Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Updates for the CBOE Fees Schedule, 34560-34563 [2017-15529]

Download as PDF 34560 Federal Register / Vol. 82, No. 141 / Tuesday, July 25, 2017 / Notices SECURITIES AND EXCHANGE COMMISSION SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting mstockstill on DSK30JT082PROD with NOTICES Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (‘‘OCIE’’) will host a public conference, characterized as a ‘‘Compliance Outreach Program for Broker-Dealers,’’ on Thursday, July 27, 2017, in the Auditorium, Room L–002 at the Commission’s headquarters, 100 F Street NE., Washington, DC 20549. The conference will begin at 10:30 a.m. (ET). Seating will be on a first-come, firstserved basis. Doors will open at 9:00 a.m. Visitors will be subject to security checks. The conference will be webcast on the Commission’s Web site at www.sec.gov. On May 3, 2017, the Commission issued notice of the conference indicating that the conference is open to the public. This Sunshine Act notice is being issued because a quorum of the Commission may attend. The agenda for the conference includes: Opening remarks by Chairman Jay Clayton; a panel discussion with insights from Michael Piwowar, Commissioner, Securities and Exchange Commission, Robert Cook, President and CEO of FINRA (Financial Industry Regulatory Authority), and moderated by Peter Driscoll, Acting Director, OCIE; a panel discussion addressing certain broker-dealer hot topics, including antimoney laundering, conflicts of interest, recidivist and high risk brokers and dual registrants. Other panels include a discussion of issues relating to senior investors and those investing for retirement and a discussion addressing current cybersecurity threats impacting brokerdealers and the securities markets, including mitigation approaches. For further information, please contact Brent J. Fields from the Office of the Secretary at (202) 551–5400. Dated: July 20, 2017. Brent J. Fields, Secretary. [FR Doc. 2017–15627 Filed 7–21–17; 11:15 am] [Release No. 34–81170; File No. SR–CBOE– 2017–055] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Updates for the CBOE Fees Schedule July 19, 2017. 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 July 11, 2017, Chicago Board Options Exchange, Incorporated (‘‘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. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to make a number of changes to its Fees Schedule, effective immediately. The text of the proposed rule change is also available on the Exchange’s Web site (http://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. BILLING CODE 8011–01–P 1 15 2 17 VerDate Sep<11>2014 19:30 Jul 24, 2017 Jkt 241001 PO 00000 Fmt 4703 1. Purpose The Exchange proposes to make a number of changes to its Fees Schedule.3 VIX License Index Surcharge Waiver The Exchange proposes to extend the current waiver of the VIX Index License Surcharge of $0.10 per contract for Clearing Trading Permit Holder Proprietary (‘‘Firm’’) (origin codes ‘‘F’’ or ‘‘L’’) VIX orders that have a premium of $0.10 or lower and have series with an expiration of seven (7) calendar days or less. The Exchange adopted the current waiver to reduce transaction costs on expiring, low-priced VIX options, which the Exchange believed would encourage Firms to seek to close and/or roll over such positions close to expiration at low premium levels, including facilitating customers to do so, in order to free up capital and encourage additional trading. The Exchange had proposed to waive the surcharge through June 30, 2017. The Exchange proposes to extend the waiver of the surcharge through December 31, 2017, at which time the Exchange will reevaluate whether the waiver has continued to prompt Firms to close and roll over positions close to expiration at low premium levels. Extended Trading Hour Fees Waiver In order to promote and encourage trading during the Extended Trading Hours (‘‘ETH’’) session, the Exchange currently waives ETH Trading Permit and Bandwidth Packet fees for one (1) of each initial Trading Permits and one (1) of each initial Bandwidth Packet, per affiliated TPH. The Exchange notes that waiver is set to expire June 30, 2017. The Exchange also waives fees through June 30, 2017 for a CMI and FIX login ID if the CMI and/or FIX login ID is related to a waived ETH Trading Permit and/or waived Bandwidth packet. In order to continue to promote trading during ETH, the Exchange wishes to extend these waivers through December 31, 2017. RLG, RLV, RUI, AWDE, FTEM, FXTM and UKXM Transaction Fees Waiver The Exchange was recently authorized to list options on seven FTSE Russell Indexes (i.e., Russell 1000 Growth Index (‘‘RLG’’), Russell 1000 3 The Exchange initially filed the proposed fee change on June 29, 2017 (SR–CBOE–2017–053). On July 11, 2017, the Exchange withdrew that filing and submitted this filing. U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00089 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change Sfmt 4703 E:\FR\FM\25JYN1.SGM 25JYN1 Federal Register / Vol. 82, No. 141 / Tuesday, July 25, 2017 / Notices Value Index (‘‘RLV’’), Russell 1000 Index (‘‘RUI’’), FTSE Developed Europe Index (‘‘AWDE’’), FTSE Emerging Markets Index (‘‘FTEM’’), China 50 Index ‘‘(FXTM’’) and FTSE 100 Index (‘‘UKXM’’)). In order to promote and encourage trading of these products, the Exchange currently waives all transaction fees (including the Floor Brokerage Fee, Index License Surcharge and CFLEX Surcharge Fee) for each of these products. This waiver however is set to expire June 