Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Options Regulatory Fee, 42723-42725 [2018-18161]
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Federal Register / Vol. 83, No. 164 / Thursday, August 23, 2018 / Notices
daltland on DSKBBV9HB2PROD with NOTICES
The Nasdaq Exchanges represent that
the BX Rule 8000 and 9000 Series are
not trading rules. Moreover, the Nasdaq
Exchanges state that in each instance,
the Nasdaq Exchanges propose to
incorporate by reference categories of
rules (rather than individual rules
within a category) that are regulatory in
nature. The Nasdaq Exchanges will, as
a condition of this exemption, provide
written notice to their members
whenever BX proposes a change to its
Rule 8000 and 9000 Series.7 Such notice
will alert the members of each Nasdaq
Exchange to the proposed rule change
and give them an opportunity to
comment on the proposal. The Nasdaq
Exchanges state that they will also
inform members in writing when the
Commission approves any such
proposed changes.8
The Nasdaq Exchanges believe this
exemption is necessary and appropriate,
because it will result in the Nasdaq
Exchanges’ rules being consistent with
the relevant cross-referenced BX rules at
all times, thus ensuring that the Nasdaq
Exchanges and BX maintain a
harmonious system of investigating,
disciplining, and adjudicating the rights
of their respective members, associated
persons, and other persons subject to
their jurisdiction. Without such an
exemption, members of the Nasdaq
Exchanges and BX could become subject
to different standards for investigations
and disciplinary actions.9
The Commission has issued
exemptions similar to the Nasdaq
Exchanges’ request.10 In granting one
7 The Nasdaq Exchanges state that they will
provide such notice on their websites in the same
section they use to post their own proposed rule
change filings pursuant to Rule 19b–4(l) within the
timeframe required by such Rule. In addition, the
Nasdaq Exchanges state that their website will also
include a link to the BX website where the
proposed rule change filings are located. Id. at 3.
8 Id.
9 Id. at 2.
10 See, e.g., Securities Exchange Act Release Nos.
80338 (March 29, 2017), 82 FR 16464 (April 4,
2017) (order granting exemptive request from MIAX
PEARL, LLC relating to rules of Miami International
Securities Exchange, LLC incorporated by
reference); 72650 (July 22, 2014), 79 FR 44075 (July
29, 2014) (order granting exemptive requests from
NASDAQ OMX BX, Inc. and the NASDAQ Stock
Market LLC relating to rules of NASDAQ OMX
PHLX LLC incorporated by reference); 67256 (June
26, 2012), 77 FR 39277, 39286 (July 2, 2012) (order
approving SR–BX–2012–030 and granting
exemptive request relating to rules incorporated by
reference by the BX Options rules); 61534 (February
18, 2010), 75 FR 8760 (February 25, 2010) (order
granting BATS Exchange, Inc.’s exemptive request
relating to rules incorporated by reference by the
BATS Exchange Options Market rules) (‘‘BATS
Options Market Order’’); and 57478 (March 12,
2008), 73 FR 14521, 14539–40 (March 18, 2008)
(order approving SR–NASDAQ–2007–004 and SR–
NASDAQ–2007–080, and granting exemptive
request relating to rules incorporated by reference
by The NASDAQ Options Market).
