Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fees Schedule, 66706-66708 [2016-23322]

Download as PDF 66706 Federal Register / Vol. 81, No. 188 / Wednesday, September 28, 2016 / Notices The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed companies. Therefore, it is Ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading in the securities of the above-listed companies is suspended for the period from 9:30 a.m. EDT on September 26, 2016, through 11:59 p.m. EDT on October 7, 2016. By the Commission. Brent J. Fields, Secretary. BILLING CODE 8011–01–P 1. Purpose SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78907; File No. SR–CBOE– 2016–068] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fees Schedule September 22, 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 September 13, 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. mstockstill on DSK3G9T082PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Frequent Trader Program. 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. 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 18:04 Sep 27, 2016 Jkt 238001 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 the Statutory Basis for, the Proposed Rule Change [FR Doc. 2016–23561 Filed 9–26–16; 4:15 pm] 1 15 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The Exchange proposes to amend its Fees Schedule.3 Specifically, the Exchange proposes to expand its Frequent Trader Program. By way of background, on April 1, 2016, the Exchange adopted a program that offers transaction fee rebates to Customers (origin code ‘‘C’’) that meet certain volume thresholds in CBOE VIX Volatility Index options (‘‘VIX options’’) and S&P 500 Index options (‘‘SPX’’), weekly S&P 500 options (‘‘SPXW’’) and p.m.-settled SPX Index options (‘‘SPXpm’’) (collectively referred to as ‘‘SPX options’’) provided the Customer registers for the program (the ‘‘Frequent Trader Program’’ or ‘‘Program’’).4 To participate in the Frequent Trader Program, Customers register with the Exchange. Once registered, the Customer is provided a unique identification number (‘‘FTID’’) that can be affixed to each of its orders. The FTID allows the Exchange to identify and aggregate all electronic and manual trades during both the Regular Trading Hours and Extended Trading Hours sessions from that Customer for purposes of determining whether the Customer meets any of the various volume thresholds. The Customer has to provide its FTID to the Trading Permit Holder (‘‘TPH’’) submitting that Customer’s order to the Exchange (executing agent’’ or ‘‘executing TPH’’) and that executing TPH would have to enter the Customer’s FTID on each of that Customer’s orders. 3 The Exchange initially filed the proposed change on September 1, 2016 (SR–CBOE–2016– 065). On September 13, 2016, the Exchange withdrew that filing and submitted this filing. 4 See Securities Exchange Act Release No. 77554 (April 7, 2016), 81 FR 21928 (April 13, 2016) (SR– CBOE–2016–023). PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 The Exchange first proposes to expand the program to allow Professional Customers and Voluntary Professionals (‘‘W’’ origin code) (‘‘Professionals’’) to qualify for the Program. The same terms and conditions would apply to Professionals as currently does to Customers. The Exchange believes this proposed change would provide additional incentive to direct Professional order flow to the Exchange, which benefits all market participants through increased liquidity and enhanced price discovery. The Exchange next proposes to provide that, in addition to SPX and VIX options, the Program would apply to Russell 2000 Index (‘‘RUT’’) options. As with SPX and VIX, the Exchange would aggregate a Customer’s (or Professional’s) volume (for which their FTID was entered) on a monthly basis for RUT options. If the Customer or Professional meets the thresholds proposed below, it would receive a rebate on its RUT options transaction fees, also indicated below.5 Also, as is currently the case with SPX and VIX, although all executed contracts with an FTID will count towards the qualifying volume thresholds, the rebates will be based on the actual amount of fees assessed in accordance with the Fees Schedule (e.g., if a Customer submits a RUT order for 10,000 contracts, pursuant to the current Fees Schedule, that customer would be assessed fees for only the first 5,000 contracts under the Customer Large Trade Discount Program. Therefore, while all 10,000 contracts would count when determining the tier, the Customer’s rebate would be based on the amount of the fees assessed for 5,000 contracts, not on the value of the total 10,000 contracts executed). The thresholds and rebates are as follows: RUT Tier Monthly RUT contracts traded 1 ........ 2 ........ 3 ........ 4,000–7,999 ................... 8,000–14,999 ................. 