Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fees Schedule, 3824-3834 [2018-01367]
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Federal Register / Vol. 83, No. 18 / Friday, January 26, 2018 / Notices
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 website 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
filings will also be available for
inspection and copying at the principal
office of ICE Clear Credit and on ICE
Clear Credit’s website at https://
www.theice.com/clear-credit/regulation.
All comments received will be posted
without change. Persons submitting
comments are cautioned that we do not
redact or edit personal identifying
information from comment submissions.
You should submit only information
that you wish to make available
publicly. All submissions should refer
to File Number SR–ICC–2018–001 and
should be submitted on or before
February 16, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–01357 Filed 1–25–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting; Cancellation
FEDERAL REGISTER CITATION OF PREVIOUS
ANNOUNCEMENT: 83 FR 3239, January 23,
2018
PREVIOUSLY ANNOUNCED TIME AND DATE OF
THE MEETING: Wednesday, January 24,
2018 at 11:00 a.m.
The Closed
Meeting scheduled for Wednesday,
January 24, 2018 at 11:00 a.m., has been
cancelled.
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed, please contact
Brent J. Fields of the Office of the
Secretary at (202) 551–5400.
CHANGES IN THE MEETING:
Dated: January 23, 2018.
Brent J. Fields,
Secretary.
[FR Doc. 2018–01550 Filed 1–24–18; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82553; File No. SR–CBOE–
2018–007]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the Fees
Schedule
January 19, 2018.
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/CBOELegalRegulatory
Home.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
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January
19, 2018, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) 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 Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Fees Schedule. The text of the proposed
rule change is provided in Exhibit 5.
The Exchange proposes to make a
number of changes to its Fees
Schedule.3
Liquidity Provider Sliding Scale
Under the Liquidity Provider Sliding
Scale (‘‘LP Sliding Scale’’), a Liquidity
Provider’s (Cboe Options MarketMakers, DPMs and LMMs) standard percontract transaction fees for all products
except Underlying Symbol List A 4 are
reduced based upon the Liquidity
Provider (‘‘LP’’) reaching certain
contract volume thresholds in a month.5
The Exchange proposes to adjust the
volume thresholds. Specifically, the
Exchange proposes to adjust Tiers 2
through 5. Tier 1 remains unchanged
and there are no changes to any of the
LP Sliding Scale rates. The proposed
changes are as follows:
Percentage thresholds of National Market-Maker Contract
Volume excluding underlying Symbol List A
Tier
daltland on DSKBBV9HB2PROD with NOTICES
Current
1
2
3
4
5
...............................................................
...............................................................
...............................................................
...............................................................
...............................................................
15 17
0.00%–0.05% ..........................................
Above 0.05%–0.70% ...............................
Above 0.70%–1.40% ...............................
Above 1.40%–2.00% ...............................
Above 2.00% ...........................................
No change ...............................................
Above 0.05%–0.80% ...............................
Above 0.80%–1.50% ...............................
Above 1.50%–2.25% ...............................
Above 2.25% ...........................................
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The Exchange initially filed the proposed fee
changes on January 2, 2018 (SR–CBOE–2018–001).
1 15
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Rate
Proposed
On business date January 19, 2018, the Exchange
withdrew that filing and submitted this filing.
4 As of January 19, 2018, Underlying Symbol List
A includes Underlying Symbol List A consists of
OEX, XEO, RUT, RLG, RLV, RUI, AWDE, FTEM,
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$0.23
0.17
0.10
0.05
0.03
FXTM, UKXM, SPX (includes SPXw), VIX,
VOLATILITY INDEXES and binary options.
5 See Cboe Options Fees Schedule, Liquidity
Provider Sliding Scale.
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The purpose of this change is to
adjust for the Exchange’s market share
gains, which the Exchange has an
interest in maintaining, while
continuing to offer an incremental
incentive for LPs to strive for the highest
tier level.
LP Sliding Scale Adjustment Table
The Exchange proposes to amend the
LP Sliding Scale Adjustment Table
which provides that Taker fees be
applied to ‘‘Taker’’ volume and a Maker
rebate be applied to ‘‘Maker’’ volume in
addition to the transaction fees assessed
under the LP Sliding Scale. The amount
of the Taker fee (or Maker rebate) is
determined by the LP’s percentage of
volume from the previous month that
was Maker (‘‘Make Rate’’).6 The
Exchange proposes to adjust the
Performance Tiers (determined by the
Make Rate), fees and rebates.
Specifically the Exchange proposes to
amend the volume thresholds for the
make rate as follows:
Make rate (% based on prior month)
Tier
Current
1
2
3
4
5
.........................................................................................................................................
.........................................................................................................................................
.........................................................................................................................................
.........................................................................................................................................
.........................................................................................................................................
Proposed
0%–50% ...........................
Above 50%–75% ..............
Above 75%–85% ..............
Above 85%–90% ..............
Above 90% .......................
No change.
Above 50%–60%.
Above 60%–75%.
Above 75%–90%.
No change.
The Exchange also proposes to amend
the Maker rebates and Taker fees as
follows:
Maker rebate
Tier
Penny classes
Current
1
2
3
4
5
Taker fee
.....................
.....................
.....................
.....................
.....................
Non-Penny
Classes
Proposed
($0.00)
(0.00)
(0.00)
(0.00)
(0.01)
No change ........
No change ........
(0.01) .................
(0.02) .................
(0.03) .................
The Exchange notes that Taker fees
for Penny classes will continue to be
subject to a cap of 0.50 per contract,
which includes the LP Sliding Scale
transaction fee, Adjustment Table fee
and Marketing Fee.7 The Exchange
notes that the proposed changes to the
Adjustment Table are designed to
encourage LPs to provide and post
liquidity to the Exchange and continue
to encourage market participation and
price improvement.
No
No
No
No
No
change
change
change
change
change
Penny classes
Current
........
........
........
........
........
$0.04
0.03
0.02
0.01
0.00
Proposed
transaction fees generated from a
transaction on the HAL system in a
penny pilot class, provided that at least
70% of the Market-Maker’s quotes in
that class (excluding quotes in LEAPS
series) in the prior calendar month were
on one side of the NBBO. The Exchange
no longer desires to provide this
incentive and therefore proposes to
eliminate the HAL Step-Up Rebate from
the Fees Schedule.
daltland on DSKBBV9HB2PROD with NOTICES
Volume Incentive Program
Under the Volume Incentive Program
(‘‘VIP’’), the Exchange credits each
Trading Permit Holder (‘‘TPH’’) the per
contract amount set forth in the VIP
6 See Cboe Options Fees Schedule, Liquidity
Provider Sliding Scale Adjustment Table.
7 For example, if an LP is assessed the Marketing
Fee on a given transaction (0.25 per contract) for
which it was a Taker in a Penny class, and that LP
falls in Tier 1 of the LP Sliding Scale ($0.23 per
contract) and Performance Tier 1 of the Adjustment
Table ($0.05 per contract), the LP would be assessed
$0.50 per contract for the transaction, instead of
$0.53 per contract.
8 See Cboe Options Fees Schedule, Volume
Incentive Program.
20:14 Jan 25, 2018
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Current
$0.05 .................
$0.04 .................
$0.03 .................
$0.00 .................
No change ........
Hybrid Agency Liaison (‘‘HAL’’) StepUp Rebate
The Exchange currently rebates a
Market-Maker $0.05 per contract against
VerDate Sep<11>2014
Non-Penny classes
$0.08
0.06
0.04
0.02
0.00
Proposed
$0.10.
$0.07.
$0.05.
$0.04.
No change.
table for Public Customer orders (‘‘C’’
origin code) transmitted by that TPH
(with certain exceptions) which is
executed electronically on the
Exchange, provided the TPH meets
certain volume thresholds in a month.8
The Exchange proposes to make a few
amendments to VIP. First, the Exchange
proposes to amend the volume
thresholds for Tiers 2, 3 and 4 and also
add a Tier 5.9 The changes are as
follows:
9 The Exchange notes that the Tier 5 rates for
Simple and Complex Non-AIM will be the same as
the rates for Tier 4 for Simple and Complex NonAIM.
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Percentage thresholds of National Customer Volume
in all underlying symbols excluding underlying Symbol
List A, DJX, MXEA, MXEF, MNX, NDX, XSP and
XSPAM
Tier
Current
1
2
3
4
5
.........................................................................................................................................
.........................................................................................................................................
.........................................................................................................................................
.........................................................................................................................................
.........................................................................................................................................
Proposed
0.00%–0.75% ...................
Above 0.75% to 1.80% ....
Above 1.80% to 3.00% ....
Above 3.00% ....................
N/A ....................................
No change.
Above 0.75% to 2.00%.
Above 2.00% to 3.00%.
Above 3.00% to 4.00%.
Above 4.00%.
The Exchange also proposes to reduce
the per contract credits for AIM orders.
The proposed changes are as follows:
Per contract credit for AIM orders
Simple
Tier
daltland on DSKBBV9HB2PROD with NOTICES
1
2
3
4
5
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
The purpose of these changes is to
adjust for current volume trends while
maintaining an incremental incentive
for TPH’s to strive for the highest tier
level. The Exchange does not believe it’s
necessary to maintain the existing
credits for AIM volume, but still seeks
to maintain an incremental incentive for
TPHs to strive for the highest tier level.
Lastly, the Exchange proposes to
provide that a TPH will only receive the
Complex credit rates for both its
Complex AIM and Non-AIM volume if
at least 40% of that TPH’s qualifying
VIP volume (in both AIM and Non-AIM)
in the previous month was comprised of
Simple volume. If the TPH’s previous
month’s volume does not meet the 40%
Simple volume threshold, then the
TPH’s Customer (C) Complex volume
will receive credits at the Simple rate
only (i.e., all volume, both Simple and
Complex, will receive credits at the
applicable Simple rate). The proposed
40% requirement will apply beginning
in February 2018 (i.e., the proposed
threshold will not affect January’s
credits. Rather, February 2018 volume
will be based on whether a TPH’s
volume in January 2018 was comprised
of at least 40% Simple volume).
Notwithstanding the higher credits
offered for Complex volume, the
Exchange believes the proposed change
will encourage TPHs to continue to send
both Simple and Complex volume to the
Exchange.
VerDate Sep<11>2014
21:50 Jan 25, 2018
Jkt 244001
Current
$0.00
0.09
0.11
0.14
N/A
No change .....
No change .....
0.10 ................
0.13 ................
0.14 ................
Market-Maker Affiliate Volume Plan
The Exchange proposes to amend its
Market-Maker Affiliate Volume Plan
(‘‘AVP’’). By way of background, under
AVP, if a TPH Affiliate 10 or Appointed
OFP 11 of a Market-Maker qualifies
under VIP, that Market-Maker will also
qualify for a discount on that MarketMaker’s LP Sliding Scale transaction
fees and Trading Permit fees. As noted
above, the Exchange proposes to add an
additional tier to VIP. As such, the
Exchange also proposes to add an
additional tier to AVP (Tier 5).
Particularly, Market-Makers will receive
a discount on transaction fees and
Trading Permit fees of 35% if their
Affiliate or Appointed OFP reach Tier 5
of VIP. The Exchange also proposes to
reduce the discount for reaching Tier 3
from 20% to 15%.
Electronic Transaction Fees for Clearing
Trading Permit Holder Proprietary
The Exchange proposes to increase
the transaction fees for electronic
executions for Clearing Trading Permit
Holder Proprietary (origin codes ‘‘F’’
and ‘‘L’’) orders in equity, ETF, ETN and
10 For purposes of AVP, ‘‘Affiliate’’ is defined as
having at least 75% common ownership between
the two entities as reflected on each entity’s Form
BD, Schedule A.
11 See Cboe Options Fees Schedule Footnote 23.
Particularly, a Market-Maker may designate an
Order Flow Provider (‘‘OFP’’) as its ‘‘Appointed
OFP’’ and an OFP may designate a Market-Maker
to be its ‘‘Appointed Market-Maker’’ for purposes of
qualifying for credits under AVP.
PO 00000
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Complex
Proposed
$0.00
0.20
0.23
0.24
N/A
Current
No change.
0.19.
0.22.
0.23.
0.24.
index options (excluding Underlying
Symbol List A) classes from $0.38 per
contract to $0.43 per contract in Penny
Classes and $0.65 per contract to $0.70
per contract in Non-Penny classes.12
The Exchange notes that this increase is
in line with the amounts assessed by
others exchanges for similar
transactions.13
Complex Surcharge
Currently, the Exchange assesses a
Complex Surcharge of $0.10 per
contract per side for non-customer
complex order executions that take
liquidity from the Complex Order Book
(‘‘COB’’) and auction responses in the
Complex Order Auction (‘‘COA’’) and
the Automated Improvement
Mechanism (‘‘AIM’’) in all classes
except Underlying Symbol List A.14 The
Exchange proposes to increase the
amount of the Complex Surcharge from
$0.10 per contract to $0.12 per contract.