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19:43 Aug 22, 2018
Jkt 244001
such exemption in 2010, the
Commission repeated a prior, 2004
Commission statement that it would
consider similar future exemption
requests from other self-regulatory
organizations (‘‘SROs’’), provided that:
• An SRO wishing to incorporate
rules of another SRO by reference has
submitted a written request for an order
exempting it from the requirement in
Section 19(b) of the Exchange Act to file
proposed rule changes relating to the
rules incorporated by reference, has
identified the applicable originating
SRO(s), together with the rules it wants
to incorporate by reference, and
otherwise has complied with the
procedural requirements set forth in the
Commission’s release governing
procedures for requesting exemptive
orders pursuant to Rule 0–12 under the
Exchange Act; 11
• The incorporating SRO has
requested incorporation of categories of
rules (rather than individual rules
within a category) that are not trading
rules (e.g., the SRO has requested
incorporation of rules such as margin,
suitability, or arbitration); and
• The incorporating SRO has
reasonable procedures in place to
provide written notice to its members
each time a change is proposed to the
incorporated rules of another SRO.12
The Commission believes that the
Nasdaq Exchanges have satisfied each of
these conditions. The Commission also
believes that granting the Nasdaq
Exchanges an exemption from the rule
filing requirements under Section 19(b)
of the Exchange Act will promote
efficient use of Commission and Nasdaq
Exchange resources by avoiding
duplicative rule filings based on
simultaneous changes to identical rule
text sought by more than one SRO.13
The Commission therefore finds it
appropriate in the public interest and
consistent with the protection of
investors to exempt the Nasdaq
Exchanges from the rule filing
requirements under Section 19(b) of the
Exchange Act with respect to the abovedescribed rules they have incorporated
by reference. This exemption is
11 See 17 CFR 240.0–12 and Securities Exchange
Act Release No. 39624 (February 5, 1998), 63 FR
8101 (February 18, 1998) (‘‘Commission Procedures
for Filing Applications for Orders for Exemptive
Relief Pursuant to Section 36 of the Exchange Act;
Final Rule’’).
12 See BATS Options Market Order, supra note 10
(citing Securities Exchange Act Release No. 49260
(February 17, 2004), 69 FR 8500 (February 24, 2004)
(order granting exemptive request relating to rules
incorporated by reference by several SROs) (‘‘2004
Order’’)).
13 See BATS Options Market Order, supra note
10, 75 FR at 8761; see also 2004 Order, supra note
12, 69 FR at 8502.
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42723
conditioned upon the Nasdaq
Exchanges promptly providing written
notice to their members whenever the
BX changes a rule that the Nasdaq
Exchanges have incorporated by
reference.
Accordingly, it is ordered, pursuant to
Section 36 of the Exchange Act,14 that
the Nasdaq Exchanges are exempt from
the rule filing requirements of Section
19(b) of the Exchange Act solely with
respect to changes to the rules identified
in their request that incorporate by
reference certain BX rules that are the
result of changes to such BX rules,
provided that the Nasdaq Exchanges
promptly provide written notice to their
members whenever the BX proposes to
change a rule that the Nasdaq Exchanges
have incorporated by reference.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–18278 Filed 8–22–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83876; File No. SR–C2–
2018–017]
Self-Regulatory Organizations; Cboe
C2 Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the Options
Regulatory Fee
August 17, 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 August 9,
2018, Cboe C2 Exchange, Inc. (the
‘‘Exchange’’ or ‘‘C2’’) 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 relating to the Options
Regulatory Fee.
The text of the proposed rule change
is also available on the Exchange’s
14 15
U.S.C. 78mm.
CFR 200.30–3(a)(76).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
15 17
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42724
Federal Register / Vol. 83, No. 164 / Thursday, August 23, 2018 / Notices
website (https://www.c2exchange.com/
Legal/), 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.
daltland on DSKBBV9HB2PROD with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to decrease
the Options Regulatory Fee (‘‘ORF’’)
from $.0014 per contract to $.0011 per
contract in order to help ensure that
revenue collected from the ORF, in
combination with other regulatory fees
and fines, meets the Exchange’s total
regulatory costs.3
The ORF is assessed by C2 Options to
each Trading Permit Holder (‘‘TPH’’) for
options transactions cleared by the TPH
that are cleared by the Options Clearing
Corporation (OCC) in the customer
range, regardless of the exchange on
which the transaction occurs. In other
words, the Exchange imposes the ORF
on all customer-range transactions
cleared by a TPH, even if the
transactions do not take place on the
Exchange. The ORF is collected by OCC
on behalf of the Exchange from the
Clearing Trading Permit Holder
(‘‘CTPH’’) or non-CTPH that ultimately
clears the transaction. With respect to
linkage transactions, C2 Options
reimburses its routing broker providing
Routing Services pursuant to C2
Options Rule 6.15 for options regulatory
fees it incurs in connection with the
Routing Services it provides.