15,000 and above ......... RUT fee rebate (%) 5 10 15 The Exchange notes that the highest achieved threshold rebate rate will apply from the first executed contract (e.g., if a Customer or Professional executes 10,000 RUT contracts in a month, the Tier 2 10% rebate rate would apply to all 10,000 RUT contracts). The Exchange believes the tiered program 5 The Exchange notes that only transaction fees would be discounted (i.e., no other surcharges, such as the Index License Surcharge Fee, would be rebated or discounted). E:\FR\FM\28SEN1.SGM 28SEN1 Federal Register / Vol. 81, No. 188 / Wednesday, September 28, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES incentivizes the sending of Customer and Professional orders to the Exchange while maintaining an incremental incentive for Customers and Professionals to strive for the highest tier level. The Exchange also notes that the volume thresholds for SPX options and VIX options are higher than for RUT in light of their more mature and established positions in the industry. Next, the Exchange proposes to make some clarifying, non-substantive and organizational changes to the Frequent Trader table and Notes section in light of the proposed changes described above. First, the Exchange proposes to add a reference to Professional Customers and Voluntary Professionals in the Notes section and define ‘‘customer’’ as including both Customers (‘‘C’’ origin) and Professional Customers and Voluntary Professionals (‘‘W’’ origin). Additionally, the Exchange proposes to eliminate from the definition of ‘‘customer’’ in the Notes section the reference to ‘‘nonProfessionals’’, as reference to ‘‘customer’’ will include both Customers and Professionals going forward. The Exchange also proposes to change the last reference to customer in the Notes section to lower case to avoid confusion as to which ‘‘customer’’ is being referenced. The Exchange also proposes to eliminate obsolete language pertaining to the handling of the Frequent Trader Program—Volume Corrections Form for the month of April 2016, as such language is unnecessary to maintain. Additionally, the Exchange proposes to relocate the language of the Notes section to below the Frequent Trader Program table in order to accommodate the new RUT scale. Lastly, the Exchange proposes to amend the Frequent Trader Program—Volume Corrections Form (‘‘Form’’) to reflect that the Program also applies to RUT.6 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.7 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 8 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable 6 The updated Frequent Trader Program—Volume Corrections Form, which will replace the current Frequent Trader Program—Volume Corrections Form, is attached as Exhibit 3. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 18:04 Sep 27, 2016 Jkt 238001 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. The Exchange also believes the proposed rule change is consistent with Section 6(b)(4) of the Act,9 which provides that Exchange rules may provide for the equitable allocation of reasonable dues, fees, and other charges among its Trading Permit Holders. The expansion of the Frequent Trader Program to Professionals is reasonable because it will allow Professionals who register for the program an opportunity to receive certain rebates for reaching certain trading volume thresholds. The Exchange notes that it is voluntary for Professionals to choose whether or not to register for the program and whether to request that their unique FTID be appended to their orders. The Program is also voluntary for executing TPHs who have the option of choosing not to participate (i.e., they may decline to append FTID numbers on Professional orders). The Exchange believes it’s equitable and not unfairly discriminatory to expand the program to Professionals because this is designed to attract a greater number of Professional VIX, SPX and RUT orders. This increased volume creates greater trading opportunities that benefit all market participants. Specifically, while only Customer and Professional orders qualify for the proposed rebates under the Frequent Trader Program, an increase in Customer and Professional order flow will bring greater volume and liquidity, which benefit all market participants by providing more trading opportunities and tighter spreads. Moreover, the options industry has a long history of providing preferential pricing to Customers. Like Customers, Professionals are non-TPH, non-broker dealers and have historically also been given preferential pricing. Indeed, the Exchange notes that incentive programs based on Customer and Professional volume already exist elsewhere within the industry.10 In addition the Exchange 9 15 U.S.C. 78f(b)(4). e.g., NYSE Arca Options Fees and Charges, Customer and Professional Customer Incentive Program and Customer and Professional Customer Posting Credit Tiers in Penny and Non Penny Pilot Issues. See also NASDAQ Options Market (‘‘NOM’’) Options Pricing, Sec. 2 NASDAQ Options Market— Fees and Rebates, Customer and Professional Penny Pilot Options Rebate to Add Liquidity. 10 See PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 66707 believes the proposed program is equitable and not unfairly discriminatory because any Professional may avail itself of this program provided it registers with the Exchange and its executing TPH participates. Expanding the Frequent Trader Program to RUT options is reasonable because it will allow Customers and Professionals who register for the program an opportunity to receive certain rebates for reaching certain trading volume thresholds in RUT, as well as VIX and SPX. The Exchange believes adding RUT options to the Program is equitable and not unfairly discriminatory because the Exchange has expended considerable time and resources in maintaining RUT, along with VIX and SPX. The proposed rule change is designed to encourage greater Customer and Professional RUT