30, 2017. In order to continue to promote trading of these options classes, the Exchange proposes to extend the fee waiver of through December 31, 2017. AWDE, FTEM, FXTM and UKXM DPM Payment Extension The Exchange currently offers a compensation plan to the Designated Primary Market-Maker(s) (‘‘DPM(s)’’) appointed in AWDE, FTEM, FXTM or UKXM to offset the initial DPM costs. Specifically, the Fees Schedule provides that DPM(s) appointed for an entire month in these classes will receive a payment of $7,500 per class per month through June 30, 2017. The Exchange notes that DPMs appointed in these products still have ongoing costs, which the Exchange desires to continue to help offset. As such, the Exchange proposes to extend the DPM payment plan through December 31, 2017. mstockstill on DSK30JT082PROD with NOTICES FLEX Asian and Cliquet Flex Trader Incentive Program Extension By way of background, a FLEX Trader is 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 Broad-Based Index Options with Asian or Cliquet style settlement (‘‘Exotics’’) each month (‘‘Incentive Program’’). The Fees Schedule provides that the Incentive Program is set to expire either by June 30, 2017 or until total average daily volume in Exotics exceeds 15,000 contracts for three consecutive months, whichever comes first. The Exchange notes that total average daily volume in Exotics has not yet exceeded 15,000 contracts for three consecutive months. In order to continue to incentivize FLEX Traders to provide liquidity in FLEX Asian and Cliquet options, the Exchange proposes to extend the program to December 31, 2017 or until total average daily volume in Exotics exceeds 15,000 contracts for three consecutive months, whichever comes first. VerDate Sep<11>2014 19:30 Jul 24, 2017 Jkt 241001 RVX DPM Payment The Exchange proposes to offer a compensation plan for the DPM appointed in CBOE Russell 2000 Volatility Index (‘‘RVX’’) to offset associated DPM costs, similar to the compensation plan offered to DPM(s) appointed in AWDE, FTEM, FXTM or UKXM. Specifically, the Exchange proposes to provide that the DPM appointed for an entire month in RVX will receive a payment of $8,500 through December 31, 2017. The Exchange notes that a DPM appointed in this product has ongoing costs, which the Exchange desires to continue to help offset so that the DPM may continue to meet its obligations. Volume Incentive Program The Exchange also proposes to amend its Volume Incentive Program (‘‘VIP’’). By way of background, under VIP, the Exchange credits each Trading Permit Holder (‘‘TPH’’) the per contract amount set forth in the VIP table resulting from each public customer (‘‘C’’ origin code) order transmitted by that TPH (with certain exceptions) which is executed electronically on the Exchange, provided the TPH meets certain volume thresholds in a month.4 The Exchange proposes to provide that Professional Customers and Voluntary Professionals (‘‘Professional Customers’’) (origin code ‘‘W’’), Broker-Dealers (origin code ‘‘B’’) and Joint Back-Offices (‘‘JBO’’) (origin code ‘‘J’’) orders would also count towards the qualifying volume thresholds. The Exchange believes the inclusion of Professional Customer, Broker-Dealer and JBO orders in the qualifying thresholds will encourage TPHs to execute more Professional Customer, Broker-Dealer and JBO orders. The Exchange notes however, that while these orders would now count towards the qualifying volume thresholds, the Exchange would not pay credits to the executing TPH for these orders (i.e., only Customer orders (origin code ‘‘C’’) would continue to receive the credits under the program). Footnote 25 Clarification The Exchange proposes to clarify an inadvertent omission in Footnote 25 of the Fees Schedule. By way of background, Footnote 25, which governs rebates on Floor Broker Trading Permits, currently provides that any Floor Broker that executes a certain average of customer open-outcry contracts per day over the course of a calendar month in all underlying symbols excluding Underlying Symbol List A (except RLG, 4 See CBOE Fees Schedule, Volume Incentive Program. PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 34561 RLV, RUI, AWDE, FTEM, FXTM and UKXM), DJX, XSP, XSPAM and subcabinet trades (‘‘Qualifying Symbols’’), will receive a rebate on that TPH’s Floor Broker Trading Permit fees. The Exchange notes that it inadvertently failed to include a reference to ‘‘subcabinet trades’’ in the last sentence of the footnote (i.e., when referencing which options are excluded from the qualifying thresholds).5 The Exchange notes that subcabinet trades should have been included in this section and proposes to add it to avoid potential confusion. Removal of SPXPM The Exchange lastly proposes to eliminate references to ‘‘SPXPM’’ from the Fees Schedule. Particularly, the Exchange recently moved P.M.-settled S&P 500 Index options expiring on the third-Friday of the month (‘‘thirdFriday’’), previously listed in a separate class and trading under the symbol ‘‘SPXPM’’, to the SPX class which includes the weekly SPXW. In connection with the move, the Exchange has changed the trading symbol for these options from ‘‘SPXPM’’ to ‘‘SPXW.’’ As such, the Exchange proposes to delete from the Fees Schedule references to SPXPM, as such references are obsolete. 