12 The Exchange notes that it inadvertently did
not update the Clearing Trading Permit Holder
Proprietary transaction fee rates for electronic
executions for in the Clearing Trading Permit
Holder Fee Cap table in the Fees Schedule.
Currently, the rate is listed as $0.35 per contract.
The Exchange notes it is now updating the fee to
the proposed amounts of $0.43 for Penny Classes
and $0.70 for Non-Penny Classes.
13 See e.g., Nasdaq PHLX LLC Pricing Schedule,
Section II, Multiply Listed Options Fees. See also
NYSE American Options Fees Schedule, Section
I.A, Options Transaction Fees and Credits.
14 See Cboe Options Fees Schedule, Complex
Surcharge and Footnote 35 for more details
regarding the Complex Surcharge.
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The Exchange notes that it will continue
to cap noncustomer complex auction
responses in COA and AIM in Penny
classes at $0.50 per contract, which
includes the applicable transaction fee,
Complex Surcharge and Marketing Fee
(if applicable).15
AIM Contra
The Exchange proposes to increase
the AIM Contra Execution Fee for
Broker-Dealer, Firm, Joint Back-Office,
Non-TPH Market-Maker and
Professional/Voluntary Professional
orders from $0.05 to $0.07. The
Exchange notes that the proposed
amount of the fee is in line with the
amount assessed for similar transactions
at another exchange.16
ORS and CORS
The Exchange proposes to amend its
Order Routing Subsidy (ORS) and
Complex Order Routing Subsidy (CORS)
Programs (collectively ‘‘Programs’’). By
way of background, the ORS and CORS
Programs allow the Exchange to enter
into subsidy arrangements with any
TPH (each, a ‘‘Participating TPH’’) or
Non-TPH broker-dealer (each a
‘‘Participating Non-TPH’’) that meet
certain criteria and provide certain
order routing functionalities to other
TPHs, Non-TPHs and/or use such
functionalities themselves.17
Participants in the ORS Program receive
a payment for every executed contract
for simple orders routed to the Exchange
through their system and participants in
the CORS Program receive a payment
for every executed contract for complex
orders routed to the Exchange through
their system. Additionally, participants
whose total aggregate non-customer
ORS and CORS volume is greater than
0.40% of the total national volume
(excluding volume in options classes
included in Underlying Symbol List A,
DJX, MXEA, MXEF, XSP or XSPAM)
receive an additional payment of $0.07
per contract for all executed contracts
exceeding that threshold during a
calendar month. The Exchange proposes
to reduce the threshold required to
receive the additional $0.07 per contract
from 0.40% to 0.25%.
Liquidity Provider Sliding Scale for SPX
and SPXW
The Exchange proposes to amend its
sliding scale for LP transaction fees in
SPX and SPXW (‘‘SPX LP Sliding
Scale’’). Currently, LPs’ transaction fees
in SPX and SPXW are determined by
their average monthly contracts in SPX
and SPXW. The SPX LP Sliding Scale
currently provides for three tiers. The
Exchange proposes to add two
additional tiers, adjust the volume
thresholds, and amend the transaction
fees for each tier. The SPX LP Sliding
Scale will continue to provide
progressively lower rates if increased
volume thresholds in SPX (including
SPXW) options are attained during a
month. The changes to the SPX LP
Sliding Scale are as follows:
Volume thresholds
Rate
Tier
Current
1
2
3
4
5
......................................................
......................................................
......................................................
......................................................
......................................................
Proposed
0.00%–1.50% .................................
Above 1.01%–10.00% ...................
Above 10.00% ................................
N/A .................................................
N/A .................................................
0.00%–1.00% .................................
Above 1.00%–4.00% .....................
Above 4.00%–9.00% .....................
Above 9.00%–15.00% ...................
Above 15.00% ................................
The proposed changes to the SPX LP
Sliding Scale continue to provide
incremental incentives for LPs to reach
the highest tier level and encourage
trading of SPX options.
daltland on DSKBBV9HB2PROD with NOTICES
Proprietary Products Sliding Scale
The Proprietary Products Sliding
Scale (‘‘Proprietary Sliding Scale’’) table
provides that Clearing Trading Permit
Holder Proprietary transaction fees for
Clearing Trading Permit Holders and for
Non-Clearing Trading Permit Holder
Affiliates (‘‘Non-TPH Affiliates’’)
(collectively, ‘‘Clearing TPHs’’) in
Underlying Symbol List A are reduced
provided a Clearing TPH reaches certain
average daily volume (‘‘ADV’’)
thresholds in all underlying symbols
excluding Underlying Symbol List A on
the Exchange in a month. The Exchange
proposes to increase the rates set forth
in Tiers B2 and A1. Specifically, the
Exchange proposes to increase the rate
15 For example, a Market-Maker COA response in
a Penny class that is subject to the Marketing Fee
($0.25 per contract), the Liquidity Provider Sliding
Scale Tier 1 rate ($0.23 per contract) and Complex
Surcharge ($0.12 per contract), would only be
VerDate Sep<11>2014
20:14 Jan 25, 2018
Jkt 244001
in Tier B2 to $0.18 from $0.12 and in
Tier A1 to $0.04 from $0.02. The
purpose of increasing the transaction
Fee Per Contract rates (and thereby
reducing the amount of the discount
Clearing TPHs may receive on
proprietary products) is to moderate the
discount levels for these products in
view of their growth and performance.
Particularly, the Exchange does not
believe it’s necessary to maintain the
existing discounted rates for these tiers,
but still seeks to maintain an
incremental incentive for Clearing TPHs
to strive for the highest tier level.
Current
$0.25
0.23
0.21
N/A
N/A
Proposed
$0.28
0.26
0.24
0.22
0.20
Affiliates) proprietary orders to be
reduced provided a Clearing TPH
reaches certain proprietary VIX options
volume thresholds during a month. The
Exchange wishes to reduce the VIX fees
in Tier 2 of the VIX Sliding Scale from
$0.17 per contract to $0.15 per contract.
Supplemental VIX Discount
The Exchange proposes to amend its
Clearing Trading Permit Holder
Proprietary VIX Sliding Scale (the ‘‘VIX
Sliding Scale’’). The VIX Sliding Scale
allows VIX volatility index options
(‘‘VIX options’’) transaction fees for
Clearing TPH (including its Non-TPH
The Exchange proposes to amend its
Supplemental VIX Total Firm Volume
Discount (‘‘Supplemental VIX
Discount’’). The Supplemental VIX
Discount allows VIX options transaction
fees for Clearing TPHs (including its
Non-TPH Affiliates) proprietary orders
to be discounted provided a Clearing
TPH reaches certain VIX firm volume
percentage thresholds during a calendar
month. The Exchange wishes to lower
the volume thresholds in Tiers 1 and 2
as follows in order to reduce VIX
transaction fees and encourage greater
VIX trading activity:
charged $0.50 per contract, instead of $0.60 per
contract.
16 See PHLX Pricing Schedule, Section IV, PIXL
Pricing.
17 See Cboe Options Fees Schedule, ‘‘Order
Router Subsidy Program’’ and ‘‘Complex Order
Router Subsidy Program’’ tables for more details on
the ORS and CORS Programs.
VIX Sliding Scale
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VIX Firm volume percentage
Tier
Current
1
2
3
4
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
SPX Index License Surcharge
The Exchange proposes to increase
the Index License Surcharge Fee for SPX
(including SPXW) (the ‘‘SPX
Surcharge’’) from $0.14 per contract to
$0.16 per contract. The Exchange
licenses from S&P Dow Jones Indices
(‘‘SPDJI’’) (the ‘‘SPDJI License’’) the
right to offer an index option product
based on the S&P 500 index (that
product being SPX and other SPX-based
0.00%–10.99% ............
11.00%–12.99% ..........
13.00%–14.99% ..........
Above 14.99% .............
index option products). In order to
offset the costs of the SPDJI License, the
Exchange assesses the SPX Surcharge.
The Exchange therefore proposes to
increase the SPX Surcharge from $0.14
per contract to $0.16 per contract in
order to offset more of the costs
associated with the SPX license.
Floor Broker Trading Permit Fees
The Exchange proposes to amend its
Floor Broker Trading Permit Sliding
Proposed
0.00%–7.00%.
7.01%–11.00%.
11.01%–15.00%.
Above 15.00%.
Scale Program (‘‘FB TP Sliding Scale’’).
The FB TP Sliding Scale allows Floor
Brokers to pay reduced rates for their
Trading Permits if they commit in
advance to a specific tier that includes
a minimum number of eligible Floor
Broker Trading Permits for each
calendar year. The Exchange proposes
to amend the Permit thresholds as
follows:
Number of permits
Tiers
Current
1 .....................................
2 .....................................
Proposed
1 ............................................................................
2–7 ........................................................................
8 or more ..............................................................
No change ............................................................
2–5 ........................................................................
6 or more ..............................................................
The purpose of this change is to
reduce access costs and thereby
encourage greater Floor Broker access.
Floor Brokerage Fees Discount
The Exchange proposes to adopt a
new discount for floor brokerage fees.
Currently, floor brokerage fees for OEX,
XEO, RUT, RLG, RLV, RUI, AWDE,
FTEM, FXTM, UKXM and SPX Index
Options are $0.04 per contract (crossed
orders $0.02) and VIX and volatility
index options are $0.03 per contract
(crossed orders $0.015). The Exchange
wishes to implement a new floor
brokerage fees discount for Floor
Brokers (‘‘FB Discount’’). The FB
Discount will be based on a Floor
Broker’s total monthly Floor Broker
volume and will allow Floor Brokers to
reduce their floor brokerage fees
provided certain volume thresholds are
attained during a month. The Exchange
1
2
3
4
5
..................................................................................................
..................................................................................................
..................................................................................................
..................................................................................................
..................................................................................................
daltland on DSKBBV9HB2PROD with NOTICES
Cboe Command Connectivity Charges
Next, the Exchange proposes to
increase Cboe Command Connectivity
Fees. First, the Exchange proposes to
increase the monthly fee for a 1 gigabit
per second (‘‘Gbps’’) Network Access
Port from $750 per port to $1,500 per
18 Once a volume threshold is attained during the
month, the corresponding discount percentage will
apply to all qualifying contracts. For example, if a
Floor Broker has 2,000,000 contracts in qualifying
volume in a given month, all 2,000,000 contracts
will receive a discount of 4%.
VerDate Sep<11>2014
21:50 Jan 25, 2018
Jkt 244001
19 The Exchange also proposes to update the
example in the Notes section to reflect the increased
fee for the 1 Gbps Network Access Ports.
Frm 00156
% Discount on
all floor brokerage fees 18
0–250,000 ...................................................................................
250,001–1,500,000 .....................................................................
1,500,001–5,000,000 ..................................................................
5,000,001–7,500,000 ..................................................................
Above 7,500,000 ........................................................................
port.19 The Exchange also proposes to
increase the monthly fee for a 10 Gbps
Network Access Port from $4,000 per
port to $5,000 per port. The Exchange
has expended significant resources
setting up, providing and maintaining
this connectivity and the Exchange
desires to offset such costs. The
Exchange notes that such costs are also
increasing due to network infrastructure
upgrades. This fee amount is still within
PO 00000
$9,000
5,000
3,000
notes that only volume that is assessed
transaction fees will be considered
qualifying volume to meet the volume
thresholds (i.e., OEX, XEO, RUT, SPX,
SPXw, VIX and volatility index
options). The Exchange notes that
currently transaction fees for RLG, RLV,
RUI, AWDE, FTEM, FXTM, UKXM are
waived and as such will not count
towards the volume thresholds. The
FBD will be as follows:
Total monthly floor broker contracts traded in
qualifying classes
Tiers
Amount
per month
per permit
Fmt 4703
Sfmt 4703
0
3
4
5
6
the range of, and in some cases less
than, similar fees assessed by other
exchanges.20
Linkage
The Exchange proposes to increase
the Linkage fee (in addition to the
applicable away fees) for Customer
orders from $0.10 to $0.15. The Fees
Schedule currently provides that, in
20 See e.g., Cboe BZX Exchange, Inc., Options
Exchange Fees Schedule, Options Physical
Connection Fees, which lists connectivity fees of
$2,000 per month for 1 Gbps and $6,000 per month
for 10 Gbps.
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addition to the customary Cboe Options
execution charges, for each customer
order that is routed, in whole or in part,
to one or more exchanges in connection
with the Options Order Protection and
Locked/Crossed Market Plan referenced
in Rule 6.80, the Exchange shall pass
through the actual transaction fee
assessed by the exchange(s) to which
the order was routed. The Exchange
proposes to assess an additional $0.05
per contract for customer orders routed
away in addition to the applicable pass
through fees. The proposed increase
will help offset costs incurred by the
Exchange associated with routing
customer orders through linkage.
