin codes other than ‘‘C’’ against
customer orders in FLEX Asian and
Cliquet options. A compensation pool
4 Id. See CBOE Rules 24A.5 and 24B.5 for
additional information regarding FLEX trading
procedures.
5 A ‘‘crediting method’’ is the method used to
measure the change in the underlying index (e.g.,
point-to-point or annual reset).
6 See Securities Exchange Act Release No. 75312
(July 10, 2016), 80 FR 42152 (July 16, 2016) (SR–
CBOE–2015–044).
7 The Exchange initially filed the proposed fee
changes on March 17, 2016 (SR–CBOE–2016–020).
On March 18, 2016, the Exchange withdrew that
filing and replaced it with SR–CBOE–2016–022. On
March 24, 2016, the Exchange withdrew SR–CBOE–
2016–022 and replaced it with SR–CBOE–2016–
025. On March 28, 2016 the Exchange withdrew
SR–CBOE–2016–025 and replaced it with this
filing.
E:\FR\FM\05APN1.SGM
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Federal Register / Vol. 81, No. 65 / Tuesday, April 5, 2016 / Notices
equal to the lesser of 20% of customer
exchange fees for Exotics (collected
from customer orders traded against
orders with origin codes other than ‘‘C’’)
or $50,000 will be available each
month.8 For example: (1) On SPX
contracts, CBOE expects to collect $1.00
per contract (customer transaction fee of
$0.44 9 + $0.10 CFLEX surcharge 10
+ $0.21 Hybrid 3.0 execution
surcharge 11 + $0.25 customer exotic
surcharge); (2) on XSP contracts, CBOE
expects to collect $0.35 per contract
($0.00 customer transaction fee + $0.10
CFLEX surcharge + $0.25 customer
exotic surcharge); (3) on DJX and RUT
incentivize FLEX Traders to provide
liquidity in FLEX Asian and Cliquet
options. The Program shall be in place
until December 31, 2016 or until total
average daily volume in Exotics exceeds
15,000 contracts for three consecutive
months, whichever comes first. At the
time the FLEX Asian & Cliquet FLEX
Trader Incentive Program ends, the
Exchange will submit a rule filing
removing the program from the fee
schedule and notice shall be given via
regulatory circular.
The following examples demonstrate
how the program will work when both
the monthly cap is and is not reached.
contracts, CBOE expects to collect $0.53
per contract ($0.18 customer transaction
fee + $0.10 CFLEX surcharge + $0.25
customer exotic surcharge); and (4) on
NDX contracts, CBOE expects to collect
$0.43 per contract ($0.18 standard index
exchange fee + $0.25 customer exotic
surcharge).
A FLEX Trader will be entitled to a
pro-rata share of the monthly
compensation pool based on the
customer order fees collected from
customer orders traded against that
FLEX Trader’s orders with origin codes
other than ‘‘C’’ in FLEX Asian and
Cliquet options each month. The
Exchange believes the Program will
EXAMPLE 1—MONTHLY CAP NOT REACHED
Customer fees
per contract
Index
SPX ......................................................................................
XSP ......................................................................................
DJX ......................................................................................
RUT ......................................................................................
NDX ......................................................................................
Total monthly Customer fees collected from Customer orders traded against orders with origin codes other than
‘‘C’’ ....................................................................................
FLEX Trader % of fees collected from Customer-to-orders
with origin codes other than ‘‘C’’ ......................................
Compensation pool amount (i.e. 20% of the Customer
fees collected) ..................................................................
FLEX Trader’s pro-rata share of compensation pool ..........
Total exotic
contracts
traded for the
month,
customer-toorders with
origin codes
other than ‘‘C’’
FLEX Trader 1
FLEX Trader 2
FLEX Trader 3
$1.00
0.35
0.53
0.53
0.43
18,000
10,500
10,500
3,000
1,800
4,000
2,500
2,500
500
300
6,500
3,000
3,000
1,000
500
7,500
5,000
5,000
1,500
1,000
29,604.00
........................
6,594.00
9,885.00
13,125.00
........................
........................
22.27%
33.39%
44.34%
5,920.80
........................
........................
........................
........................
1,318.80
........................
1,977.00
........................
2,625.00
EXAMPLE 2—MONTHLY CAP IS REACHED
Customer fees
per contract
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Index
SPX ......................................................................................
XSP ......................................................................................
DJX ......................................................................................
RUT ......................................................................................