Revenue generated from ORF, when
combined with all of the Exchange’s
other regulatory fees and fines, is
designed to recover a material portion of
the regulatory costs to the Exchange of
the supervision and regulation of TPH
3 The Exchange initially filed the proposed fee
change on August 1, 2018 (SR–C2–2018–016) for
August 1, 2018 effectiveness. On business date
August 9, 2018, the Exchange withdrew that filing
and submitted this filing.
VerDate Sep<11>2014
19:43 Aug 22, 2018
Jkt 244001
customer options business. Regulatory
costs include direct regulatory expenses
and certain indirect expenses for work
allocated in support of the regulatory
function. The direct expenses include
in-house and third party service
provider costs to support the day to day
regulatory work such as surveillances,
investigations and examinations. The
indirect expenses include support from
such areas as human resources, legal,
information technology and accounting.
These indirect expenses are estimated to
be approximately 6% of C2 Options’
total regulatory costs for 2018. Thus,
direct expenses are estimated to be
approximately 94% of total regulatory
costs for 2018. In addition, it is C2
Options’ practice that revenue generated
from ORF not exceed more than 75% of
total annual regulatory costs. These
expectations are estimated, preliminary
and may change. There can be no
assurance that our final costs for 2018
will not differ materially from these
expectations and prior practice;
however, the Exchange believes that
revenue generated from the ORF, when
combined with all of the Exchange’s
other regulatory fees and fines, will
cover a material portion, but not all, of
the Exchange’s regulatory costs.
The Exchange also notes that its
regulatory responsibilities with respect
to TPH compliance with options sales
practice rules have largely been
allocated to FINRA under a 17d-2
agreement.4 The ORF is not designed to
cover the cost of that options sales
practice regulation.
The Exchange will continue to
monitor the amount of revenue
collected from the ORF to ensure that it,
in combination with its other regulatory
fees and fines, does not exceed the
Exchange’s total regulatory costs. The
Exchange monitors its regulatory costs
and revenues at a minimum on a semiannual basis. If the Exchange
determines regulatory revenues exceed
or are insufficient to cover a material
portion of its regulatory costs, the
Exchange will adjust the ORF by
submitting a fee change filing to the
Commission. The Exchange notifies
TPHs of adjustments to the ORF via
regulatory circular. The Exchange
endeavors to provide TPHs with such
notice at least 30 calendar days prior to
the effective date of the change.
The Exchange lastly proposes a
couple of minor clean up changes to the
Fees Schedule. Particularly, the ORF is
listed as being $.0015 per contract
through January 31, 2018 and $0.0014
4 See Securities Exchange Act Release No. 76309
(October 29, 2015), 80 FR 68361 (November 4,
2015).
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
per contract effective February 1, 2018.
As these dates have passed and the ORF
is now simply $0.0011 per contract, the
Exchange proposes to delete the
reference to the ORF being $0.0015 per
contract through January 31, 2018 and
the February 1, 2018 effective date of
the $0.0014 per contract ORF.
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.5 Specifically,
the Exchange believes the proposed rule
change is consistent with Section 6(b)(4)
of the Act,6 which provides that
Exchange rules may provide for the
equitable allocation of reasonable dues,
fees, and other charges among its TPHs
and other persons using its facilities.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 7 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange believes the proposed
fee change is reasonable because it
would help ensure that revenue
collected from the ORF, in combination
with other regulatory fees and fines,
does not exceed the Exchange’s total
regulatory costs. Moreover, the
Exchange believes the ORF ensures
fairness by assessing higher fees to those
TPHs that require more Exchange
regulatory services based on the amount
of customer options business they
conduct. Regulating customer trading
activity is much more labor intensive
and requires greater expenditure of
human and technical resources than
regulating non-customer trading
activity, which tends to be more
automated and less labor-intensive. As a
result, the costs associated with
administering the customer component
of the Exchange’s overall regulatory
program are materially higher than the
costs associated with administering the
non-customer component (e.g., TPH
proprietary transactions) of its
regulatory program.8 The Exchange
believes the proposed fee change is
equitable and not unfairly
discriminatory in that it is charged to all
5 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
7 15 U.S.C. 78f(b)(5).