Indeed, the Exchange notes that it is,
and will still be, subsidizing the costs
associated with routing customer orders
through linkage. The Exchange notes
that the proposed amount of the fee is
also in line with the amount assessed at
other exchanges.21
Frequent Trader
The Exchange next proposes to amend
its Frequent Trader Program. By way of
background, the Frequent Trader
Program offers transaction fee rebates to
registered Customers, Professional
Customers and Voluntary Professionals
(origin codes ‘‘C’’ and ‘‘W’’)
(collectively, ‘‘Customers’’) that meet
certain volume thresholds in VIX, RUT,
and SPX (including SPXW) options
provided the Customer registers for the
program. The Exchange proposes to
amend the Frequent Trader Program to
increase the volume thresholds and
increase the rebates for RUT options.
Specifically, the proposed changes will
be as follows:
RUT
Tier
Fee rebate
Monthly contracts trade
Current
(%)
Current
1 ......................................................
2 ......................................................
3 ......................................................
Proposed
5,000–9,999 ...................................
10,000–12,999 ...............................
13,000 and above ..........................
10,000–24,999 ...............................
25,000–49,999 ...............................
50,000 and above ..........................
The Exchange believes the proposed
changes incentivizes the sending of RUT
Customer orders to the Exchange while
maintaining an incremental incentive
for Customers to strive for the highest
tier level.
daltland on DSKBBV9HB2PROD with NOTICES
VIX License Index Surcharge
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 December 31, 2017,
at which time the Exchange had stated
that it would evaluate whether the
waiver has in fact prompted Firms to
close and roll over these positions close
to expiration as intended. The Exchange
believes the proposed change has in fact
continued to encourage Firms to do so
and as such, proposes to extend the
waiver of the surcharge through June 30,
2018, at which time the Exchange will
again reevaluate whether the waiver has
continued to prompt Firms to close and
roll over positions close to expiration at
low premium levels. Accordingly, the
Exchange proposes to delete the
reference to the current waiver period of
December 31, 2017 from the Fees
Schedule and replace it with June 30,
2018.
Extended Trading Hour Fees
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 December 31,
2017. The Exchange also waives fees
through June 30, 2018 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
June 30, 2018.
RLG, RLV, RUI, AWDE, FTEM, FXTM
and UKXM Transaction Fees
In order to promote and encourage
trading of seven new FTSE Russell
Index products (i.e., Russell 1000
Growth Index (‘‘RLG’’), Russell 1000
Value Index (‘‘RLV’’), Russell 1000
Index (‘‘RUI’’), FTSE Developed Europe
Index (‘‘AWDE’’), FTSE Emerging
Markets Index (‘‘FTEM’’), China 50
20:14 Jan 25, 2018
Jkt 244001
PO 00000
Frm 00157
Fmt 4703
Sfmt 4703
3
6
9
10
15
25
Index ‘‘(FXTM’’) and FTSE 100 Index
(‘‘UKXM’’)), the Exchange waives all
transaction fees (including the Floor
Brokerage Fee, Index License Surcharge
and CFLEX Surcharge Fee) for each of
these products. This waiver however,
expired December 31, 2017. In order to
continue to promote trading of these
options classes, the Exchange proposes
to extend the fee waiver through June
30, 2018.
FLEX Asian and Cliquet Flex Trader
Incentive Program
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
December 31, 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 June
30, 2018 or until total average daily
volume in Exotics exceeds 15,000
21 See e.g., PHLX Pricing Schedule, Section V.,
Customer Routing Fees.
VerDate Sep<11>2014
Proposed
(%)
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contracts for three consecutive months,
whichever comes first.
AWDE, FTEM, FXTM, UKXM, RVX
DPM Payment
The Exchange currently offers a
compensation plan to the Designated
Primary Market-Maker(s) (‘‘DPM(s)’’)
appointed in AWDE, FTEM, FXTM,
UKXM or RVX to offset the initial DPM
costs. Specifically, the Fees Schedule
provides that DPM(s) appointed for an
entire month in AWDE, FTEM, FXTM or
UKXM classes will receive a payment of
$7,500 per class per month, and the
DPM appointed in RVX will receive a
payment of $8,500 per month, through
December 31, 2017. The Exchange notes
that it plans on delisting AWDE, FTEM,
FXTM and RVX shortly and therefore no
longer wishes to extend these DPM
payments. The Exchange also notes
however, that it does not intend on
delisting UKXM at this time and wishes
to extend the payment to help offset
ongoing costs associated with being the
DPM in UKXM. The Exchange proposes
to reduce the payment to $5,000 per
month through December 31, 2018.
daltland on DSKBBV9HB2PROD with NOTICES
OHS Order Cancellation Fee
The Exchange notes that the OHS
(Order Handling Service) Order
Cancellation Fee used to be assessed to
an executing Clearing Trading Permit
Holder (single OHS firm) for each
cancelled public customer (origin code
‘‘C’’) OHS order in excess of the number
of public customer orders that the
executing Clearing Trading Permit
Holder executed in a month for itself or
for a correspondent firm. However, this
fee has been set at $0.00 for some time
now. The Exchange does not intend on
assessing this fee in the near future and
as such, desires to remove the fee from
the Fees Schedule to avoid any
confusion.
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.22 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 23 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
Section 6(b)(4) of the Act,24 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 adjusting the
LP Sliding Scale volume thresholds is
reasonable because it adjusts for the
current volume trends and the
Exchange’s market share gains. The
Exchange also notes that the rates set
forth in the LP Sliding Scale are not
changing. Rather, the rebalance of tiers
still allows the Exchange to maintain an
incremental incentive for LP’s to strive
for the highest tier level, which provides
increasingly lower fees. The Exchange
believes it is equitable and not unfairly
discriminatory because the proposed
changes to the qualifying volume
thresholds apply to all LPs uniformly.
The Exchange also believes the
proposed change is equitable and not
unfairly discriminatory for the reasons
discussed below in the Burden of
Competition section relating to the
favorable treatment of LPs.
The Exchange believes that the
proposed amendments to the LP Sliding
Scale Adjustment Table thresholds are
reasonable because the amount of LP
transaction fees including the proposed
changes to Taker adjustments per
contract are similar and in line with the
amount assessed for similar transactions
at other exchanges and because the
adjustments are still subject to a $0.50
per contract cap.25 The proposed
changes to the Maker rebates provide
LPs additional opportunities to qualify
for a rebate they would not otherwise
receive. Additionally the proposed rule
change is designed to encourage LPs to
provide and post liquidity to the
Exchange. The Exchange believes that
the proposed changes are equitable and
not unfairly discriminatory because they
apply to all LPs. The Exchange also
notes that it believes it’s equitable and
not unfairly discriminatory to assess
additional Taker fees to transactions
removing liquidity from the market
(‘‘Takers’’) and not Maker volume
because the Exchange wants to continue
U.S.C. 78f(b)(4).
e.g., NYSE Arca Options Fees and Charge,
Transaction Fee for Electronic Executions—Per
Contract.
24 15
25 See
22 15
U.S.C. 78f(b).
23 15 U.S.C. 78f(b)(5).
VerDate Sep<11>2014
20:14 Jan 25, 2018
Jkt 244001
to encourage market participation and
price improvement.
The Exchange believes it’s reasonable
to eliminate the HAL Step-Up Rebate
because it is not required to provide
such a rebate. Additionally, the
Exchange notes that it originally
adopted the HAL Step-Up rebate to
incent Market-Makers to execute orders
at Cboe Options versus routing orders
away via Linkage (as the Exchange had
been subsidizing most of the costs
associated with linkage for competitive
reasons). However, the Exchange no
longer subsidizes most of the linkage
costs, as routing practices have changed
over the years. Therefore, the Exchange
no longer wishes to offer the rebate. The
Exchange believes it’s equitable and not
unfairly discriminatory because it
applies uniformly to all TPHs.
The Exchange believes adjusting VIP
volume thresholds is reasonable because
it adjusts for current volume trends and
given the Exchange’s market share
gains. The Exchange notes that the
rebalance of tiers still allows the
Exchange to maintain an incremental
incentive for TPHs to strive for the
highest tier level, which provides
increasingly higher credits. This change
is also equitable and not unfairly
discriminatory because it will be
applied to all TPHs uniformly. The
Exchange believes adding an additional
Tier is reasonable because it provides a
rebate for AIM executions, the amount
of which is the same as previously
offered, albeit at a different threshold.
The Exchange believes it’s reasonable to
reduce the credits available for Simple
and Complex AIM executions because
VIP still provides an opportunity for
TPHs to receive credits for Simple and
Complex AIM orders for reaching
certain qualifying volume thresholds
that they would not otherwise receive
(now just a smaller credit). The
Exchange also believes it’s reasonable,
equitable and not unfairly
discriminatory to establish lower credits
for AIM executions than non-AIM
executions under VIP because AIM
transactions are already assessed lower
transaction fees than non-AIM.26 The
Exchange believes the proposal to
provide that a TPH will only receive the
Complex credit rates for both its
Complex AIM and Non-AIM volume if
at least 40% of that TPH’s qualifying
VIP volume (in both AIM and Non-AIM)
in the previous month was comprised of
Simple volume is reasonable because
TPHs still receive credits they would
not otherwise receive. The Exchange
PO 00000
Frm 00158
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26 See Cboe Options Fees Schedule, Equity, ETF,
ETN and Index Options (excluding Underlying
Symbol List A) rate tables.
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believes the proposed rule changes
incentivize the sending of both Simple
and Complex orders to the Exchange.
The greater liquidity and trading
opportunities of both Simple and
Complex orders should benefit not just
customers (whose orders are the only
ones that qualify for the VIP) but all
market participants. The Exchange
believes the proposed change is
equitable and not unfairly
discriminatory because it applies to all
TPHs that meet the qualifying volume
thresholds.
The Exchange believes that adding an
additional tier to AVP is reasonable
because it provides LPs an additional
opportunity to receive increased
discounts on their transaction fees and
Trading Permit fees. Additionally, the
Exchange notes that the proposed tier is
made in conjunction with the proposal
to add a tier to VIP. Moreover,
enhancing the incentives under AVP
further incentivizes a Market-Maker
Affiliate to achieve the highest tier on
VIP so that the Market-Maker can
achieve those higher credits, which
thereby can result in greater customer
liquidity. The resulting increased
volume benefits all market participants
(including Market-Makers or their
affiliates who do not achieve the higher
tiers on the VIP; indeed, this increased
volume may allow them to reach these
tiers). The Exchange believes reducing
the discount in Tier 2 of AVP from 20%
to 15% is reasonable because it still
provides an opportunity for LPs to
receive a discount they would not
otherwise receive (now just a smaller
discount). The Exchange believes the
proposed changes are equitable and not
unfairly discriminatory because they
apply uniformly to all Market-Makers
whose Affiliates or Appointed Affiliates
meet the VIP tiers. The Exchange also
notes that any Market-Maker may enter
into a relationship with an Appointed
Affiliate and thus have the opportunity
to avail itself of AVP discounts. Lastly,
the Exchange believes the proposed
change is equitable and not unfairly
discriminatory for the reasons discussed
below in the Burden of Competition
section relating to the favorable
treatment of LPs.
Increasing the fee for electronic
executions for Clearing Trading Permit
Holder Proprietary orders in Penny and
Non-Penny equity, ETF, ETN and index
options (excluding Underlying Symbol
List A) classes is reasonable because the
proposed fee amounts are in line with
the amounts assessed by another
exchange for similar transactions.27 The
27 See e.g., PHLX Pricing Schedule, Section II,
Multiply Listed Options Fees and NYSE Amex
VerDate Sep<11>2014
20:14 Jan 25, 2018
Jkt 244001
Exchange believes that this proposed
change is also equitable and not unfairly
discriminatory because the proposed
changes will apply equally to all
Clearing Trading Permit Holders.
The Exchange believes that the
proposed increase of the Complex
Surcharge from $0.10 per contract per
side to $0.12 per contract per side is
reasonable because it helps offset high
credits given to complex orders under
VIP. The Exchange also notes that
notwithstanding the increase,
noncustomer COA and AIM auction
responses in Penny classes continue to
be capped at $0.50 per contract. The
Exchange believes the proposed change
is equitable and not unfairly
discriminatory because it applies
uniformly to all noncustomer orders.
The Exchange believes increasing the
AIM Contra fee is reasonable because
the proposed amount of the fee is in line
with the amount assessed for similar
transactions at another exchange.28
Additionally, as noted above AIM
transactions are already assessed lower
transaction fees than non-AIM.29 The
Exchange believes the proposed change
is equitable and not unfairly
discriminatory because it applies
equally to applicable TPH transactions.