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.6 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 7 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 5 Specifically, the last sentence currently reads: ‘‘For purposes of determining the rebate, the qualifying volume of all Floor Broker Trading Permit Holders affiliated with a single TPH organization will be aggregated, and, if such total meets or exceeds the customer and/or professional customer and voluntary professional open-outcry contracts per day thresholds in all underlying symbols excluding Underlying Symbol List A (except RLG, RLV, RUI, AWDE, FTEM, FXTM and UKXM)(34), DJX, XSP and XSPAM that TPH organization will receive a single rebate, regardless of the number of Floor Broker Trading Permits affiliated with that TPH organization.’’ 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(5). E:\FR\FM\25JYN1.SGM 25JYN1 mstockstill on DSK30JT082PROD with NOTICES 34562 Federal Register / Vol. 82, No. 141 / Tuesday, July 25, 2017 / Notices 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,8 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 it’s appropriate to continue to waive the VIX Index License Surcharge for Clearing Trading Permit Holder Proprietary VIX orders that have a premium of $0.10 or lower and have series with an expiration of 7 calendar days or less because the Exchange wants to continue encouraging Firms to roll and close over positions close to expiration at low premium levels. Particularly, the Exchange believes it’s reasonable to waive the entire $0.10 per contract surcharge because without the waiver of the surcharge, firms are less likely to engage in these transactions, as opposed to other VIX transactions, due to the associated transaction costs. The Exchange believes it’s equitable and not unfairly discriminatory to limit the waiver to Clearing Trading Permit Holder Proprietary orders because they contribute capital to facilitate the execution of VIX customer orders with a premium of $0.10 or lower and series with an expiration of 7 calendar days or less. Finally, the Exchange believes it’s reasonable, equitable and not unfairly discriminatory to provide that the surcharge will be waived through December 2017, as it gives the Exchange additional time to evaluate if the waiver is continuing to have the desired effect of encouraging these transactions. The Exchange believes extending the waiver of ETH Trading Permit and Bandwidth Packet fees for one of each type of Trading Permit and Bandwidth Packet, per affiliated TPH through December 2017 is reasonable, equitable and not unfairly discriminatory, because the respective fees are being waived in their entirety, which promotes and encourages trading during the ETH session and applies to all ETH TPHs. The Exchange believes it’s also reasonable, equitable and not unfairly discriminatory to waive fees for Login IDs related to waived Trading Permits and/or Bandwidth Packets because the respective fees are being waived in their entirety, which promotes and encourages ongoing participation in ETH and applies to all ETH TPHs. 8 15 U.S.C. 78f(b)(4). VerDate Sep<11>2014 19:30 Jul 24, 2017 Jkt 241001 The Exchange believes it is appropriate to extend the waiver of all transaction fees for RLG, RLV, RUI, AWDE, FTEM, FXTM and UKXM transactions, including the Floor Brokerage fee, the License Index Surcharge and CFLEX Surcharge Fee. Particularly, it is reasonable because TPHs will not be assessed fees for these transactions which promotes and encourages trading of these products which are still relatively new. The Exchange believes the proposed change is equitable and not unfairly discriminatory because it applies to all TPHs. The Exchange believes that the compensation plan for DPM(s) appointed in AWDE, FTEM, FXTM and UKXM is reasonable because it offsets the DPM(s)’ ongoing costs. The Exchange believes it’s equitable and not unfairly discriminatory to extend the compensation plan to the DPM(s) appointed in AWDE, FTEM, FXTM or UKXM because these DPMs have ongoing DPM costs related to these products and the Exchange wants to continue to incentivize the DPMs to continue to serve as DPMs in these products. The Exchange believes extending the FLEX Asian and Cliquet Flex Trading Incentive Program is reasonable, equitable and not unfairly discriminatory because the Exchange believes the amount of the current incentives provided to FLEX Traders should encourage the Flex Traders to trade FLEX Asian and Cliquet options, which should result in a more robust price discovery process that will result in better execution prices for customers. In addition, the proposed change applies equally to all FLEX Traders. The Exchange believes that the proposed subsidy to the DPM appointed in RVX is reasonable because it offsets the DPM’s ongoing DPM costs. The Exchange notes that the DPM provides a crucial role in providing quotes and the opportunity for market participants to trade RVX, which can lead to increased volume, thereby providing a robust market. Additionally, the Exchange believes the proposed change is equitable and not unfairly discriminatory because the DPM in RVX incurs costs as part of being a DPM. Moreover, as noted above, a similar compensation plan is already in place for DPM(s) of AWDE, FTEM, FXTM and UKXM. While the amount of the proposed subsidy for RVX is larger than the amount provided to the DPM(s) of AWDE, FTEM, FXTM, UKXM, the Exchange notes that it is more difficult to quote a volatility index, as opposed to a cash index. Additionally, the PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 Exchange notes that there is currently more volume in RVX than the products mentioned above and as such, the Exchange wishes to ensure the DPM continues to provide liquid and active markets in the product to encourage its continued growth. The