options trading, which, along with bringing greater RUT options trading opportunities to all market participants, would bring in more fees to the Exchange, and such fees can be used to recoup the Exchange’s costs and expenditures from maintaining RUT options. The Exchange believes it’s equitable and not unfairly discriminatory to establish lower threshold tiers for RUT than for the SPX product group and VIX because the SPX product group and VIX have reached a more mature and established level than RUT. The Exchange believes it’s reasonable, equitable and not unfairly discriminatory to include all of a Customer’s and Professional’s RUT executed contracts with an FTID towards the respective qualifying thresholds because the Exchange wishes to support and encourage Customers and Professionals to provide greater order flow in this class, which allows for price improvement and has a number of positive impacts on the market system. The Exchange also believes however, that it’s reasonable, equitable and not unfairly discriminatory to base the rebate off the amount of transaction fees that would be assessed pursuant to the Fees Schedule (as opposed to being based off the ‘‘theoretical’’ fee value of all contracts executed) because the Exchange does not want to provide rebates on contracts for which it is not also collecting transaction fees. The Exchange believes it’s reasonable, equitable and not unfairly discriminatory to provide Professionals a choice as to how their payment is delivered. Providing Professionals with the option of requesting to receive their rebates under the Frequent Trader Program as separate direct payments or E:\FR\FM\28SEN1.SGM 28SEN1 66708 Federal Register / Vol. 81, No. 188 / Wednesday, September 28, 2016 / Notices via a distribution to one or more of its executing Clearing Trading Permit Holders will provide Professionals with a convenient manner in which to receive their rebates, which perfects the mechanism for a free and open market. Lastly, the Exchange believes the proposed update to the Frequent Trader Program—Volume Corrections Form along with the clarifying, nonsubstantive and organizational changes maintains clarity in the Form and Fees Schedule, respectively, and avoids potential confusion given the proposed changes to expand the Frequent Trader Program. Alleviation of confusion removes impediments to, and perfects the mechanism for a free and open market and a national market system, and, in general, protects investors and the public interest of market participants. B. Self-Regulatory Organization’s Statement on Burden on Competition mstockstill on DSK3G9T082PROD with NOTICES 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 because, while the rebates apply only to Customers and Professionals, the proposed change is designed to encourage increased Customer and Professional VIX, SPX and RUT options volume, which provides greater trading opportunities for all market participants. Additionally, the Exchange notes that incentive programs based on Customer and Professional volume already exist elsewhere within the industry.11 The Exchange believes that the proposed rule change will not cause an unnecessary burden on intermarket competition because VIX and SPX products are only traded on CBOE and RUT products are only traded on CBOE and C2 Options Exchange, Incorporated. To the extent that the proposed changes make CBOE a more attractive marketplace for market participants at other exchanges, such market participants are welcome to become CBOE market participants. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received 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 12 and paragraph (f) of Rule 19b–4 13 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the 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–2016–068 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–2016–068. 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– 2016–068, and should be submitted on or before October 19, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Brent J. Fields, Secretary. [FR Doc. 2016–23322 Filed 9–27–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78909; File No. SR–BX– 2016–046] Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing of Proposed Rule Change To Amend BX Rules 4702 and 4703 September 22, 2016. 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 September 13, 2016, NASDAQ BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend BX Rules 4702, Order Types, and 4703, Order Attributes, to change the way in which Post Only Orders interact with resting Non-Display orders and preventing the execution of midpoint pegged orders during a crossed market. The text of the proposed rule change is available on the Exchange’s Web site at https://nasdaqbx.cchwallstreet.com/, at the principal office of the Exchange, 14 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 12 15 U.S.C. 78s(b)(3)(A). 13 17 CFR 240.19b–4(f). 11 Id. VerDate Sep<11>2014 18:04 Sep 27, 2016 Jkt 238001 PO 00000 Frm 00089 Fmt 4703 1 15 Sfmt 4703 E:\FR\FM\28SEN1.SGM 28SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 188 (Wednesday, September 28, 2016)]
[Notices]
[Pages 66706-66708]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23322]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78907; File No. SR-CBOE-2016-068]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend the Fees Schedule