The Exchange believes the proposed
amendments to the ORS and CORS
Programs are reasonable because the
proposed changes make it easier for
Participants to receive additional
payments to subsidize the costs
associated with providing certain order
routing functionalities. Additionally,
the Exchange believes the subsidy helps
attract order flow to the Exchange,
which brings greater liquidity and
trading opportunity, which benefits all
market participants. The Exchange also
believes the proposed change is
equitable and not unfairly
discriminatory because it applies
equally to all participating TPHs and
Non-TPH broker dealers.
The Exchange believes adding two
additional tiers, adjusting the volume
thresholds, and amending the
transaction fees for each tier of the SPX
LP Sliding Scale is reasonable because
the sliding scale continues to provide
incremental incentives for LPs to reach
the highest tier level and encourage
trading of SPX options. Additionally,
the Exchange believes increasing SPX
transaction fees for LPs is reasonable
Options Fees Schedule, Section I.A, Options
Transaction Fees and Credits, Rates for Standard
Options Transactions.
28 See PHLX Pricing Schedule, Section IV, PIXL
Pricing.
29 See Cboe Options Fees Schedule, Equity, ETF,
ETN and Index Options (excluding Underlying
Symbol List A) rate tables.
PO 00000
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Fmt 4703
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3831
because the Exchange has expended
considerable resources developing and
maintaining SPX. The Exchange
believes that this proposed change is
equitable and not unfairly
discriminatory because it applies
uniformly to all LPs. The Exchange also
believes that this proposed change is
equitable and not unfairly
discriminatory because although LPs
still pay lower SPX transaction fees than
certain other market participants, LPs
are valuable market participants that
provide liquidity in the marketplace and
incur costs that other market
participants do not incur.
The Exchange believes increasing the
SPX Surcharge is reasonable because it
helps offset the costs of the SPDJI
License. The Exchange notes in
particular, that the proposed surcharge
still does not offset the full cost of the
SPDJI License. This increase is equitable
and not unfairly discriminatory because
all non-Customer market participants
will be assessed the same increased SPX
Surcharge. Not applying the SPX
Surcharge to customer orders is
equitable and not unfairly
discriminatory because this is designed
to attract customer SPX orders, which
increases liquidity and provides greater
trading opportunities to all market
participants.
The Exchange believes increasing the
rates in Tiers B2 and A1 of the
Proprietary Sliding Scale (and thereby
reducing the overall discount) is
reasonable because it still provides
Clearing TPHs (including their NonTPH Affiliates) an opportunity to
receive notable discounted rates on
classes in Underlying Symbol list A for
reaching certain qualifying volume
thresholds that they would not
otherwise receive (now just a smaller
discount). Additionally, the Exchange
notes that lower fees for executing more
contracts is equitable and not unfairly
discriminatory because it provides
market participants with an incentive to
execute more contracts on the Exchange.
This brings greater liquidity and trading
opportunity, which benefits all market
participants. The Exchange believes that
the proposed change is not unfairly
discriminatory because it will apply to
all Clearing TPHs that meet the
qualifying volume thresholds. The
Exchange also believes offering lower
fees under the Proprietary Sliding Scale
to Clearing TPHs and not other market
participants is equitable and not
unfairly discriminatory because
Clearing TPHs must take on certain
obligations and responsibilities, such as
clearing and membership with the
Options Clearing Corporation, as well as
significant regulatory burdens and
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financial obligations, that other market
participants are not required to
undertake.
The Exchange believes decreasing the
rate in Tier 2 of the VIX Sliding Scale
(and thereby increasing the overall
discount) is reasonable because it
provides Clearing TPHs (including their
Non-TPH Affiliates) an opportunity to
receive an additional discounted rates
in VIX for reaching the qualifying
volume threshold in VIX. The Exchange
notes that lowering the VIX fee is
equitable and not unfairly
discriminatory because it provides
Clearing TPHs with an incentive to
execute more VIX contracts on the
Exchange. The Exchange believes that
the proposed change is not unfairly
discriminatory because it will apply to
all Clearing TPHs that meet the
qualifying volume threshold. The
Exchange also believes offering lower
fees under the VIX Sliding Scale to
Clearing TPHs and not other market
participants is equitable and not
unfairly discriminatory because
Clearing TPHs must take on certain
obligations and responsibilities, such as
clearing and membership with the
Options Clearing Corporation, as well as
significant regulatory burdens and
financial obligations, that other market
participants are not required to
undertake.
The Exchange believes adjusting the
qualifying thresholds under the
Supplemental VIX Discount allows
Clearing TPHs the opportunity to obtain
a discount on its VIX transaction fees at
a quicker rate. The proposed rule
change is designed to encourage
increased Clearing TPH proprietary VIX
options volume, which provides
increased VIX options volume and
greater trading opportunities for all
market participants. Similarly, applying
higher discount rates for Clearing TPHs
who hit the higher percentage of total
VIX options contract proprietary volume
of all Clearing TPHs on the VIX
Discount is equitable and not unfairly
discriminatory because this is designed
to encourage increased TPH proprietary
VIX options volume, which provides
increased VIX options volume and
greater trading opportunities for all
Clearing TPHs, including those who are
not able to reach the higher volume
percentages. The Exchange believes the
proposed change is equitable and not
unfairly discriminatory because it
applies uniformly to all Clearing TPHs.
Additionally, as discussed above (and
below in the Burden of Competition
section), Clearing TPHs have clearing
obligations that other market
participants do not have.
VerDate Sep<11>2014
20:14 Jan 25, 2018
Jkt 244001
The Exchange believes the proposal to
amend the Trading Permit thresholds
under the FB TP Sliding Scale are
reasonable because it reduces Floor
Broker access costs. Lower access costs
may encourage greater Floor Broker
access, which thereby brings greater
trading activity, volume and liquidity,
benefitting all market participants. The
Exchange believes the proposed change
is equitable and not unfairly
discriminatory because it applies to all
Floor Brokers.
Similarly, the Exchange believes the
FB Discount is reasonable because it
provides Floor Brokers the opportunity
to receive discounts on floor brokerage
fees that they otherwise would not
receive. Discounted floor brokerage rates
may encourage the execution of more
orders in the classes that are currently
assessed floor brokerage fees, which
should increase volume, which would
benefit all market participants
(including Floor Brokers who do not hit
the volume thresholds). The Exchange
believes the proposed changes are
equitable and not unfairly
discriminatory because they apply to
qualifying Floor Brokers equally. The
Exchange believes it’s reasonable,
equitable and not unfairly
discriminatory to provide that only
volume that is assessed transaction fees
will be considered qualifying volume to
meet the volume thresholds because the
Exchange is not collecting any floor
brokerage fees on that volume.
Providing that the discounts apply only
to OEX, XEO, RUT, SPX, SPXw, VIX
and volatility index options is equitable
and not unfairly discriminatory because
those products currently are assessed
floor brokerage fees.30
The proposed change to increase the
1 Gbps and 10 Gbps Network Access
Port fees is reasonable because the fees
are within the same range as those
assessed on other exchanges,31 and
because such increase will assist in
recouping ongoing expenditures made
by the Exchange. Additionally, as noted
above, such expenditures are increasing
due to network infrastructure upgrades.
This proposed change is equitable and
not unfairly discriminatory because the
proposed change will apply to all TPHs.
The Exchange’s proposal to increase
the Linkage fee from $0.10 per contract
to $0.15 per contract (in addition to
applicable transaction fees) for customer
30 As previously noted, transaction fees for RLG,
RLV, RUI, AWDE, FTEM, FXTM, UKXM are
currently waived.
31 See e.g., Cboe BZX Exchange, Inc., Options
Exchange Fees Schedule, Options Physical
Connection Fees, which lists connectivity fees of
$2,000 per month for 1 Gbps and $6,000 per month
for 10 Gbps.
PO 00000
Frm 00160
Fmt 4703
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orders is reasonable because the
increase will help offset the costs
associated with routing orders through
Linkage. Additionally, the proposed
amount is reasonable as it is in line with
amounts charged by other Exchanges for
similar transactions.32 The Exchange
believes it’s equitable and not unfairly
discriminatory because the proposed
change will apply to all customer orders
that are linked away.
The Exchange believes it’s reasonable
to increase the Frequent Trader rebates
for RUT because it provides Customers
an opportunity to receive increased
rebates for reaching certain qualifying
volume thresholds that they would not
otherwise receive. The proposed rule
change is designed to encourage greater
Customer 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 also
reasonable to increase the qualifying
volume thresholds for RUT as it still
allows the Exchange to maintain an
incremental incentive for Customers to
strive for the highest tier level and
because the Exchange has increased the
rebates for each of the tiers. The
Exchange believes it’s equitable and not
unfairly discriminatory to establish
higher rebates under the Frequent
Trader Program for RUT as compared to
SPX and VIX options because the
Exchange would like to encourage more
RUT trading. The Exchange believes
that the proposed change is not unfairly
discriminatory because it will apply to
all Frequent Trader Customers and
because any Customer may avail itself of
the Frequent Trader Program provided it
registers with the Exchange and its
executing TPH participates. The
Exchange believes it’s reasonable 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 fee is being
waived in its entirety and the Exchange
wants to continue encouraging Firms to
roll and close over positions close to
expiration at low premium levels. The
Exchange notes that without the waiver,
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
32 See e.g., PHLX Pricing Schedule, Section V.,
Customer Routing Fees.
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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. Additionally, encouraging firms to
roll and close over these positions
would free up capital that the firm can
then use to benefit others. Finally, the
Exchange believes it’s reasonable,
equitable and not unfairly
discriminatory to provide that the
surcharge will be waived through June
30, 2018, 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 June
30, 2018 is reasonable, equitable and not
unfairly discriminatory, because those
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 in order to
promote and encourage ongoing
participation in ETH and also applies to
all ETH TPHs.
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory 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,
because the respective fees are being
waived in their entirety, which
promotes and encourages trading of
these products which are still relatively
new and applies to all TPHs.
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 it is
reasonable, equitable and not unfairly
discriminatory to extend the
compensation plan to the DPM
appointed in UKXM to continue to
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offset its ongoing DPM costs and
continue to incentivize the DPM to
continue to serve as a DPM in this
products. The Exchange believes it’s
reasonable to reduce the payment to
$5,000 because the DPM is still
receiving a payment it would not
otherwise receive. The Exchange
believes it’s reasonable, equitable and
not unfairly discriminatory to eliminate
(i.e., not extend) the DPM payments for
AWDE, FTEM, FXTM, UKXM, and RVX
because the Exchange either does not
trade or plans to delist these classes
shortly.
Finally, the Exchange believes
eliminating the OHS Cancellation Fee
from the Fees Schedule will eliminate
unnecessary language and alleviate
confusion as the fee is currently set to
$0.00. The alleviation of confusion
removes impediments to and perfects
the mechanism of a free and open
market and a national market system,
and, in general, protects investors and
the public interest.
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. For example, Clearing
TPHs have clearing obligations that
other market participants do not have.
Market-Makers 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, as
they often do not have as sophisticated
trading operations and systems as other
market participants, which often makes
other market participants prefer to trade
with customers. Further, the Exchange
fees and rebates, both current and those
proposed to be changed, 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 changes will impose
any burden on intermarket competition
PO 00000
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3833
that is not necessary or appropriate in
furtherance of the purposes of the Act
because the proposed changes are
intended to promote competition and
better improve the Exchange’s
competitive position and make Cboe
Options a more attractive marketplace
in order to encourage market
participants to bring increased volume
to the Exchange (while still covering
costs as necessary). Further, the
proposed changes only affect trading on
the Exchange. To the extent that the
proposed changes make Cboe Options a
more attractive marketplace for market
participants at other exchanges, such
market participants are welcome to
become Cboe Options 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 33 and paragraph (f) of Rule
19b–4 34 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–2018–007 on the subject line.
33 15
34 17
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CFR 240.19b–4(f).
26JAN1
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Federal Register / Vol. 83, No. 18 / Friday, January 26, 2018 / Notices
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82545; File No. SR–BX–
2018–001]
All submissions should refer to File
Number SR–CBOE–2018–007. 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 website (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 website 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CBOE–2018–007, and
should be submitted on or before
February 16, 2018.
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Add a New Rule 4765
and Commentary Thereto To Codify
Participant Risk Settings and To
Authorize the Exchange To Share
those Risk Settings With the Clearing
Member That Clears Transactions on
Behalf of the Participant
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.35
Eduardo A. Aleman,
Assistant Secretary.