Exchange believes that permitting Professional Customer, Broker-Dealer and JBO orders to count towards the qualifying volume thresholds for VIP is reasonable because it will allow TPHs to more easily reach qualifying volume thresholds (and thereby receive more credits). The Exchange believes the proposed change is equitable and not unfairly discriminatory because it applies to TPHs equally. The Exchange also notes that, while only certain orders would count towards the qualifying thresholds, Professional Customers, Broker-Dealers and JBOs are similar to Customers in that these market participants’ orders are primarily executed by an agent and VIP is an incentive program for agency trading. Additionally, an increase in Customer, Professional Customer, Broker-Dealer and JBO order flow would bring greater volume and liquidity, which benefits all market participants by providing more trading opportunities and tighter spreads. Indeed, the Exchange notes that incentive programs based on aggregate volume of certain market participants already exist elsewhere within the industry.9 Additionally, the Exchange believes it’s reasonable, equitable and not unfairly discriminatory to only apply credits to Customer orders (i.e., ‘‘C’’ origin code) because Customer order flow enhances liquidity on the Exchange for the benefit of all market participants. Specifically, Customer volume is important because it continues to attract liquidity to the Exchange, which benefits all market participants by providing more trading opportunities, which attracts MarketMakers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Moreover, the options industry has a long history of providing preferential pricing to Customers. Lastly, while the proposed rule change may affect the Affiliate Volume Plan (‘‘AVP’’), the Exchange believes the proposed change is still appropriate for the reasons set forth in filings related to AVP.10 9 See e.g., NASDAQ Stock Market Rules, Chapter XV, Options Pricings, Sec. 2 Options Market—Fees and Rebates, Tiers 1–5 and Tier 8. 10 See Securities Exchange Act Release No. 76923 (January 15, 2016), 81 FR 3841 (January 22, 2016) E:\FR\FM\25JYN1.SGM 25JYN1 Federal Register / Vol. 82, No. 141 / Tuesday, July 25, 2017 / Notices Lastly, the Exchange believes (i) eliminating references to SPXPM in the Fees Schedule and (ii) correcting an inadvertent failure to include a reference to ‘‘subcabinet’’ trades in Footnote 25 will help to avoid confusion, thereby removing impediments to and perfecting the mechanism of a free and open market and a national market system. Additionally, the Exchange notes that no substantive changes are being made by these particular proposed rule changes. mstockstill on DSK30JT082PROD with NOTICES B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule changes will impose any burden on competition that are not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that the proposed rule change will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because, while different fees and rebates are assessed to different market participants in some circumstances, these different market participants have different obligations and different circumstances as discussed above. For example, Clearing TPHs have clearing obligations that other market participants do not have and DPMs have quoting obligations that other market participants do not have. There is also a history in the options markets of providing preferential treatment to customers. Further, the proposed changes, are intended to encourage market participants to bring increased volume to the Exchange (which benefits all market participants), while still covering Exchange costs (including those associated with the upgrading and maintenance of Exchange systems). The Exchange does not believe that the proposed rule change will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed change only affects trading on CBOE. To the extent that the proposed change makes 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 11 and paragraph (f) of Rule 19b–4 12 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CBOE–2017–055 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–2017–055. 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 (http://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 (SR–CBOE–2016–002) and Securities Exchange Act Release No. 77926 (May 26, 2016), 81 FR 35421 (June 2, 2016) (SR–CBOE–2016–045). VerDate Sep<11>2014 19:30 Jul 24, 2017 Jkt 241001 PO 00000 11 15 12 17 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). Frm 00092 Fmt 4703 communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal offices of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CBOE– 2017–055, and should be submitted on or before August 15, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–15529 Filed 7–24–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold a closed meeting on Thursday, July 27, 2017 at 2 p.m. Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the closed meeting. Certain staff members who have an interest in the matters also may be present. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) and 17 CFR 200.402(a)(3), (a)(5), (a)(7), (a)(9)(ii) and (a)(10), permit consideration of the scheduled matters at the closed meeting. Commissioner Piwowar, as duty officer, voted to consider the items listed for the closed meeting in closed session. The subject matters of the closed meeting will be: Institution and settlement of injunctive actions; 13 17 Sfmt 4703 34563 E:\FR\FM\25JYN1.SGM CFR 200.30–3(a)(12). 25JYN1