NDX ......................................................................................
Total monthly Customer fees collected from Customer orders traded against orders with origin codes other than
‘‘C’’ ....................................................................................
FLEX Trader % of fees collected from Customer-to-orders
with origin codes other than ‘‘C’’ ......................................
Compensation pool amount (i.e. 20% of the Customer
fees collected is 59,208.00, so cap applied) ...................
8 Fees collected from customer-to-customer FLEX
Asian and Cliquet option transactions would be
excluded from the compensation pool. Further, fees
collected from contracts executed in a FLEX
Trader’s customer-to-customer transactions would
not be included to determine the FLEX Trader’s
share of the compensation pool. Customer fees
would be assessed normally on both sides of the
transaction.
VerDate Sep<11>2014
17:18 Apr 04, 2016
Jkt 238001
Total exotic
contracts
traded for the
month,
customer-toorders with
origin codes
other than ‘‘C’’
FLEX Trader 1
FLEX Trader 2
FLEX Trader 3
$1.00
0.35
0.53
0.53
0.43
180,000
105,000
105,000
30,000
18,000
40,000
25,000
25,000
5,000
3,000
65,000
30,000
30,000
10,000
5,000
75,000
50,000
50,000
15,000
10,000
296,040.00
........................
$65,940.00
$98,850.00
$131,250.00
........................
........................
22.27%
33.39%
44.34%
50,000.00
........................
........................
........................
........................
9 SPX contract transaction fees are dependent
upon premium prices. The parenthetical and the
examples below assume executions at a premium
price of $1.00 or greater.
10 CFLEX surcharge fees are capped at $250 per
trade and assessed on electronic FLEX transactions.
The parenthetical and the examples below assume
the $250 cap was not reached on any individual
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
transaction and that the transactions were entered
electronically.
11 The Hybrid 3.0 execution surcharge is assessed
for transactions in SPX contracts executed via the
Hybrid 3.0 system. The parenthetical and the
examples below assume the SPX transactions were
executed via the Hybrid 3.0 system.
E:\FR\FM\05APN1.SGM
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Federal Register / Vol. 81, No. 65 / Tuesday, April 5, 2016 / Notices
EXAMPLE 2—MONTHLY CAP IS REACHED—Continued
Customer fees
per contract
FLEX Trader’s pro-rata share of compensation pool ..........
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Index
Total exotic
contracts
traded for the
month,
customer-toorders with
origin codes
other than ‘‘C’’
........................
........................
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.12 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 13 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and 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
Section 6(b)(4) of the Act,14 which
requires that Exchange rules provide for
the equitable allocation of reasonable
dues, fees, and other charges among its
Trading Permit Holders and other
persons using its facilities.
The Exchange believes that the Exotic
Surcharge of $0.25 is reasonable because
the amount of the new fee is within the
range of surcharges assessed for
customer transactions in other products
(for example, customers are currently
assessed a $0.21 Hybrid 3.0 Execution
Surcharge (which essentially acts as a
customer priority surcharge) in SPX
options). Furthermore, the Exchange
believes customers are willing to pay
premium exchange fees on FLEX Asian
and Cliquet options to obtain traditional
exchange-traded benefits, like price
discovery, transparency and centralized
clearing.
The Exchange believes that it is
equitable and not unfairly
discriminatory to assess the Exotic
Surcharge to customers and not other
12 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
14 15 U.S.C. 78f(b)(4).
13 15
VerDate Sep<11>2014
17:18 Apr 04, 2016
Jkt 238001
FLEX Trader 1
FLEX Trader 2
FLEX Trader 3
$11,137.01
$16,695.38
$22,167.61
market participants because customers
are not subject to additional costs for
effecting transactions in FLEX BroadBased Index options that are applicable
to other market participants, such as
license surcharges. Additionally,
customers are not subject to fees for
effecting transactions in general that are
applicable to other market participants,
such as connectivity fees and fees
relating to Trading Permits, and are not
subject to the same obligations as other
market participants, including
regulatory and compliance requirements
and quoting obligations.
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to offer FLEX Traders a
pro-rata share of a compensation pool
equal to the lesser of 20% of the
customer exchange fees collected on
FLEX Asian and Cliquet options (from
customer orders traded against orders
with origin codes other than ‘‘C’’) or
$50,000. FLEX Asian and Cliquet
options currently trade exclusively in
the OTC market. The traditional benefits
of exchange-traded options cannot be
realized unless there is liquidity in the
FLEX markets as compared to OTC.