Rules of Nasdaq BX
[FR Doc. 2018–01367 Filed 1–25–18; 8:45 am]
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 January
11, 2018, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘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 add a new
Rule 4765 and commentary thereto to
codify Participant risk settings in the
Exchange’s trading system and to
authorize the Exchange to share such
risk settings with the clearing member
that clears transactions on behalf of the
Participant.
The text of the proposed rule change
is set forth below. Proposed new
language is italicized; deleted text is in
brackets.
*
*
*
*
*
Equity Rules
*
*
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
20:14 Jan 25, 2018
*
*
Rule 4765. Exchange Sharing of
Participant Risk Settings
1 15
35 17
*
The Exchange may share any
Participant risk settings in the trading
system specified in the commentary
below with the clearing member that
clears transactions on behalf of the
Participant. For purposes of this Rule,
the term ‘‘Participant’’ has the meaning
set forth in Rule 4701(c).
Commentary
BILLING CODE 8011–01–P
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00162
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The Exchange offers certain risk
settings applicable to a Participant’s
activities on the Exchange. The risk
settings currently offered by the
Exchange are:
(a) Share Size Control—When enabled
by a Participant, this optional control
will allow a Participant to limit the
number of shares that the Participant
may associate with an order placed on
the Exchange;
(b) ISO Control—When enabled by a
Participant, this optional control will
prevent a Participant from entering an
ISO order onto the Exchange;
(c) Cancel-on-Disconnect Control—
When enabled by a Participant, this
optional control will allow a Participant,
when it experiences a disruption in its
connection to the Exchange, to
immediately cancel all pending
Exchange orders except for Good-TillCanceled orders (RASH & FIX only);
(d) The BX Kill Switch—This control
is described in Rule 4764;
(e) Limit Order Protection—This
control is described in Rule 4757(d);
(f) Price Collar Check—This control
will automatically restrict a routed order
from executing at a price that differs
from the NBBO (at the time of order
entry) by more than five percent or
$0.25, whichever difference is greater.
The system will proceed to route an
order unless and until it crosses the
greater of these two price collars, and if
it does so, then the system will block
further routings of the order that fall
outside of the collars. For example, if
the NBBO is $99 x $100 at the time of
entry of a buy order, then the system
will route the order at prices at or below
$105, but will stop doing so if the offer
price rises above $105 (five percent of
the NBO);
(g) Maximum Order Volume Check—
This control will automatically reject an
order for routing away that exceeds a
maximum volume of shares. As applied
to equity orders, the default maximum
order volume is set at 25,000 shares, but
the Participant may request that the
Exchange set a higher default based on
historic volume;
(h) Cumulative Order Volume
Check—This control will automatically
block an attempt by a Participant using
a particular MPID to route orders away
to buy or sell equity securities that,
cumulatively, exceed 9.5 million shares
during a five second time period; and
(i) Duplication Control—This control
will automatically reject an order that a
Participant submits to the Exchange to
the extent that it is duplicative of
another order that the Participant
submitted to the Exchange during the
prior five seconds.
*
*
*
*
*
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]]>Agencies
[Federal Register Volume 83, Number 18 (Friday, January 26, 2018)]
[Notices]
[Pages 3824-3834]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-01367]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82553; File No. SR-CBOE-2018-007]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Fees Schedule
January 19, 2018.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 19, 2018, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') 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 Substance
of the Proposed Rule Change
The Exchange proposes to amend its Fees Schedule. The text of the
proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to make a number of changes to its Fees
Schedule.\3\
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed fee changes on
January 2, 2018 (SR-CBOE-2018-001). On business date January 19,
2018, the Exchange withdrew that filing and submitted this filing.
---------------------------------------------------------------------------
Liquidity Provider Sliding Scale
Under the Liquidity Provider Sliding Scale (``LP Sliding Scale''),
a Liquidity Provider's (Cboe Options Market-Makers, DPMs and LMMs)
standard per-contract transaction fees for all products except
Underlying Symbol List A \4\ are reduced based upon the Liquidity
Provider (``LP'') reaching certain contract volume thresholds in a
month.\5\ The Exchange proposes to adjust the volume thresholds.
Specifically, the Exchange proposes to adjust Tiers 2 through 5. Tier 1
remains unchanged and there are no changes to any of the LP Sliding
Scale rates. The proposed changes are as follows:
---------------------------------------------------------------------------
\4\ As of January 19, 2018, Underlying Symbol List A includes
Underlying Symbol List A consists of OEX, XEO, RUT, RLG, RLV, RUI,
AWDE, FTEM, FXTM, UKXM, SPX (includes SPXw), VIX, VOLATILITY INDEXES
and binary options.
\5\ See Cboe Options Fees Schedule, Liquidity Provider Sliding
Scale.
----------------------------------------------------------------------------------------------------------------
Percentage thresholds of National Market-Maker
Contract Volume excluding underlying Symbol List A
Tier -------------------------------------------------------- Rate
Current Proposed
----------------------------------------------------------------------------------------------------------------
1....................................... 0.00%-0.05%............... No change................. $0.23
2....................................... Above 0.05%-0.70%......... Above 0.05%-0.80%......... 0.17
3....................................... Above 0.70%-1.40%......... Above 0.80%-1.50%......... 0.10
4....................................... Above 1.40%-2.00%......... Above 1.50%-2.25%......... 0.05
5....................................... Above 2.00%............... Above 2.25%............... 0.03
----------------------------------------------------------------------------------------------------------------
[[Page 3825]]
The purpose of this change is to adjust for the Exchange's market
share gains, which the Exchange has an interest in maintaining, while
continuing to offer an incremental incentive for LPs to strive for the
highest tier level.
LP Sliding Scale Adjustment Table
The Exchange proposes to amend the LP Sliding Scale Adjustment
Table which provides that Taker fees be applied to ``Taker'' volume and
a Maker rebate be applied to ``Maker'' volume in addition to the
transaction fees assessed under the LP Sliding Scale. The amount of the
Taker fee (or Maker rebate) is determined by the LP's percentage of
volume from the previous month that was Maker (``Make Rate'').\6\ The
Exchange proposes to adjust the Performance Tiers (determined by the
Make Rate), fees and rebates. Specifically the Exchange proposes to
amend the volume thresholds for the make rate as follows:
---------------------------------------------------------------------------
\6\ See Cboe Options Fees Schedule, Liquidity Provider Sliding
Scale Adjustment Table.
----------------------------------------------------------------------------------------------------------------
Make rate (% based on prior month)
Tier -----------------------------------------------------------------------------
Current Proposed
----------------------------------------------------------------------------------------------------------------
1................................. 0%-50%............................... No change.
2................................. Above 50%-75%........................ Above 50%-60%.
3................................. Above 75%-85%........................ Above 60%-75%.
4................................. Above 85%-90%........................ Above 75%-90%.
5................................. Above 90%............................ No change.
----------------------------------------------------------------------------------------------------------------
The Exchange also proposes to amend the Maker rebates and Taker
fees as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Maker rebate Taker fee
---------------------------------------------------------------------------------------------------------------------------------
Tier Penny classes Penny classes Non-Penny classes
------------------------------------- Non-Penny Classes -----------------------------------------------------------------------
Current Proposed Current Proposed Current Proposed
--------------------------------------------------------------------------------------------------------------------------------------------------------
1..................... ($0.00) No change.......... No change.......... $0.04 $0.05............. $0.08 $0.10.
2..................... (0.00) No change.......... No change.......... 0.03 $0.04............. 0.06 $0.07.
3..................... (0.00) (0.01)............. No change.......... 0.02 $0.03............. 0.04 $0.05.
4..................... (0.00) (0.02)............. No change.......... 0.01 $0.00............. 0.02 $0.04.
5..................... (0.01) (0.03)............. No change.......... 0.00 No change......... 0.00 No change.
--------------------------------------------------------------------------------------------------------------------------------------------------------
The Exchange notes that Taker fees for Penny classes will continue
to be subject to a cap of 0.50 per contract, which includes the LP
Sliding Scale transaction fee, Adjustment Table fee and Marketing
Fee.\7\ The Exchange notes that the proposed changes to the Adjustment
Table are designed to encourage LPs to provide and post liquidity to
the Exchange and continue to encourage market participation and price
improvement.
---------------------------------------------------------------------------
\7\ For example, if an LP is assessed the Marketing Fee on a
given transaction (0.25 per contract) for which it was a Taker in a
Penny class, and that LP falls in Tier 1 of the LP Sliding Scale
($0.23 per contract) and Performance Tier 1 of the Adjustment Table
($0.05 per contract), the LP would be assessed $0.50 per contract
for the transaction, instead of $0.53 per contract.
---------------------------------------------------------------------------
Hybrid Agency Liaison (``HAL'') Step-Up Rebate
The Exchange currently rebates a Market-Maker $0.05 per contract
against transaction fees generated from a transaction on the HAL system
in a penny pilot class, provided that at least 70% of the Market-
Maker's quotes in that class (excluding quotes in LEAPS series) in the
prior calendar month were on one side of the NBBO. The Exchange no
longer desires to provide this incentive and therefore proposes to
eliminate the HAL Step-Up Rebate from the Fees Schedule.
Volume Incentive Program
Under the Volume Incentive Program (``VIP''), the Exchange credits
each Trading Permit Holder (``TPH'') the per contract amount set forth
in the VIP table for Public Customer orders (``C'' origin code)
transmitted by that TPH (with certain exceptions) which is executed
electronically on the Exchange, provided the TPH meets certain volume
thresholds in a month.\8\ The Exchange proposes to make a few
amendments to VIP. First, the Exchange proposes to amend the volume
thresholds for Tiers 2, 3 and 4 and also add a Tier 5.\9\ The changes
are as follows:
---------------------------------------------------------------------------
\8\ See Cboe Options Fees Schedule, Volume Incentive Program.
\9\ The Exchange notes that the Tier 5 rates for Simple and
Complex Non-AIM will be the same as the rates for Tier 4 for Simple
and Complex Non-AIM.
[[Page 3826]]
----------------------------------------------------------------------------------------------------------------
Percentage thresholds of National Customer Volume in all underlying symbols
excluding underlying Symbol List A, DJX, MXEA, MXEF, MNX, NDX, XSP and XSPAM
Tier -----------------------------------------------------------------------------
Current Proposed
----------------------------------------------------------------------------------------------------------------
1................................. 0.00%-0.75%.......................... No change.
2................................. Above 0.75% to 1.80%................. Above 0.75% to 2.00%.
3................................. Above 1.80% to 3.00%................. Above 2.00% to 3.00%.
4................................. Above 3.00%.......................... Above 3.00% to 4.00%.
5................................. N/A.................................. Above 4.00%.
----------------------------------------------------------------------------------------------------------------
The Exchange also proposes to reduce the per contract credits for
AIM orders. The proposed changes are as follows:
----------------------------------------------------------------------------------------------------------------
Per contract credit for AIM orders
------------------------------------------------------------------------------------
Simple Complex
------------------------------------------------------------------------------------
Tier Current Proposed Current Proposed
-------------------------------------------------------------------------------------------------------- ----------
1............................. $0.00 No change.......... $0.00 No change.
2............................. 0.09 No change.......... 0.20 0.19.
3............................. 0.11 0.10............... 0.23 0.22.
4............................. 0.14 0.13............... 0.24 0.23.
5............................. N/A 0.14............... N/A 0.24.
----------------------------------------------------------------------------------------------------------------
The purpose of these changes is to adjust for current volume trends
while maintaining an incremental incentive for TPH's to strive for the
highest tier level. The Exchange does not believe it's necessary to
maintain the existing credits for AIM volume, but still seeks to
maintain an incremental incentive for TPHs to strive for the highest
tier level.
Lastly, the Exchange proposes to provide that a TPH will only
receive the Complex credit rates for both its Complex AIM and Non-AIM
volume if at least 40% of that TPH's qualifying VIP volume (in both AIM
and Non-AIM) in the previous month was comprised of Simple volume. If
the TPH's previous month's volume does not meet the 40% Simple volume
threshold, then the TPH's Customer (C) Complex volume will receive
credits at the Simple rate only (i.e., all volume, both Simple and
Complex, will receive credits at the applicable Simple rate). The
proposed 40% requirement will apply beginning in February 2018 (i.e.,
the proposed threshold will not affect January's credits. Rather,
February 2018 volume will be based on whether a TPH's volume in January
2018 was comprised of at least 40% Simple volume). Notwithstanding the
higher credits offered for Complex volume, the Exchange believes the
proposed change will encourage TPHs to continue to send both Simple and
Complex volume to the Exchange.
Market-Maker Affiliate Volume Plan
The Exchange proposes to amend its Market-Maker Affiliate Volume
Plan (``AVP''). By way of background, under AVP, if a TPH Affiliate
\10\ or Appointed OFP \11\ of a Market-Maker qualifies under VIP, that
Market-Maker will also qualify for a discount on that Market-Maker's LP
Sliding Scale transaction fees and Trading Permit fees. As noted above,
the Exchange proposes to add an additional tier to VIP. As such, the
Exchange also proposes to add an additional tier to AVP (Tier 5).