September 22, 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 September 13, 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 its Frequent Trader Program. 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 the
Statutory Basis for, the Proposed Rule Change

1. Purpose
The Exchange proposes to amend its Fees Schedule.\3\ Specifically,
the Exchange proposes to expand its Frequent Trader Program. By way of
background, on April 1, 2016, the Exchange adopted a program that
offers transaction fee rebates to Customers (origin code ``C'') that
meet certain volume thresholds in CBOE VIX Volatility Index options
(``VIX options'') and S&P 500 Index options (``SPX''), weekly S&P 500
options (``SPXW'') and p.m.-settled SPX Index options (``SPXpm'')
(collectively referred to as ``SPX options'') provided the Customer
registers for the program (the ``Frequent Trader Program'' or
``Program'').\4\
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\3\ The Exchange initially filed the proposed change on
September 1, 2016 (SR-CBOE-2016-065). On September 13, 2016, the
Exchange withdrew that filing and submitted this filing.
\4\ See Securities Exchange Act Release No. 77554 (April 7,
2016), 81 FR 21928 (April 13, 2016) (SR-CBOE-2016-023).
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To participate in the Frequent Trader Program, Customers register
with the Exchange. Once registered, the Customer is provided a unique
identification number (``FTID'') that can be affixed to each of its
orders. The FTID allows the Exchange to identify and aggregate all
electronic and manual trades during both the Regular Trading Hours and
Extended Trading Hours sessions from that Customer for purposes of
determining whether the Customer meets any of the various volume
thresholds. The Customer has to provide its FTID to the Trading Permit
Holder (``TPH'') submitting that Customer's order to the Exchange
(executing agent'' or ``executing TPH'') and that executing TPH would
have to enter the Customer's FTID on each of that Customer's orders.
The Exchange first proposes to expand the program to allow
Professional Customers and Voluntary Professionals (``W'' origin code)
(``Professionals'') to qualify for the Program. The same terms and
conditions would apply to Professionals as currently does to Customers.
The Exchange believes this proposed change would provide additional
incentive to direct Professional order flow to the Exchange, which
benefits all market participants through increased liquidity and
enhanced price discovery. The Exchange next proposes to provide that,
in addition to SPX and VIX options, the Program would apply to Russell
2000 Index (``RUT'') options. As with SPX and VIX, the Exchange would
aggregate a Customer's (or Professional's) volume (for which their FTID
was entered) on a monthly basis for RUT options. If the Customer or
Professional meets the thresholds proposed below, it would receive a
rebate on its RUT options transaction fees, also indicated below.\5\
Also, as is currently the case with SPX and VIX, although all executed
contracts with an FTID will count towards the qualifying volume
thresholds, the rebates will be based on the actual amount of fees
assessed in accordance with the Fees Schedule (e.g., if a Customer
submits a RUT order for 10,000 contracts, pursuant to the current Fees
Schedule, that customer would be assessed fees for only the first 5,000
contracts under the Customer Large Trade Discount Program. Therefore,
while all 10,000 contracts would count when determining the tier, the
Customer's rebate would be based on the amount of the fees assessed for
5,000 contracts, not on the value of the total 10,000 contracts
executed). The thresholds and rebates are as follows:
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\5\ The Exchange notes that only transaction fees would be
discounted (i.e., no other surcharges, such as the Index License
Surcharge Fee, would be rebated or discounted).