Providing FLEX Traders with incentives
to trade FLEX Asian and Cliquet options
should result in a more robust price
discovery process that will result in
better execution prices for customers. In
addition, FLEX Traders in broad-based
index options have equal opportunity to
receive and respond to RFQs in FLEX
Asian and Cliquet options and
accordingly equal opportunity to receive
a pro-rata allocation of the
compensation pool (based upon the
share of total fees collected from
customer contracts against which the
respective FLEX Trader trades orders
with origin codes other than ‘‘C’’
orders).
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule changes will impose
any burdens on competition that are not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
proposed rule change will impose any
burden on intramarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
While different transaction fees are
assessed to different market
participants, different market
participants have different obligations
and circumstances as noted above.
Furthermore the incentive program
encourages market participants to bring
liquidity in FLEX Asian and Cliquet
options to the Exchange (which benefits
all market participants).
The Exchange does not believe that
the proposed rule changes will impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
As of March 21, 2016, CBOE will be the
only exchange to trade FLEX Asian and
Cliquet options. To the extent that the
proposed changes make CBOE a more
attractive marketplace for market
participants at other exchanges, such
market participants are welcome to
become CBOE market participants.
Finally, as mentioned above, FLEX
Asian and Cliquet options on the CBOE
will provide competition with OTC
products while providing the benefits of
trading on an exchange.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 15 and paragraph (f) of Rule
19b–4 16 thereunder. At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
15 15
16 17
E:\FR\FM\05APN1.SGM
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
05APN1
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Federal Register / Vol. 81, No. 65 / Tuesday, April 5, 2016 / Notices
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
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–2016–026 on the subject line.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–2016–026. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–CBOE–
17:18 Apr 04, 2016
Jkt 238001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–07686 Filed 4–4–16; 8:45 am]
BILLING CODE 8011–01–P
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
VerDate Sep<11>2014
2016–026 and should be submitted on
or before April 26, 2016.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–32061; File No. 812–14482]
OHA Investment Corporation, et al.;
Notice of Application
March 30, 2016.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under sections 17(d) and 57(i) of
the Investment Company Act of 1940
(the ‘‘Act’’) and rule 17d–1 under the
Act to permit certain joint transactions
otherwise prohibited by sections 17(d)
and 57(a)(4) of the Act and rule 17d–1
under the Act.
AGENCY:
Summary of Application: Applicants
request an order to permit certain
business development companies
(‘‘BDCs’’) and closed-end management
investment companies to co-invest in
portfolio companies with each other and
with affiliated investment funds.
Applicants: OHA Investment
Corporation (‘‘OHAI’’); Oak Hill
Advisors, L.P. (‘‘OHA’’); OHA Funding
GP, LLC, OHA Asset Holdings GP, LLC,
OHA Asset Holdings, LP, OHA Asset
Holdings II, LP, OHA Asset Holdings III,
LP, OHA Asset Holdings V, LP, OHA
Asset Holdings VI, LP, OHA Funding,
LP, OHA/OCI Investments, LLC, OHA
Nevada, LLC, Oak Hill Credit
Opportunities Master Fund, Ltd., Oak
Hill Credit Opportunities Fund, L.P.,
OHA Diversified Credit Strategies Fund
Master, L.P., OHA Diversified Credit
Strategies Fund, L.P., OHA Diversified
Credit Strategies Fund (Parallel), L.P.,
OHA Diversified Credit Strategies
Master Fund (Parallel II), L.P., OHA
Diversified Credit Strategies Tractor
Master Fund, L.P., OHA Structured
Products Master Fund C, L.P., OHA Asia
Customized Credit Fund, L.P., OHA
Denmark Customized Credit Fund, L.P.,
OHA Centre Street Partnership, L.P.,
OHA Custom Multi-Sector Credit Master
Fund, L.P., OHA Custom Multi-Sector
Credit Fund, Ltd., OHA Finlandia Credit
Fund, L.P., OHA Strategic Credit Master
Fund II, L.P., OHA Strategic Credit
17 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00108
Fmt 4703
Sfmt 4703
Fund II, L.P., OHA AD Customized
Credit Fund (International), L.P., OHA
BCSS SSD, L.P., OHA BCSS SSD, Ltd.,
OHA MPS SSD, L.P. and OHA MPS
SSD, Ltd. (together, the ‘‘Existing CoInvestment Affiliates,’’ and the Existing
Co-Investment Affiliates together with
OHAI and OHA, the ‘‘Applicants’’).