Particularly, Market-Makers will receive a discount on transaction fees
and Trading Permit fees of 35% if their Affiliate or Appointed OFP
reach Tier 5 of VIP. The Exchange also proposes to reduce the discount
for reaching Tier 3 from 20% to 15%.
---------------------------------------------------------------------------
\10\ For purposes of AVP, ``Affiliate'' is defined as having at
least 75% common ownership between the two entities as reflected on
each entity's Form BD, Schedule A.
\11\ See Cboe Options Fees Schedule Footnote 23. Particularly, a
Market-Maker may designate an Order Flow Provider (``OFP'') as its
``Appointed OFP'' and an OFP may designate a Market-Maker to be its
``Appointed Market-Maker'' for purposes of qualifying for credits
under AVP.
---------------------------------------------------------------------------
Electronic Transaction Fees for Clearing Trading Permit Holder
Proprietary
The Exchange proposes to increase the transaction fees for
electronic executions for Clearing Trading Permit Holder Proprietary
(origin codes ``F'' and ``L'') orders in equity, ETF, ETN and index
options (excluding Underlying Symbol List A) classes from $0.38 per
contract to $0.43 per contract in Penny Classes and $0.65 per contract
to $0.70 per contract in Non-Penny classes.\12\ The Exchange notes that
this increase is in line with the amounts assessed by others exchanges
for similar transactions.\13\
---------------------------------------------------------------------------
\12\ The Exchange notes that it inadvertently did not update the
Clearing Trading Permit Holder Proprietary transaction fee rates for
electronic executions for in the Clearing Trading Permit Holder Fee
Cap table in the Fees Schedule. Currently, the rate is listed as
$0.35 per contract. The Exchange notes it is now updating the fee to
the proposed amounts of $0.43 for Penny Classes and $0.70 for Non-
Penny Classes.
\13\ See e.g., Nasdaq PHLX LLC Pricing Schedule, Section II,
Multiply Listed Options Fees. See also NYSE American Options Fees
Schedule, Section I.A, Options Transaction Fees and Credits.
---------------------------------------------------------------------------
Complex Surcharge
Currently, the Exchange assesses a Complex Surcharge of $0.10 per
contract per side for non-customer complex order executions that take
liquidity from the Complex Order Book (``COB'') and auction responses
in the Complex Order Auction (``COA'') and the Automated Improvement
Mechanism (``AIM'') in all classes except Underlying Symbol List A.\14\
The Exchange proposes to increase the amount of the Complex Surcharge
from $0.10 per contract to $0.12 per contract.
[[Page 3827]]
The Exchange notes that it will continue to cap noncustomer complex
auction responses in COA and AIM in Penny classes at $0.50 per
contract, which includes the applicable transaction fee, Complex
Surcharge and Marketing Fee (if applicable).\15\
---------------------------------------------------------------------------
\14\ See Cboe Options Fees Schedule, Complex Surcharge and
Footnote 35 for more details regarding the Complex Surcharge.
\15\ For example, a Market-Maker COA response in a Penny class
that is subject to the Marketing Fee ($0.25 per contract), the
Liquidity Provider Sliding Scale Tier 1 rate ($0.23 per contract)
and Complex Surcharge ($0.12 per contract), would only be charged
$0.50 per contract, instead of $0.60 per contract.
---------------------------------------------------------------------------
AIM Contra
The Exchange proposes to increase the AIM Contra Execution Fee for
Broker-Dealer, Firm, Joint Back-Office, Non-TPH Market-Maker and
Professional/Voluntary Professional orders from $0.05 to $0.07. The
Exchange notes that the proposed amount of the fee is in line with the
amount assessed for similar transactions at another exchange.\16\
---------------------------------------------------------------------------
\16\ See PHLX Pricing Schedule, Section IV, PIXL Pricing.
---------------------------------------------------------------------------
ORS and CORS
The Exchange proposes to amend its Order Routing Subsidy (ORS) and
Complex Order Routing Subsidy (CORS) Programs (collectively
``Programs''). By way of background, the ORS and CORS Programs allow
the Exchange to enter into subsidy arrangements with any TPH (each, a
``Participating TPH'') or Non-TPH broker-dealer (each a ``Participating
Non-TPH'') that meet certain criteria and provide certain order routing
functionalities to other TPHs, Non-TPHs and/or use such functionalities
themselves.\17\ Participants in the ORS Program receive a payment for
every executed contract for simple orders routed to the Exchange
through their system and participants in the CORS Program receive a
payment for every executed contract for complex orders routed to the
Exchange through their system. Additionally, participants whose total
aggregate non-customer ORS and CORS volume is greater than 0.40% of the
total national volume (excluding volume in options classes included in
Underlying Symbol List A, DJX, MXEA, MXEF, XSP or XSPAM) receive an
additional payment of $0.07 per contract for all executed contracts
exceeding that threshold during a calendar month. The Exchange proposes
to reduce the threshold required to receive the additional $0.07 per
contract from 0.40% to 0.25%.
---------------------------------------------------------------------------
\17\ See Cboe Options Fees Schedule, ``Order Router Subsidy
Program'' and ``Complex Order Router Subsidy Program'' tables for
more details on the ORS and CORS Programs.
---------------------------------------------------------------------------
Liquidity Provider Sliding Scale for SPX and SPXW
The Exchange proposes to amend its sliding scale for LP transaction
fees in SPX and SPXW (``SPX LP Sliding Scale''). Currently, LPs'
transaction fees in SPX and SPXW are determined by their average
monthly contracts in SPX and SPXW. The SPX LP Sliding Scale currently
provides for three tiers. The Exchange proposes to add two additional
tiers, adjust the volume thresholds, and amend the transaction fees for
each tier. The SPX LP Sliding Scale will continue to provide
progressively lower rates if increased volume thresholds in SPX
(including SPXW) options are attained during a month. The changes to
the SPX LP Sliding Scale are as follows:
----------------------------------------------------------------------------------------------------------------
Volume thresholds Rate
Tier -----------------------------------------------------------------------------
Current Proposed Current Proposed
----------------------------------------------------------------------------------------------------------------
1................................. 0.00%-1.50%.......... 0.00%-1.00%.......... $0.25 $0.28
2................................. Above 1.01%-10.00%... Above 1.00%-4.00%.... 0.23 0.26
3................................. Above 10.00%......... Above 4.00%-9.00%.... 0.21 0.24
4................................. N/A.................. Above 9.00%-15.00%... N/A 0.22
5................................. N/A.................. Above 15.00%......... N/A 0.20
----------------------------------------------------------------------------------------------------------------
The proposed changes to the SPX LP Sliding Scale continue to
provide incremental incentives for LPs to reach the highest tier level
and encourage trading of SPX options.
Proprietary Products Sliding Scale
The Proprietary Products Sliding Scale (``Proprietary Sliding
Scale'') table provides that Clearing Trading Permit Holder Proprietary
transaction fees for Clearing Trading Permit Holders and for Non-
Clearing Trading Permit Holder Affiliates (``Non-TPH Affiliates'')
(collectively, ``Clearing TPHs'') in Underlying Symbol List A are
reduced provided a Clearing TPH reaches certain average daily volume
(``ADV'') thresholds in all underlying symbols excluding Underlying
Symbol List A on the Exchange in a month. The Exchange proposes to
increase the rates set forth in Tiers B2 and A1. Specifically, the
Exchange proposes to increase the rate in Tier B2 to $0.18 from $0.12
and in Tier A1 to $0.04 from $0.02. The purpose of increasing the
transaction Fee Per Contract rates (and thereby reducing the amount of
the discount Clearing TPHs may receive on proprietary products) is to
moderate the discount levels for these products in view of their growth
and performance. Particularly, the Exchange does not believe it's
necessary to maintain the existing discounted rates for these tiers,
but still seeks to maintain an incremental incentive for Clearing TPHs
to strive for the highest tier level.
VIX Sliding Scale
The Exchange proposes to amend its Clearing Trading Permit Holder
Proprietary VIX Sliding Scale (the ``VIX Sliding Scale''). The VIX
Sliding Scale allows VIX volatility index options (``VIX options'')
transaction fees for Clearing TPH (including its Non-TPH Affiliates)
proprietary orders to be reduced provided a Clearing TPH reaches
certain proprietary VIX options volume thresholds during a month. The
Exchange wishes to reduce the VIX fees in Tier 2 of the VIX Sliding
Scale from $0.17 per contract to $0.15 per contract.
Supplemental VIX Discount
The Exchange proposes to amend its Supplemental VIX Total Firm
Volume Discount (``Supplemental VIX Discount''). The Supplemental VIX
Discount allows VIX options transaction fees for Clearing TPHs
(including its Non-TPH Affiliates) proprietary orders to be discounted
provided a Clearing TPH reaches certain VIX firm volume percentage
thresholds during a calendar month. The Exchange wishes to lower the
volume thresholds in Tiers 1 and 2 as follows in order to reduce VIX
transaction fees and encourage greater VIX trading activity:
[[Page 3828]]
----------------------------------------------------------------------------------------------------------------
VIX Firm volume percentage
Tier ---------------------------------------------------------------------------
Current Proposed
----------------------------------------------------------------------------------------------------------------
1................................... 0.00%-10.99%........................ 0.00%-7.00%.
2................................... 11.00%-12.99%....................... 7.01%-11.00%.
3................................... 13.00%-14.99%....................... 11.01%-15.00%.
4................................... Above 14.99%........................ Above 15.00%.
----------------------------------------------------------------------------------------------------------------
SPX Index License Surcharge
The Exchange proposes to increase the Index License Surcharge Fee
for SPX (including SPXW) (the ``SPX Surcharge'') from $0.14 per
contract to $0.16 per contract. The Exchange licenses from S&P Dow
Jones Indices (``SPDJI'') (the ``SPDJI License'') the right to offer an
index option product based on the S&P 500 index (that product being SPX
and other SPX-based index option products). In order to offset the
costs of the SPDJI License, the Exchange assesses the SPX Surcharge.
The Exchange therefore proposes to increase the SPX Surcharge from
$0.14 per contract to $0.16 per contract in order to offset more of the
costs associated with the SPX license.
Floor Broker Trading Permit Fees
The Exchange proposes to amend its Floor Broker Trading Permit
Sliding Scale Program (``FB TP Sliding Scale''). The FB TP Sliding
Scale allows Floor Brokers to pay reduced rates for their Trading
Permits if they commit in advance to a specific tier that includes a
minimum number of eligible Floor Broker Trading Permits for each
calendar year. The Exchange proposes to amend the Permit thresholds as
follows:
----------------------------------------------------------------------------------------------------------------
Number of permits Amount per
Tiers ------------------------------------------------------------ month per
Current Proposed permit
----------------------------------------------------------------------------------------------------------------
1........................... No change................... $9,000
1................................... 2-7......................... 2-5......................... 5,000
2................................... 8 or more................... 6 or more................... 3,000
----------------------------------------------------------------------------------------------------------------
The purpose of this change is to reduce access costs and thereby
encourage greater Floor Broker access.
Floor Brokerage Fees Discount
The Exchange proposes to adopt a new discount for floor brokerage
fees. Currently, floor brokerage fees for OEX, XEO, RUT, RLG, RLV, RUI,
AWDE, FTEM, FXTM, UKXM and SPX Index Options are $0.04 per contract
(crossed orders $0.02) and VIX and volatility index options are $0.03
per contract (crossed orders $0.015). The Exchange wishes to implement
a new floor brokerage fees discount for Floor Brokers (``FB
Discount''). The FB Discount will be based on a Floor Broker's total
monthly Floor Broker volume and will allow Floor Brokers to reduce
their floor brokerage fees provided certain volume thresholds are
attained during a month. The Exchange notes that only volume that is
assessed transaction fees will be considered qualifying volume to meet
the volume thresholds (i.e., OEX, XEO, RUT, SPX, SPXw, VIX and
volatility index options). The Exchange notes that currently
transaction fees for RLG, RLV, RUI, AWDE, FTEM, FXTM, UKXM are waived
and as such will not count towards the volume thresholds. The FBD will
be as follows:
------------------------------------------------------------------------
Total monthly floor % Discount on
broker contracts all floor
Tiers traded in brokerage fees
qualifying classes \18\
------------------------------------------------------------------------
1................................. 0-250,000........... 0
2................................. 250,001-1,500,000... 3
3................................. 1,500,001-5,000,000. 4
4................................. 5,000,001-7,500,000. 5
5................................. Above 7,500,000..... 6
------------------------------------------------------------------------
Cboe Command Connectivity Charges
Next, the Exchange proposes to increase Cboe Command Connectivity
Fees. First, the Exchange proposes to increase the monthly fee for a 1
gigabit per second (``Gbps'') Network Access Port from $750 per port to
$1,500 per port.\19\ The Exchange also proposes to increase the monthly
fee for a 10 Gbps Network Access Port from $4,000 per port to $5,000
per port. The Exchange has expended significant resources setting up,
providing and maintaining this connectivity and the Exchange desires to
offset such costs. The Exchange notes that such costs are also
increasing due to network infrastructure upgrades. This fee amount is
still within the range of, and in some cases less than, similar fees
assessed by other exchanges.\20\
---------------------------------------------------------------------------
\18\ Once a volume threshold is attained during the month, the
corresponding discount percentage will apply to all qualifying
contracts. For example, if a Floor Broker has 2,000,000 contracts in
qualifying volume in a given month, all 2,000,000 contracts will
receive a discount of 4%.