RUT
------------------------------------------------------------------------
RUT fee
Tier Monthly RUT contracts traded rebate
(%)
------------------------------------------------------------------------
1......................... 4,000-7,999...................... 5
2......................... 8,000-14,999..................... 10
3......................... 15,000 and above................. 15
------------------------------------------------------------------------

The Exchange notes that the highest achieved threshold rebate rate
will apply from the first executed contract (e.g., if a Customer or
Professional executes 10,000 RUT contracts in a month, the Tier 2 10%
rebate rate would apply to all 10,000 RUT contracts). The Exchange
believes the tiered program

[[Page 66707]]

incentivizes the sending of Customer and Professional orders to the
Exchange while maintaining an incremental incentive for Customers and
Professionals to strive for the highest tier level. The Exchange also
notes that the volume thresholds for SPX options and VIX options are
higher than for RUT in light of their more mature and established
positions in the industry.
Next, the Exchange proposes to make some clarifying, non-
substantive and organizational changes to the Frequent Trader table and
Notes section in light of the proposed changes described above. First,
the Exchange proposes to add a reference to Professional Customers and
Voluntary Professionals in the Notes section and define ``customer'' as
including both Customers (``C'' origin) and Professional Customers and
Voluntary Professionals (``W'' origin). Additionally, the Exchange
proposes to eliminate from the definition of ``customer'' in the Notes
section the reference to ``non-Professionals'', as reference to
``customer'' will include both Customers and Professionals going
forward. The Exchange also proposes to change the last reference to
customer in the Notes section to lower case to avoid confusion as to
which ``customer'' is being referenced. The Exchange also proposes to
eliminate obsolete language pertaining to the handling of the Frequent
Trader Program--Volume Corrections Form for the month of April 2016, as
such language is unnecessary to maintain. Additionally, the Exchange
proposes to relocate the language of the Notes section to below the
Frequent Trader Program table in order to accommodate the new RUT
scale. Lastly, the Exchange proposes to amend the Frequent Trader
Program--Volume Corrections Form (``Form'') to reflect that the Program
also applies to RUT.\6\
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\6\ The updated Frequent Trader Program--Volume Corrections
Form, which will replace the current Frequent Trader Program--Volume
Corrections Form, is attached as Exhibit 3.
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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.\7\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \8\ 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. The Exchange
also believes the proposed rule change is consistent with Section
6(b)(4) of the Act,\9\ which provides that Exchange rules may provide
for the equitable allocation of reasonable dues, fees, and other
charges among its Trading Permit Holders.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

The expansion of the Frequent Trader Program to Professionals is
reasonable because it will allow Professionals who register for the
program an opportunity to receive certain rebates for reaching certain
trading volume thresholds. The Exchange notes that it is voluntary for
Professionals to choose whether or not to register for the program and
whether to request that their unique FTID be appended to their orders.
The Program is also voluntary for executing TPHs who have the option of
choosing not to participate (i.e., they may decline to append FTID
numbers on Professional orders).
The Exchange believes it's equitable and not unfairly
discriminatory to expand the program to Professionals because this is
designed to attract a greater number of Professional VIX, SPX and RUT
orders. This increased volume creates greater trading opportunities
that benefit all market participants. Specifically, while only Customer
and Professional orders qualify for the proposed rebates under the
Frequent Trader Program, an increase in Customer and Professional order
flow will bring greater volume and liquidity, which benefit all market
participants by providing more trading opportunities and tighter
spreads. Moreover, the options industry has a long history of providing
preferential pricing to Customers. Like Customers, Professionals are
non-TPH, non-broker dealers and have historically also been given
preferential pricing. Indeed, the Exchange notes that incentive
programs based on Customer and Professional volume already exist
elsewhere within the industry.\10\ In addition the Exchange believes
the proposed program is equitable and not unfairly discriminatory
because any Professional may avail itself of this program provided it
registers with the Exchange and its executing TPH participates.
---------------------------------------------------------------------------