Agencies

[Federal Register Volume 82, Number 141 (Tuesday, July 25, 2017)]
[Notices]
[Pages 34560-34563]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-15529]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81170; File No. SR-CBOE-2017-055]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Updates for the CBOE Fees Schedule

July 19, 2017.
    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 July 11, 2017, Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4..
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to make a number of changes to its Fees 
Schedule, effective immediately.
    The text of the proposed rule change is also available on the 
Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to make a number of changes to its Fees 
Schedule.\3\
---------------------------------------------------------------------------

    \3\ The Exchange initially filed the proposed fee change on June 
29, 2017 (SR-CBOE-2017-053). On July 11, 2017, the Exchange withdrew 
that filing and submitted this filing.
---------------------------------------------------------------------------

VIX License Index Surcharge Waiver
    The Exchange proposes to extend the current waiver of the VIX Index 
License Surcharge of $0.10 per contract for Clearing Trading Permit 
Holder Proprietary (``Firm'') (origin codes ``F'' or ``L'') VIX orders 
that have a premium of $0.10 or lower and have series with an 
expiration of seven (7) calendar days or less. The Exchange adopted the 
current waiver to reduce transaction costs on expiring, low-priced VIX 
options, which the Exchange believed would encourage Firms to seek to 
close and/or roll over such positions close to expiration at low 
premium levels, including facilitating customers to do so, in order to 
free up capital and encourage additional trading. The Exchange had 
proposed to waive the surcharge through June 30, 2017. The Exchange 
proposes to extend the waiver of the surcharge through December 31, 
2017, at which time the Exchange will reevaluate whether the waiver has 
continued to prompt Firms to close and roll over positions close to 
expiration at low premium levels.
Extended Trading Hour Fees Waiver
    In order to promote and encourage trading during the Extended 
Trading Hours (``ETH'') session, the Exchange currently waives ETH 
Trading Permit and Bandwidth Packet fees for one (1) of each initial 
Trading Permits and one (1) of each initial Bandwidth Packet, per 
affiliated TPH. The Exchange notes that waiver is set to expire June 
30, 2017. The Exchange also waives fees through June 30, 2017 for a CMI 
and FIX login ID if the CMI and/or FIX login ID is related to a waived 
ETH Trading Permit and/or waived Bandwidth packet. In order to continue 
to promote trading during ETH, the Exchange wishes to extend these 
waivers through December 31, 2017.
RLG, RLV, RUI, AWDE, FTEM, FXTM and UKXM Transaction Fees Waiver
    The Exchange was recently authorized to list options on seven FTSE 
Russell Indexes (i.e., Russell 1000 Growth Index (``RLG''), Russell 
1000

[[Page 34561]]