\19\ The Exchange also proposes to update the example in the
Notes section to reflect the increased fee for the 1 Gbps Network
Access Ports.
\20\ See e.g., Cboe BZX Exchange, Inc., Options Exchange Fees
Schedule, Options Physical Connection Fees, which lists connectivity
fees of $2,000 per month for 1 Gbps and $6,000 per month for 10
Gbps.
---------------------------------------------------------------------------
Linkage
The Exchange proposes to increase the Linkage fee (in addition to
the applicable away fees) for Customer orders from $0.10 to $0.15. The
Fees Schedule currently provides that, in
[[Page 3829]]
addition to the customary Cboe Options execution charges, for each
customer order that is routed, in whole or in part, to one or more
exchanges in connection with the Options Order Protection and Locked/
Crossed Market Plan referenced in Rule 6.80, the Exchange shall pass
through the actual transaction fee assessed by the exchange(s) to which
the order was routed. The Exchange proposes to assess an additional
$0.05 per contract for customer orders routed away in addition to the
applicable pass through fees. The proposed increase will help offset
costs incurred by the Exchange associated with routing customer orders
through linkage. Indeed, the Exchange notes that it is, and will still
be, subsidizing the costs associated with routing customer orders
through linkage. The Exchange notes that the proposed amount of the fee
is also in line with the amount assessed at other exchanges.\21\
---------------------------------------------------------------------------
\21\ See e.g., PHLX Pricing Schedule, Section V., Customer
Routing Fees.
---------------------------------------------------------------------------
Frequent Trader
The Exchange next proposes to amend its Frequent Trader Program. By
way of background, the Frequent Trader Program offers transaction fee
rebates to registered Customers, Professional Customers and Voluntary
Professionals (origin codes ``C'' and ``W'') (collectively,
``Customers'') that meet certain volume thresholds in VIX, RUT, and SPX
(including SPXW) options provided the Customer registers for the
program. The Exchange proposes to amend the Frequent Trader Program to
increase the volume thresholds and increase the rebates for RUT
options. Specifically, the proposed changes will be as follows:
----------------------------------------------------------------------------------------------------------------
RUT
-----------------------------------------------------------------------------
Tier Monthly contracts trade Fee rebate
-----------------------------------------------------------------------------
Current Proposed Current (%) Proposed (%)
----------------------------------------------------------------------------------------------------------------
1................................. 5,000-9,999.......... 10,000-24,999........ 3 10
2................................. 10,000-12,999........ 25,000-49,999........ 6 15
3................................. 13,000 and above..... 50,000 and above..... 9 25
----------------------------------------------------------------------------------------------------------------
The Exchange believes the proposed changes incentivizes the sending
of RUT Customer orders to the Exchange while maintaining an incremental
incentive for Customers to strive for the highest tier level.
VIX License Index Surcharge
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 December 31, 2017, at which
time the Exchange had stated that it would evaluate whether the waiver
has in fact prompted Firms to close and roll over these positions close
to expiration as intended. The Exchange believes the proposed change
has in fact continued to encourage Firms to do so and as such, proposes
to extend the waiver of the surcharge through June 30, 2018, at which
time the Exchange will again reevaluate whether the waiver has
continued to prompt Firms to close and roll over positions close to
expiration at low premium levels. Accordingly, the Exchange proposes to
delete the reference to the current waiver period of December 31, 2017
from the Fees Schedule and replace it with June 30, 2018.
Extended Trading Hour Fees
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
December 31, 2017. The Exchange also waives fees through June 30, 2018
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 June 30, 2018.
RLG, RLV, RUI, AWDE, FTEM, FXTM and UKXM Transaction Fees
In order to promote and encourage trading of seven new FTSE Russell
Index products (i.e., Russell 1000 Growth Index (``RLG''), Russell 1000
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'')), the Exchange waives
all transaction fees (including the Floor Brokerage Fee, Index License
Surcharge and CFLEX Surcharge Fee) for each of these products. This
waiver however, expired December 31, 2017. In order to continue to
promote trading of these options classes, the Exchange proposes to
extend the fee waiver through June 30, 2018.
FLEX Asian and Cliquet Flex Trader Incentive Program
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 December 31, 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 June 30, 2018
or until total average daily volume in Exotics exceeds 15,000
[[Page 3830]]
contracts for three consecutive months, whichever comes first.
AWDE, FTEM, FXTM, UKXM, RVX DPM Payment
The Exchange currently offers a compensation plan to the Designated
Primary Market-Maker(s) (``DPM(s)'') appointed in AWDE, FTEM, FXTM,
UKXM or RVX to offset the initial DPM costs. Specifically, the Fees
Schedule provides that DPM(s) appointed for an entire month in AWDE,
FTEM, FXTM or UKXM classes will receive a payment of $7,500 per class
per month, and the DPM appointed in RVX will receive a payment of
$8,500 per month, through December 31, 2017. The Exchange notes that it
plans on delisting AWDE, FTEM, FXTM and RVX shortly and therefore no
longer wishes to extend these DPM payments. The Exchange also notes
however, that it does not intend on delisting UKXM at this time and
wishes to extend the payment to help offset ongoing costs associated
with being the DPM in UKXM. The Exchange proposes to reduce the payment
to $5,000 per month through December 31, 2018.
OHS Order Cancellation Fee
The Exchange notes that the OHS (Order Handling Service) Order
Cancellation Fee used to be assessed to an executing Clearing Trading
Permit Holder (single OHS firm) for each cancelled public customer
(origin code ``C'') OHS order in excess of the number of public
customer orders that the executing Clearing Trading Permit Holder
executed in a month for itself or for a correspondent firm. However,
this fee has been set at $0.00 for some time now. The Exchange does not
intend on assessing this fee in the near future and as such, desires to
remove the fee from the Fees Schedule to avoid any confusion.
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.\22\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \23\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with
Section 6(b)(4) of the Act,\24\ 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.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78f(b).
\23\ 15 U.S.C. 78f(b)(5).
\24\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes adjusting the LP Sliding Scale volume
thresholds is reasonable because it adjusts for the current volume
trends and the Exchange's market share gains. The Exchange also notes
that the rates set forth in the LP Sliding Scale are not changing.
Rather, the rebalance of tiers still allows the Exchange to maintain an
incremental incentive for LP's to strive for the highest tier level,
which provides increasingly lower fees. The Exchange believes it is
equitable and not unfairly discriminatory because the proposed changes
to the qualifying volume thresholds apply to all LPs uniformly. The
Exchange also believes the proposed change is equitable and not
unfairly discriminatory for the reasons discussed below in the Burden
of Competition section relating to the favorable treatment of LPs.
The Exchange believes that the proposed amendments to the LP
Sliding Scale Adjustment Table thresholds are reasonable because the
amount of LP transaction fees including the proposed changes to Taker
adjustments per contract are similar and in line with the amount
assessed for similar transactions at other exchanges and because the
adjustments are still subject to a $0.50 per contract cap.\25\ The
proposed changes to the Maker rebates provide LPs additional
opportunities to qualify for a rebate they would not otherwise receive.
Additionally the proposed rule change is designed to encourage LPs to
provide and post liquidity to the Exchange. The Exchange believes that
the proposed changes are equitable and not unfairly discriminatory
because they apply to all LPs. The Exchange also notes that it believes
it's equitable and not unfairly discriminatory to assess additional
Taker fees to transactions removing liquidity from the market
(``Takers'') and not Maker volume because the Exchange wants to
continue to encourage market participation and price improvement.
---------------------------------------------------------------------------
\25\ See e.g., NYSE Arca Options Fees and Charge, Transaction
Fee for Electronic Executions--Per Contract.
---------------------------------------------------------------------------
The Exchange believes it's reasonable to eliminate the HAL Step-Up
Rebate because it is not required to provide such a rebate.
Additionally, the Exchange notes that it originally adopted the HAL
Step-Up rebate to incent Market-Makers to execute orders at Cboe
Options versus routing orders away via Linkage (as the Exchange had
been subsidizing most of the costs associated with linkage for
competitive reasons). However, the Exchange no longer subsidizes most
of the linkage costs, as routing practices have changed over the years.
Therefore, the Exchange no longer wishes to offer the rebate. The
Exchange believes it's equitable and not unfairly discriminatory
because it applies uniformly to all TPHs.
The Exchange believes adjusting VIP volume thresholds is reasonable
because it adjusts for current volume trends and given the Exchange's
market share gains. The Exchange notes that the rebalance of tiers
still allows the Exchange to maintain an incremental incentive for TPHs
to strive for the highest tier level, which provides increasingly
higher credits. This change is also equitable and not unfairly
discriminatory because it will be applied to all TPHs uniformly. The
Exchange believes adding an additional Tier is reasonable because it
provides a rebate for AIM executions, the amount of which is the same
as previously offered, albeit at a different threshold. The Exchange
believes it's reasonable to reduce the credits available for Simple and
Complex AIM executions because VIP still provides an opportunity for
TPHs to receive credits for Simple and Complex AIM orders for reaching
certain qualifying volume thresholds that they would not otherwise
receive (now just a smaller credit). The Exchange also believes it's
reasonable, equitable and not unfairly discriminatory to establish
lower credits for AIM executions than non-AIM executions under VIP
because AIM transactions are already assessed lower transaction fees
than non-AIM.\26\ The Exchange believes the proposal to provide that a
TPH will only receive the Complex credit rates for both its Complex AIM
and Non-AIM volume if at least 40% of that TPH's qualifying VIP volume
(in both AIM and Non-AIM) in the previous month was comprised of Simple
volume is reasonable because TPHs still receive credits they would not
otherwise receive. The Exchange
[[Page 3831]]
believes the proposed rule changes incentivize the sending of both
Simple and Complex orders to the Exchange. The greater liquidity and
trading opportunities of both Simple and Complex orders should benefit
not just customers (whose orders are the only ones that qualify for the
VIP) but all market participants. The Exchange believes the proposed
change is equitable and not unfairly discriminatory because it applies
to all TPHs that meet the qualifying volume thresholds.
---------------------------------------------------------------------------
\26\ See Cboe Options Fees Schedule, Equity, ETF, ETN and Index
Options (excluding Underlying Symbol List A) rate tables.
---------------------------------------------------------------------------
The Exchange believes that adding an additional tier to AVP is
reasonable because it provides LPs an additional opportunity to receive
increased discounts on their transaction fees and Trading Permit fees.
Additionally, the Exchange notes that the proposed tier is made in
conjunction with the proposal to add a tier to VIP. Moreover, enhancing
the incentives under AVP further incentivizes a Market-Maker Affiliate
to achieve the highest tier on VIP so that the Market-Maker can achieve
those higher credits, which thereby can result in greater customer
liquidity. The resulting increased volume benefits all market
participants (including Market-Makers or their affiliates who do not
achieve the higher tiers on the VIP; indeed, this increased volume may
allow them to reach these tiers). The Exchange believes reducing the
discount in Tier 2 of AVP from 20% to 15% is reasonable because it
still provides an opportunity for LPs to receive a discount they would
not otherwise receive (now just a smaller discount). The Exchange
believes the proposed changes are equitable and not unfairly
discriminatory because they apply uniformly to all Market-Makers whose
Affiliates or Appointed Affiliates meet the VIP tiers. The Exchange
also notes that any Market-Maker may enter into a relationship with an
Appointed Affiliate and thus have the opportunity to avail itself of
AVP discounts. Lastly, the Exchange believes the proposed change is
equitable and not unfairly discriminatory for the reasons discussed
below in the Burden of Competition section relating to the favorable
treatment of LPs.
Increasing the fee for electronic executions for Clearing Trading
Permit Holder Proprietary orders in Penny and Non-Penny equity, ETF,
ETN and index options (excluding Underlying Symbol List A) classes is
reasonable because the proposed fee amounts are in line with the
amounts assessed by another exchange for similar transactions.\27\ The
Exchange believes that this proposed change is also equitable and not
unfairly discriminatory because the proposed changes will apply equally
to all Clearing Trading Permit Holders.