DATES: Filing Dates: The application
was filed on June 5, 2015 and amended
on October 19, 2015, December 18,
2015, and March 18, 2016.
Hearing or Notification of Hearing: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on April 22, 2016, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F St.
NE., Washington, DC 20549–1090.
Applicants: 1114 Avenue of the
Americas, 27th Floor, New York, NY
10036.
Jill
Ehrlich, Senior Counsel, at (202) 551–
6819 or Dalia Osman Blass, Assistant
Chief Counsel, at (202) 551–6821
(Division of Investment Management,
Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
FOR FURTHER INFORMATION CONTACT:
Applicants’ Representations
1. OHAI is a Maryland corporation
organized as a non-diversified, closedend management investment company
that has elected to be regulated as a BDC
under the Act.1 OHAI’s investment
1 Section 2(a)(48) defines a BDC to be any closedend investment company that operates for the
purpose of making investments in securities
described in sections 55(a)(1) through 55(a)(3) of the
Act and makes available significant managerial
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[Federal Register Volume 81, Number 65 (Tuesday, April 5, 2016)]
[Notices]
[Pages 19653-19656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-07686]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77479; File No. SR-CBOE-2016-026]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule To Amend the Fees Schedule
March 30, 2016.
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 March 28, 2016, Chicago Board Options Exchange, Incorporated
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (the ``Commission'') the proposed rule change as described
in Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Fees Schedule. The text of the
proposed rule change is available on the Exchange's Web site (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's
Office of the Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Background
FLEX Broad-Based Index Options provide users with the ability to
customize key contract terms, like exercise prices, exercise styles,
expiration dates and exercise settlement values. Pursuant to CBOE Rules
24A.5 and 24B.5, to initiate a FLEX transaction, a Submitting Trading
Permit Holder submits a Request for Quotes (``RFQs'') to a FLEX Post
Official or into CBOE's Hybrid System.\3\ FLEX-participating Trading
Permit Holders (``FLEX Traders''), who have elected to receive RFQs,
may then enter bids and offers responsive to each RFQ during a
specified Request Response Period.\4\
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\3\ See CBOE Rules 24A.5 and 24B.5.
\4\ Id. See CBOE Rules 24A.5 and 24B.5 for additional
information regarding FLEX trading procedures.
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On March 21, 2016, the Exchange will begin offering Asian style
settlement and Cliquet style settlement for certain FLEX Broad-Based
Index Options. In general, Asian style settlement provides for payout
based on the average of prices of a broad-based index on pre-determined
dates over a specified time period, and Cliquet style settlement
provides for a payout that is the greater of $0 or the (positive) sum
of ``capped'' monthly returns of a broad-based index on pre-determined
dates over a specified period of time. These settlement types are also
referred to as ``Exotics'' due to their untraditional nature.
After surveying potential FLEX Broad-Based Index Options users, the
Exchange learned that indexed annuity writers (insurance companies)
extensively use over-the-counter (``OTC'') options with Asian and
Cliquet style settlement as a crediting method.\5\ Because of the level
of customization that FLEX Broad-Based Index options provide, the
Exchange is introducing exchange-traded products that would provide
potential market users with an alternative to the OTC market in
customized options. The new settlement types were approved pursuant to
a CBOE rule filing on July 10, 2015.\6\
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\5\ A ``crediting method'' is the method used to measure the
change in the underlying index (e.g., point-to-point or annual
reset).
\6\ See Securities Exchange Act Release No. 75312 (July 10,
2016), 80 FR 42152 (July 16, 2016) (SR-CBOE-2015-044).
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Proposed Change
The Exchange proposes an Exotic Surcharge of $0.25 to be assessed
on all customer (``C'' origin code) Exotic contracts executed on
CBOE.\7\ The Exotic surcharge will be assessed to those FLEX Traders
who trade customer orders in FLEX Asian and Cliquet options.
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\7\ The Exchange initially filed the proposed fee changes on
March 17, 2016 (SR-CBOE-2016-020). On March 18, 2016, the Exchange
withdrew that filing and replaced it with SR-CBOE-2016-022. On March
24, 2016, the Exchange withdrew SR-CBOE-2016-022 and replaced it
with SR-CBOE-2016-025. On March 28, 2016 the Exchange withdrew SR-
CBOE-2016-025 and replaced it with this filing.