Value Index (``RLV''), Russell 1000 Index (``RUI''), FTSE Developed 
Europe Index (``AWDE''), FTSE Emerging Markets Index (``FTEM''), China 
50 Index ``(FXTM'') and FTSE 100 Index (``UKXM'')). In order to promote 
and encourage trading of these products, the Exchange currently waives 
all transaction fees (including the Floor Brokerage Fee, Index License 
Surcharge and CFLEX Surcharge Fee) for each of these products. This 
waiver however is set to expire June 30, 2017. In order to continue to 
promote trading of these options classes, the Exchange proposes to 
extend the fee waiver of through December 31, 2017.
AWDE, FTEM, FXTM and UKXM DPM Payment Extension
    The Exchange currently offers a compensation plan to the Designated 
Primary Market-Maker(s) (``DPM(s)'') appointed in AWDE, FTEM, FXTM or 
UKXM to offset the initial DPM costs. Specifically, the Fees Schedule 
provides that DPM(s) appointed for an entire month in these classes 
will receive a payment of $7,500 per class per month through June 30, 
2017. The Exchange notes that DPMs appointed in these products still 
have ongoing costs, which the Exchange desires to continue to help 
offset. As such, the Exchange proposes to extend the DPM payment plan 
through December 31, 2017.
FLEX Asian and Cliquet Flex Trader Incentive Program Extension
    By way of background, a FLEX Trader is 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 Broad-Based Index Options 
with Asian or Cliquet style settlement (``Exotics'') each month 
(``Incentive Program''). The Fees Schedule provides that the Incentive 
Program is set to expire either by June 30, 2017 or until total average 
daily volume in Exotics exceeds 15,000 contracts for three consecutive 
months, whichever comes first. The Exchange notes that total average 
daily volume in Exotics has not yet exceeded 15,000 contracts for three 
consecutive months. In order to continue to incentivize FLEX Traders to 
provide liquidity in FLEX Asian and Cliquet options, the Exchange 
proposes to extend the program to December 31, 2017 or until total 
average daily volume in Exotics exceeds 15,000 contracts for three 
consecutive months, whichever comes first.
RVX DPM Payment
    The Exchange proposes to offer a compensation plan for the DPM 
appointed in CBOE Russell 2000 Volatility Index (``RVX'') to offset 
associated DPM costs, similar to the compensation plan offered to 
DPM(s) appointed in AWDE, FTEM, FXTM or UKXM. Specifically, the 
Exchange proposes to provide that the DPM appointed for an entire month 
in RVX will receive a payment of $8,500 through December 31, 2017. The 
Exchange notes that a DPM appointed in this product has ongoing costs, 
which the Exchange desires to continue to help offset so that the DPM 
may continue to meet its obligations.
Volume Incentive Program
    The Exchange also proposes to amend its Volume Incentive Program 
(``VIP''). By way of background, under VIP, the Exchange credits each 
Trading Permit Holder (``TPH'') the per contract amount set forth in 
the VIP table resulting from each public customer (``C'' origin code) 
order transmitted by that TPH (with certain exceptions) which is 
executed electronically on the Exchange, provided the TPH meets certain 
volume thresholds in a month.\4\ The Exchange proposes to provide that 
Professional Customers and Voluntary Professionals (``Professional 
Customers'') (origin code ``W''), Broker-Dealers (origin code ``B'') 
and Joint Back-Offices (``JBO'') (origin code ``J'') orders would also 
count towards the qualifying volume thresholds. The Exchange believes 
the inclusion of Professional Customer, Broker-Dealer and JBO orders in 
the qualifying thresholds will encourage TPHs to execute more 
Professional Customer, Broker-Dealer and JBO orders. The Exchange notes 
however, that while these orders would now count towards the qualifying 
volume thresholds, the Exchange would not pay credits to the executing 
TPH for these orders (i.e., only Customer orders (origin code ``C'') 
would continue to receive the credits under the program).
---------------------------------------------------------------------------

    \4\ See CBOE Fees Schedule, Volume Incentive Program.
---------------------------------------------------------------------------

Footnote 25 Clarification
    The Exchange proposes to clarify an inadvertent omission in 
Footnote 25 of the Fees Schedule. By way of background, Footnote 25, 
which governs rebates on Floor Broker Trading Permits, currently 
provides that any Floor Broker that executes a certain average of 
customer open-outcry contracts per day over the course of a calendar 
month in all underlying symbols excluding Underlying Symbol List A 
(except RLG, RLV, RUI, AWDE, FTEM, FXTM and UKXM), DJX, XSP, XSPAM and 
subcabinet trades (``Qualifying Symbols''), will receive a rebate on 
that TPH's Floor Broker Trading Permit fees. The Exchange notes that it 
inadvertently failed to include a reference to ``subcabinet trades'' in 
the last sentence of the footnote (i.e., when referencing which options 
are excluded from the qualifying thresholds).\5\ The Exchange notes 
that subcabinet trades should have been included in this section and 
proposes to add it to avoid potential confusion.
---------------------------------------------------------------------------