---------------------------------------------------------------------------
\27\ See e.g., PHLX Pricing Schedule, Section II, Multiply
Listed Options Fees and NYSE Amex Options Fees Schedule, Section
I.A, Options Transaction Fees and Credits, Rates for Standard
Options Transactions.
---------------------------------------------------------------------------
The Exchange believes that the proposed increase of the Complex
Surcharge from $0.10 per contract per side to $0.12 per contract per
side is reasonable because it helps offset high credits given to
complex orders under VIP. The Exchange also notes that notwithstanding
the increase, noncustomer COA and AIM auction responses in Penny
classes continue to be capped at $0.50 per contract. The Exchange
believes the proposed change is equitable and not unfairly
discriminatory because it applies uniformly to all noncustomer orders.
The Exchange believes increasing the AIM Contra fee is reasonable
because the proposed amount of the fee is in line with the amount
assessed for similar transactions at another exchange.\28\
Additionally, as noted above AIM transactions are already assessed
lower transaction fees than non-AIM.\29\ The Exchange believes the
proposed change is equitable and not unfairly discriminatory because it
applies equally to applicable TPH transactions.
---------------------------------------------------------------------------
\28\ See PHLX Pricing Schedule, Section IV, PIXL Pricing.
\29\ See Cboe Options Fees Schedule, Equity, ETF, ETN and Index
Options (excluding Underlying Symbol List A) rate tables.
---------------------------------------------------------------------------
The Exchange believes the proposed amendments to the ORS and CORS
Programs are reasonable because the proposed changes make it easier for
Participants to receive additional payments to subsidize the costs
associated with providing certain order routing functionalities.
Additionally, the Exchange believes the subsidy helps attract order
flow to the Exchange, which brings greater liquidity and trading
opportunity, which benefits all market participants. The Exchange also
believes the proposed change is equitable and not unfairly
discriminatory because it applies equally to all participating TPHs and
Non-TPH broker dealers.
The Exchange believes adding two additional tiers, adjusting the
volume thresholds, and amending the transaction fees for each tier of
the SPX LP Sliding Scale is reasonable because the sliding scale
continues to provide incremental incentives for LPs to reach the
highest tier level and encourage trading of SPX options. Additionally,
the Exchange believes increasing SPX transaction fees for LPs is
reasonable because the Exchange has expended considerable resources
developing and maintaining SPX. The Exchange believes that this
proposed change is equitable and not unfairly discriminatory because it
applies uniformly to all LPs. The Exchange also believes that this
proposed change is equitable and not unfairly discriminatory because
although LPs still pay lower SPX transaction fees than certain other
market participants, LPs are valuable market participants that provide
liquidity in the marketplace and incur costs that other market
participants do not incur.
The Exchange believes increasing the SPX Surcharge is reasonable
because it helps offset the costs of the SPDJI License. The Exchange
notes in particular, that the proposed surcharge still does not offset
the full cost of the SPDJI License. This increase is equitable and not
unfairly discriminatory because all non-Customer market participants
will be assessed the same increased SPX Surcharge. Not applying the SPX
Surcharge to customer orders is equitable and not unfairly
discriminatory because this is designed to attract customer SPX orders,
which increases liquidity and provides greater trading opportunities to
all market participants.
The Exchange believes increasing the rates in Tiers B2 and A1 of
the Proprietary Sliding Scale (and thereby reducing the overall
discount) is reasonable because it still provides Clearing TPHs
(including their Non-TPH Affiliates) an opportunity to receive notable
discounted rates on classes in Underlying Symbol list A for reaching
certain qualifying volume thresholds that they would not otherwise
receive (now just a smaller discount). Additionally, the Exchange notes
that lower fees for executing more contracts is equitable and not
unfairly discriminatory because it provides market participants with an
incentive to execute more contracts on the Exchange. This brings
greater liquidity and trading opportunity, which benefits all market
participants. The Exchange believes that the proposed change is not
unfairly discriminatory because it will apply to all Clearing TPHs that
meet the qualifying volume thresholds. The Exchange also believes
offering lower fees under the Proprietary Sliding Scale to Clearing
TPHs and not other market participants is equitable and not unfairly
discriminatory because Clearing TPHs must take on certain obligations
and responsibilities, such as clearing and membership with the Options
Clearing Corporation, as well as significant regulatory burdens and
[[Page 3832]]
financial obligations, that other market participants are not required
to undertake.
The Exchange believes decreasing the rate in Tier 2 of the VIX
Sliding Scale (and thereby increasing the overall discount) is
reasonable because it provides Clearing TPHs (including their Non-TPH
Affiliates) an opportunity to receive an additional discounted rates in
VIX for reaching the qualifying volume threshold in VIX. The Exchange
notes that lowering the VIX fee is equitable and not unfairly
discriminatory because it provides Clearing TPHs with an incentive to
execute more VIX contracts on the Exchange. The Exchange believes that
the proposed change is not unfairly discriminatory because it will
apply to all Clearing TPHs that meet the qualifying volume threshold.
The Exchange also believes offering lower fees under the VIX Sliding
Scale to Clearing TPHs and not other market participants is equitable
and not unfairly discriminatory because Clearing TPHs must take on
certain obligations and responsibilities, such as clearing and
membership with the Options Clearing Corporation, as well as
significant regulatory burdens and financial obligations, that other
market participants are not required to undertake.
The Exchange believes adjusting the qualifying thresholds under the
Supplemental VIX Discount allows Clearing TPHs the opportunity to
obtain a discount on its VIX transaction fees at a quicker rate. The
proposed rule change is designed to encourage increased Clearing TPH
proprietary VIX options volume, which provides increased VIX options
volume and greater trading opportunities for all market participants.
Similarly, applying higher discount rates for Clearing TPHs who hit the
higher percentage of total VIX options contract proprietary volume of
all Clearing TPHs on the VIX Discount is equitable and not unfairly
discriminatory because this is designed to encourage increased TPH
proprietary VIX options volume, which provides increased VIX options
volume and greater trading opportunities for all Clearing TPHs,
including those who are not able to reach the higher volume
percentages. The Exchange believes the proposed change is equitable and
not unfairly discriminatory because it applies uniformly to all
Clearing TPHs. Additionally, as discussed above (and below in the
Burden of Competition section), Clearing TPHs have clearing obligations
that other market participants do not have.
The Exchange believes the proposal to amend the Trading Permit
thresholds under the FB TP Sliding Scale are reasonable because it
reduces Floor Broker access costs. Lower access costs may encourage
greater Floor Broker access, which thereby brings greater trading
activity, volume and liquidity, benefitting all market participants.
The Exchange believes the proposed change is equitable and not unfairly
discriminatory because it applies to all Floor Brokers.
Similarly, the Exchange believes the FB Discount is reasonable
because it provides Floor Brokers the opportunity to receive discounts
on floor brokerage fees that they otherwise would not receive.
Discounted floor brokerage rates may encourage the execution of more
orders in the classes that are currently assessed floor brokerage fees,
which should increase volume, which would benefit all market
participants (including Floor Brokers who do not hit the volume
thresholds). The Exchange believes the proposed changes are equitable
and not unfairly discriminatory because they apply to qualifying Floor
Brokers equally. The Exchange believes it's reasonable, equitable and
not unfairly discriminatory to provide that only volume that is
assessed transaction fees will be considered qualifying volume to meet
the volume thresholds because the Exchange is not collecting any floor
brokerage fees on that volume. Providing that the discounts apply only
to OEX, XEO, RUT, SPX, SPXw, VIX and volatility index options is
equitable and not unfairly discriminatory because those products
currently are assessed floor brokerage fees.\30\
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\30\ As previously noted, transaction fees for RLG, RLV, RUI,
AWDE, FTEM, FXTM, UKXM are currently waived.
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The proposed change to increase the 1 Gbps and 10 Gbps Network
Access Port fees is reasonable because the fees are within the same
range as those assessed on other exchanges,\31\ and because such
increase will assist in recouping ongoing expenditures made by the
Exchange. Additionally, as noted above, such expenditures are
increasing due to network infrastructure upgrades. This proposed change
is equitable and not unfairly discriminatory because the proposed
change will apply to all TPHs.
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\31\ See e.g., Cboe BZX Exchange, Inc., Options Exchange Fees
Schedule, Options Physical Connection Fees, which lists connectivity
fees of $2,000 per month for 1 Gbps and $6,000 per month for 10
Gbps.
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The Exchange's proposal to increase the Linkage fee from $0.10 per
contract to $0.15 per contract (in addition to applicable transaction
fees) for customer orders is reasonable because the increase will help
offset the costs associated with routing orders through Linkage.
Additionally, the proposed amount is reasonable as it is in line with
amounts charged by other Exchanges for similar transactions.\32\ The
Exchange believes it's equitable and not unfairly discriminatory
because the proposed change will apply to all customer orders that are
linked away.
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\32\ See e.g., PHLX Pricing Schedule, Section V., Customer
Routing Fees.
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The Exchange believes it's reasonable to increase the Frequent
Trader rebates for RUT because it provides Customers an opportunity to
receive increased rebates for reaching certain qualifying volume
thresholds that they would not otherwise receive. The proposed rule
change is designed to encourage greater Customer 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 also
reasonable to increase the qualifying volume thresholds for RUT as it
still allows the Exchange to maintain an incremental incentive for
Customers to strive for the highest tier level and because the Exchange
has increased the rebates for each of the tiers. The Exchange believes
it's equitable and not unfairly discriminatory to establish higher
rebates under the Frequent Trader Program for RUT as compared to SPX
and VIX options because the Exchange would like to encourage more RUT
trading. The Exchange believes that the proposed change is not unfairly
discriminatory because it will apply to all Frequent Trader Customers
and because any Customer may avail itself of the Frequent Trader
Program provided it registers with the Exchange and its executing TPH
participates. The Exchange believes it's reasonable 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
fee is being waived in its entirety and the Exchange wants to continue
encouraging Firms to roll and close over positions close to expiration
at low premium levels. The Exchange notes that without the waiver,
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
[[Page 3833]]
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. Additionally, encouraging firms to roll and
close over these positions would free up capital that the firm can then
use to benefit others. Finally, the Exchange believes it's reasonable,
equitable and not unfairly discriminatory to provide that the surcharge
will be waived through June 30, 2018, 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 June 30, 2018 is
reasonable, equitable and not unfairly discriminatory, because those
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 in order to promote and encourage
ongoing participation in ETH and also applies to all ETH TPHs.
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory 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,
because the respective fees are being waived in their entirety, which
promotes and encourages trading of these products which are still
relatively new and applies to all TPHs.
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 it is reasonable, equitable and not
unfairly discriminatory to extend the compensation plan to the DPM
appointed in UKXM to continue to offset its ongoing DPM costs and
continue to incentivize the DPM to continue to serve as a DPM in this
products. The Exchange believes it's reasonable to reduce the payment
to $5,000 because the DPM is still receiving a payment it would not
otherwise receive. The Exchange believes it's reasonable, equitable and
not unfairly discriminatory to eliminate (i.e., not extend) the DPM
payments for AWDE, FTEM, FXTM, UKXM, and RVX because the Exchange
either does not trade or plans to delist these classes shortly.
Finally, the Exchange believes eliminating the OHS Cancellation Fee
from the Fees Schedule will eliminate unnecessary language and
alleviate confusion as the fee is currently set to $0.00. The
alleviation of confusion removes impediments to and perfects the
mechanism of a free and open market and a national market system, and,
in general, protects investors and the public interest.
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. For example, Clearing TPHs
have clearing obligations that other market participants do not have.
Market-Makers 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, as they often do not
have as sophisticated trading operations and systems as other market
participants, which often makes other market participants prefer to
trade with customers. Further, the Exchange fees and rebates, both
current and those proposed to be changed, 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 changes will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
proposed changes are intended to promote competition and better improve
the Exchange's competitive position and make Cboe Options a more
attractive marketplace in order to encourage market participants to
bring increased volume to the Exchange (while still covering costs as
necessary). Further, the proposed changes only affect trading on the
Exchange. To the extent that the proposed changes make Cboe Options a
more attractive marketplace for market participants at other exchanges,
such market participants are welcome to become Cboe Options 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 \33\ and paragraph (f) of Rule 19b-4 \34\
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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\33\ 15 U.S.C. 78s(b)(3)(A).
\34\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CBOE-2018-007 on the subject line.
[[Page 3834]]
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-2018-007. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2018-007, and should be submitted
on or before February 16, 2018.
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\35\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-01367 Filed 1-25-18; 8:45 am]
BILLING CODE 8011-01-P