\10\ See e.g., NYSE Arca Options Fees and Charges, Customer and
Professional Customer Incentive Program and Customer and
Professional Customer Posting Credit Tiers in Penny and Non Penny
Pilot Issues. See also NASDAQ Options Market (``NOM'') Options
Pricing, Sec. 2 NASDAQ Options Market--Fees and Rebates, Customer
and Professional Penny Pilot Options Rebate to Add Liquidity.
---------------------------------------------------------------------------

Expanding the Frequent Trader Program to RUT options is reasonable
because it will allow Customers and Professionals who register for the
program an opportunity to receive certain rebates for reaching certain
trading volume thresholds in RUT, as well as VIX and SPX. The Exchange
believes adding RUT options to the Program is equitable and not
unfairly discriminatory because the Exchange has expended considerable
time and resources in maintaining RUT, along with VIX and SPX. The
proposed rule change is designed to encourage greater Customer and
Professional RUT options trading, which, along with bringing greater
RUT options trading opportunities to all market participants, would
bring in more fees to the Exchange, and such fees can be used to recoup
the Exchange's costs and expenditures from maintaining RUT options. The
Exchange believes it's equitable and not unfairly discriminatory to
establish lower threshold tiers for RUT than for the SPX product group
and VIX because the SPX product group and VIX have reached a more
mature and established level than RUT.
The Exchange believes it's reasonable, equitable and not unfairly
discriminatory to include all of a Customer's and Professional's RUT
executed contracts with an FTID towards the respective qualifying
thresholds because the Exchange wishes to support and encourage
Customers and Professionals to provide greater order flow in this
class, which allows for price improvement and has a number of positive
impacts on the market system. The Exchange also believes however, that
it's reasonable, equitable and not unfairly discriminatory to base the
rebate off the amount of transaction fees that would be assessed
pursuant to the Fees Schedule (as opposed to being based off the
``theoretical'' fee value of all contracts executed) because the
Exchange does not want to provide rebates on contracts for which it is
not also collecting transaction fees.
The Exchange believes it's reasonable, equitable and not unfairly
discriminatory to provide Professionals a choice as to how their
payment is delivered. Providing Professionals with the option of
requesting to receive their rebates under the Frequent Trader Program
as separate direct payments or

[[Page 66708]]

via a distribution to one or more of its executing Clearing Trading
Permit Holders will provide Professionals with a convenient manner in
which to receive their rebates, which perfects the mechanism for a free
and open market.
Lastly, the Exchange believes the proposed update to the Frequent
Trader Program--Volume Corrections Form along with the clarifying, non-
substantive and organizational changes maintains clarity in the Form
and Fees Schedule, respectively, and avoids potential confusion given
the proposed changes to expand the Frequent Trader Program. Alleviation
of confusion removes impediments to, and perfects the mechanism for a
free and open market and a national market system, and, in general,
protects investors and the public interest of market participants.

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 because, while the rebates apply
only to Customers and Professionals, the proposed change is designed to
encourage increased Customer and Professional VIX, SPX and RUT options
volume, which provides greater trading opportunities for all market
participants. Additionally, the Exchange notes that incentive programs
based on Customer and Professional volume already exist elsewhere
within the industry.\11\ The Exchange believes that the proposed rule
change will not cause an unnecessary burden on intermarket competition
because VIX and SPX products are only traded on CBOE and RUT products
are only traded on CBOE and C2 Options Exchange, Incorporated. 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.
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\11\ Id.
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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

The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \12\ and paragraph (f) of Rule 19b-4 \13\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the 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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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2016-068 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-2016-068. 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-2016-068, and should be
submitted on or before October 19, 2016.
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\14\ 17 CFR 200.30-3(a)(12).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Brent J. Fields,
Secretary.
[FR Doc. 2016-23322 Filed 9-27-16; 8:45 am]
BILLING CODE 8011-01-P

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