    \5\ Specifically, the last sentence currently reads: ``For 
purposes of determining the rebate, the qualifying volume of all 
Floor Broker Trading Permit Holders affiliated with a single TPH 
organization will be aggregated, and, if such total meets or exceeds 
the customer and/or professional customer and voluntary professional 
open-outcry contracts per day thresholds in all underlying symbols 
excluding Underlying Symbol List A (except RLG, RLV, RUI, AWDE, 
FTEM, FXTM and UKXM)(34), DJX, XSP and XSPAM that TPH organization 
will receive a single rebate, regardless of the number of Floor 
Broker Trading Permits affiliated with that TPH organization.''
---------------------------------------------------------------------------

Removal of SPXPM
    The Exchange lastly proposes to eliminate references to ``SPXPM'' 
from the Fees Schedule. Particularly, the Exchange recently moved P.M.-
settled S&P 500 Index options expiring on the third-Friday of the month 
(``third-Friday''), previously listed in a separate class and trading 
under the symbol ``SPXPM'', to the SPX class which includes the weekly 
SPXW. In connection with the move, the Exchange has changed the trading 
symbol for these options from ``SPXPM'' to ``SPXW.'' As such, the 
Exchange proposes to delete from the Fees Schedule references to SPXPM, 
as such references are obsolete.
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.\6\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \7\ 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

[[Page 34562]]

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,\8\ 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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes it's appropriate to continue to waive the VIX 
Index License Surcharge for Clearing Trading Permit Holder Proprietary 
VIX orders that have a premium of $0.10 or lower and have series with 
an expiration of 7 calendar days or less because the Exchange wants to 
continue encouraging Firms to roll and close over positions close to 
expiration at low premium levels. Particularly, the Exchange believes 
it's reasonable to waive the entire $0.10 per contract surcharge 
because without the waiver of the surcharge, firms are less likely to 
engage in these transactions, as opposed to other VIX transactions, due 
to the associated transaction costs. The Exchange believes it's 
equitable and not unfairly discriminatory to limit the waiver to 
Clearing Trading Permit Holder Proprietary orders because they 
contribute capital to facilitate the execution of VIX customer orders 
with a premium of $0.10 or lower and series with an expiration of 7 
calendar days or less. Finally, the Exchange believes it's reasonable, 
equitable and not unfairly discriminatory to provide that the surcharge 
will be waived through December 2017, as it gives the Exchange 
additional time to evaluate if the waiver is continuing to have the 
desired effect of encouraging these transactions.
    The Exchange believes extending the waiver of ETH Trading Permit 
and Bandwidth Packet fees for one of each type of Trading Permit and 
Bandwidth Packet, per affiliated TPH through December 2017 is 
reasonable, equitable and not unfairly discriminatory, because the 
respective fees are being waived in their entirety, which promotes and 
encourages trading during the ETH session and applies to all ETH TPHs. 
The Exchange believes it's also reasonable, equitable and not unfairly 
discriminatory to waive fees for Login IDs related to waived Trading 
Permits and/or Bandwidth Packets because the respective fees are being 
waived in their entirety, which promotes and encourages ongoing 
participation in ETH and applies to all ETH TPHs.
    The Exchange believes it is appropriate to extend the waiver of all 
transaction fees for RLG, RLV, RUI, AWDE, FTEM, FXTM and UKXM 
transactions, including the Floor Brokerage fee, the License Index 
Surcharge and CFLEX Surcharge Fee. Particularly, it is reasonable 
because TPHs will not be assessed fees for these transactions which 
promotes and encourages trading of these products which are still 
relatively new. The Exchange believes the proposed change is equitable 
and not unfairly discriminatory because it applies to all TPHs.
    The Exchange believes that the compensation plan for DPM(s) 
appointed in AWDE, FTEM, FXTM and UKXM is reasonable because it offsets 
the DPM(s)' ongoing costs. The Exchange believes it's equitable and not 
unfairly discriminatory to extend the compensation plan to the DPM(s) 
appointed in AWDE, FTEM, FXTM or UKXM because these DPMs have ongoing 
DPM costs related to these products and the Exchange wants to continue 
to incentivize the DPMs to continue to serve as DPMs in these products.
    The Exchange believes extending the FLEX Asian and Cliquet Flex 
Trading Incentive Program is reasonable, equitable and not unfairly 
discriminatory because the Exchange believes the amount of the current 
incentives provided to FLEX Traders should encourage the Flex Traders 
to trade FLEX Asian and Cliquet options, which should result in a more 
robust price discovery process that will result in better execution 
prices for customers. In addition, the proposed change applies equally 
to all FLEX Traders.
    The Exchange believes that the proposed subsidy to the DPM 
appointed in RVX is reasonable because it offsets the DPM's ongoing DPM 
costs. The Exchange notes that the DPM provides a crucial role in 
providing quotes and the opportunity for market participants to trade 
RVX, which can lead to increased volume, thereby providing a robust 
market. Additionally, the Exchange believes the proposed change is 
equitable and not unfairly discriminatory because the DPM in RVX incurs 
costs as part of being a DPM. Moreover, as noted above, a similar 
compensation plan is already in place for DPM(s) of AWDE, FTEM, FXTM 
and UKXM. While the amount of the proposed subsidy for RVX is larger 
than the amount provided to the DPM(s) of AWDE, FTEM, FXTM, UKXM, the 
Exchange notes that it is more difficult to quote a volatility index, 
as opposed to a cash index. Additionally, the Exchange notes that there 
is currently more volume in RVX than the products mentioned above and 
as such, the Exchange wishes to ensure the DPM continues to provide 
liquid and active markets in the product to encourage its continued 
growth.
    The Exchange believes that permitting Professional Customer, 
Broker-Dealer and JBO orders to count towards the qualifying volume 
thresholds for VIP is reasonable because it will allow TPHs to more 
easily reach qualifying volume thresholds (and thereby receive more 
credits). The Exchange believes the proposed change is equitable and 
not unfairly discriminatory because it applies to TPHs equally. The 
Exchange also notes that, while only certain orders would count towards 
the qualifying thresholds, Professional Customers, Broker-Dealers and 
JBOs are similar to Customers in that these market participants' orders 
are primarily executed by an agent and VIP is an incentive program for 
agency trading. Additionally, an increase in Customer, Professional 
Customer, Broker-Dealer and JBO order flow would bring greater volume 
and liquidity, which benefits all market participants by providing more 
trading opportunities and tighter spreads. Indeed, the Exchange notes 
that incentive programs based on aggregate volume of certain market 
participants already exist elsewhere within the industry.\9\ 
Additionally, the Exchange believes it's reasonable, equitable and not 
unfairly discriminatory to only apply credits to Customer orders (i.e., 
``C'' origin code) because Customer order flow enhances liquidity on 
the Exchange for the benefit of all market participants. Specifically, 
Customer volume is important because it continues to attract liquidity 
to the Exchange, which benefits all market participants by providing 
more trading opportunities, which attracts Market-Makers. An increase 
in the activity of these market participants in turn facilitates 
tighter spreads, which may cause an additional corresponding increase 
in order flow from other market participants. Moreover, the options 
industry has a long history of providing preferential pricing to 
Customers. Lastly, while the proposed rule change may affect the 
Affiliate Volume Plan (``AVP''), the Exchange believes the proposed 
change is still appropriate for the reasons set forth in filings 
related to AVP.\10\
---------------------------------------------------------------------------