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The Exchange also proposes a FLEX Asian and Cliquet FLEX Trader
Incentive Program (``Program''). The Program will provide monthly
payments to FLEX Traders who trade orders with origin codes other than
``C'' against customer orders in FLEX Asian and Cliquet options. A
compensation pool
[[Page 19654]]
equal to the lesser of 20% of customer exchange fees for Exotics
(collected from customer orders traded against orders with origin codes
other than ``C'') or $50,000 will be available each month.\8\ For
example: (1) On SPX contracts, CBOE expects to collect $1.00 per
contract (customer transaction fee of $0.44 \9\ + $0.10 CFLEX surcharge
\10\ + $0.21 Hybrid 3.0 execution surcharge \11\ + $0.25 customer
exotic surcharge); (2) on XSP contracts, CBOE expects to collect $0.35
per contract ($0.00 customer transaction fee + $0.10 CFLEX surcharge +
$0.25 customer exotic surcharge); (3) on DJX and RUT contracts, CBOE
expects to collect $0.53 per contract ($0.18 customer transaction fee +
$0.10 CFLEX surcharge + $0.25 customer exotic surcharge); and (4) on
NDX contracts, CBOE expects to collect $0.43 per contract ($0.18
standard index exchange fee + $0.25 customer exotic surcharge).
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\8\ Fees collected from customer-to-customer FLEX Asian and
Cliquet option transactions would be excluded from the compensation
pool. Further, fees collected from contracts executed in a FLEX
Trader's customer-to-customer transactions would not be included to
determine the FLEX Trader's share of the compensation pool. Customer
fees would be assessed normally on both sides of the transaction.
\9\ SPX contract transaction fees are dependent upon premium
prices. The parenthetical and the examples below assume executions
at a premium price of $1.00 or greater.
\10\ CFLEX surcharge fees are capped at $250 per trade and
assessed on electronic FLEX transactions. The parenthetical and the
examples below assume the $250 cap was not reached on any individual
transaction and that the transactions were entered electronically.
\11\ The Hybrid 3.0 execution surcharge is assessed for
transactions in SPX contracts executed via the Hybrid 3.0 system.
The parenthetical and the examples below assume the SPX transactions
were executed via the Hybrid 3.0 system.
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A FLEX Trader will be entitled to a pro-rata share of the monthly
compensation pool based on the customer order fees collected from
customer orders traded against that FLEX Trader's orders with origin
codes other than ``C'' in FLEX Asian and Cliquet options each month.
The Exchange believes the Program will incentivize FLEX Traders to
provide liquidity in FLEX Asian and Cliquet options. The Program shall
be in place until December 31, 2016 or until total average daily volume
in Exotics exceeds 15,000 contracts for three consecutive months,
whichever comes first. At the time the FLEX Asian & Cliquet FLEX Trader
Incentive Program ends, the Exchange will submit a rule filing removing
the program from the fee schedule and notice shall be given via
regulatory circular.
The following examples demonstrate how the program will work when
both the monthly cap is and is not reached.
Example 1--Monthly Cap Not Reached
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Total exotic
contracts
traded for the
month,
Index Customer fees customer-to- FLEX Trader 1 FLEX Trader 2 FLEX Trader 3
per contract orders with
origin codes
other than
``C''
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SPX............................. $1.00 18,000 4,000 6,500 7,500
XSP............................. 0.35 10,500 2,500 3,000 5,000
DJX............................. 0.53 10,500 2,500 3,000 5,000
RUT............................. 0.53 3,000 500 1,000 1,500
NDX............................. 0.43 1,800 300 500 1,000
Total monthly Customer fees 29,604.00 .............. 6,594.00 9,885.00 13,125.00
collected from Customer orders
traded against orders with
origin codes other than ``C''..
FLEX Trader % of fees collected .............. .............. 22.27% 33.39% 44.34%
from Customer-to-orders with
origin codes other than ``C''..
Compensation pool amount (i.e. 5,920.80 .............. .............. .............. ..............
20% of the Customer fees
collected).....................
FLEX Trader's pro-rata share of .............. .............. 1,318.80 1,977.00 2,625.00
compensation pool..............