    \9\ See e.g., NASDAQ Stock Market Rules, Chapter XV, Options 
Pricings, Sec. 2 Options Market--Fees and Rebates, Tiers 1-5 and 
Tier 8.
    \10\ See Securities Exchange Act Release No. 76923 (January 15, 
2016), 81 FR 3841 (January 22, 2016) (SR-CBOE-2016-002) and 
Securities Exchange Act Release No. 77926 (May 26, 2016), 81 FR 
35421 (June 2, 2016) (SR-CBOE-2016-045).

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[[Page 34563]]

    Lastly, the Exchange believes (i) eliminating references to SPXPM 
in the Fees Schedule and (ii) correcting an inadvertent failure to 
include a reference to ``subcabinet'' trades in Footnote 25 will help 
to avoid confusion, thereby removing impediments to and perfecting the 
mechanism of a free and open market and a national market system. 
Additionally, the Exchange notes that no substantive changes are being 
made by these particular proposed rule changes.

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

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition that are not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe that the proposed rule change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because, while different fees 
and rebates are assessed to different market participants in some 
circumstances, these different market participants have different 
obligations and different circumstances as discussed above. For 
example, Clearing TPHs have clearing obligations that other market 
participants do not have and DPMs have quoting obligations that other 
market participants do not have. There is also a history in the options 
markets of providing preferential treatment to customers. Further, the 
proposed changes, are intended to encourage market participants to 
bring increased volume to the Exchange (which benefits all market 
participants), while still covering Exchange costs (including those 
associated with the upgrading and maintenance of Exchange systems). The 
Exchange does not believe that the proposed rule change will impose any 
burden on intermarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act because the proposed change 
only affects trading on CBOE. To the extent that the proposed change 
makes 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 \11\ and paragraph (f) of Rule 19b-4 \12\ 
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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2017-055 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-2017-055. 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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal offices of the Exchange. 
All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-CBOE-2017-055, 
and should be submitted on or before August 15, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-15529 Filed 7-24-17; 8:45 am]
 BILLING CODE 8011-01-P