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Example 2--Monthly Cap is Reached
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Total exotic
contracts
traded for the
month,
Index Customer fees customer-to- FLEX Trader 1 FLEX Trader 2 FLEX Trader 3
per contract orders with
origin codes
other than
``C''
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SPX............................. $1.00 180,000 40,000 65,000 75,000
XSP............................. 0.35 105,000 25,000 30,000 50,000
DJX............................. 0.53 105,000 25,000 30,000 50,000
RUT............................. 0.53 30,000 5,000 10,000 15,000
NDX............................. 0.43 18,000 3,000 5,000 10,000
Total monthly Customer fees 296,040.00 .............. $65,940.00 $98,850.00 $131,250.00
collected from Customer orders
traded against orders with
origin codes other than ``C''..
FLEX Trader % of fees collected .............. .............. 22.27% 33.39% 44.34%
from Customer-to-orders with
origin codes other than ``C''..
Compensation pool amount (i.e. 50,000.00 .............. .............. .............. ..............
20% of the Customer fees
collected is 59,208.00, so cap
applied).......................
[[Page 19655]]
FLEX Trader's pro-rata share of .............. .............. $11,137.01 $16,695.38 $22,167.61
compensation pool..............
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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.\12\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \13\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and 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
Section 6(b)(4) of the Act,\14\ which requires that Exchange rules
provide for the equitable allocation of reasonable dues, fees, and
other charges among its Trading Permit Holders and other persons using
its facilities.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
\14\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the Exotic Surcharge of $0.25 is
reasonable because the amount of the new fee is within the range of
surcharges assessed for customer transactions in other products (for
example, customers are currently assessed a $0.21 Hybrid 3.0 Execution
Surcharge (which essentially acts as a customer priority surcharge) in
SPX options). Furthermore, the Exchange believes customers are willing
to pay premium exchange fees on FLEX Asian and Cliquet options to
obtain traditional exchange-traded benefits, like price discovery,
transparency and centralized clearing.
The Exchange believes that it is equitable and not unfairly
discriminatory to assess the Exotic Surcharge to customers and not
other market participants because customers are not subject to
additional costs for effecting transactions in FLEX Broad-Based Index
options that are applicable to other market participants, such as
license surcharges. Additionally, customers are not subject to fees for
effecting transactions in general that are applicable to other market
participants, such as connectivity fees and fees relating to Trading
Permits, and are not subject to the same obligations as other market
participants, including regulatory and compliance requirements and
quoting obligations.
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to offer FLEX Traders a pro-rata share of a compensation
pool equal to the lesser of 20% of the customer exchange fees collected
on FLEX Asian and Cliquet options (from customer orders traded against
orders with origin codes other than ``C'') or $50,000. FLEX Asian and
Cliquet options currently trade exclusively in the OTC market. The
traditional benefits of exchange-traded options cannot be realized
unless there is liquidity in the FLEX markets as compared to OTC.
Providing FLEX Traders with incentives to trade FLEX Asian and Cliquet
options should result in a more robust price discovery process that
will result in better execution prices for customers. In addition, FLEX
Traders in broad-based index options have equal opportunity to receive
and respond to RFQs in FLEX Asian and Cliquet options and accordingly
equal opportunity to receive a pro-rata allocation of the compensation
pool (based upon the share of total fees collected from customer
contracts against which the respective FLEX Trader trades orders with
origin codes other than ``C'' orders).
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burdens on competition that are not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act. While different transaction
fees are assessed to different market participants, different market
participants have different obligations and circumstances as noted
above. Furthermore the incentive program encourages market participants
to bring liquidity in FLEX Asian and Cliquet options to the Exchange
(which benefits all market participants).
The Exchange does not believe that the proposed rule changes will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. As of March 21,
2016, CBOE will be the only exchange to trade FLEX Asian and Cliquet
options. To the extent that the proposed changes make CBOE a more
attractive marketplace for market participants at other exchanges, such
market participants are welcome to become CBOE market participants.
Finally, as mentioned above, FLEX Asian and Cliquet options on the CBOE
will provide competition with OTC products while providing the benefits
of trading on an exchange.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \15\ and paragraph (f) of Rule 19b-4 \16\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the
[[Page 19656]]
public interest, for the protection of investors, or otherwise in
furtherance of the purposes of the Act. If the Commission takes such
action, the Commission will institute proceedings to determine whether
the proposed rule change should be approved or disapproved.
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-CBOE-2016-026 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2016-026. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-CBOE-2016-026 and should be
submitted on or before April 26, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-07686 Filed 4-4-16; 8:45 am]
BILLING CODE 8011-01-P