8 If the Exchange changes its method of funding
regulation or if circumstances otherwise change in
the future, the Exchange may decide to modify the
ORF or assess a separate regulatory fee on TPH
proprietary transactions if the Exchange deems it
advisable.
6 15
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Federal Register / Vol. 83, No. 164 / Thursday, August 23, 2018 / Notices
TPHs on all their transactions that clear
in the customer range at the OCC.
The Exchange believes the proposal to
eliminate obsolete language with respect
to past ORF rates maintains clarity in
the rules and alleviates potential
confusion, thereby protecting investors
and the public interest.
IV. Solicitation of Comments
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Electronic Comments
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. This
proposal does not create an unnecessary
or inappropriate intra-market burden on
competition because the ORF applies to
all customer activity, thereby raising
regulatory revenue to offset regulatory
expenses. It also supplements the
regulatory revenue derived from noncustomer activity. This proposal does
not create an unnecessary or
inappropriate inter-market burden on
competition because it is a regulatory
fee that supports regulation in
furtherance of the purposes of the Act.
The Exchange is obligated to ensure that
the amount of regulatory revenue
collected from the ORF, in combination
with its other regulatory fees and fines,
does not exceed regulatory costs.
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.
daltland on DSKBBV9HB2PROD with NOTICES
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 9 and paragraph (f) of Rule
19b–4 10 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.
9 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
19:43 Aug 22, 2018
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–18161 Filed 8–22–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
• 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 No. SR–C2–
2018–017 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File No.
SR–C2–2018–017. 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 No.
SR–C2–2018–017, and should be
submitted on or before September 13,
2018.
[Release No. 34–83870; File No. SR–CBOE–
2018–056]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing of a
Proposed Rule Change To Adopt
Exchange Rule 6.57, Risk-Weighted
Assets (‘‘RWA’’) Transactions
August 17, 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 August 8,
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
rules to adopt Rule 6.57 to facilitate the
reduction of SPX options positions
maintained by Cboe Options MarketMakers.
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
1 15
10 17
VerDate Sep<11>2014
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:
11 17
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CFR 200.30–3(a)(12).
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42725
Sfmt 4703
2 17
E:\FR\FM\23AUN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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]]>Agencies
[Federal Register Volume 83, Number 164 (Thursday, August 23, 2018)]
[Notices]
[Pages 42723-42725]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-18161]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83876; File No. SR-C2-2018-017]
Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Options Regulatory Fee
August 17, 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 August 9, 2018, Cboe C2 Exchange, Inc. (the ``Exchange'' or
``C2'') 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 relating to the
Options Regulatory Fee.
The text of the proposed rule change is also available on the
Exchange's
[[Page 42724]]
website (https://www.c2exchange.com/Legal/), at the Exchange's Office of
the Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to decrease the Options Regulatory Fee
(``ORF'') from $.0014 per contract to $.0011 per contract in order to
help ensure that revenue collected from the ORF, in combination with
other regulatory fees and fines, meets the Exchange's total regulatory
costs.\3\
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed fee change on
August 1, 2018 (SR-C2-2018-016) for August 1, 2018 effectiveness. On
business date August 9, 2018, the Exchange withdrew that filing and
submitted this filing.
---------------------------------------------------------------------------
The ORF is assessed by C2 Options to each Trading Permit Holder
(``TPH'') for options transactions cleared by the TPH that are cleared
by the Options Clearing Corporation (OCC) in the customer range,
regardless of the exchange on which the transaction occurs. In other
words, the Exchange imposes the ORF on all customer-range transactions
cleared by a TPH, even if the transactions do not take place on the
Exchange. The ORF is collected by OCC on behalf of the Exchange from
the Clearing Trading Permit Holder (``CTPH'') or non-CTPH that
ultimately clears the transaction. With respect to linkage
transactions, C2 Options reimburses its routing broker providing
Routing Services pursuant to C2 Options Rule 6.15 for options
regulatory fees it incurs in connection with the Routing Services it
provides.
Revenue generated from ORF, when combined with all of the
Exchange's other regulatory fees and fines, is designed to recover a
material portion of the regulatory costs to the Exchange of the
supervision and regulation of TPH customer options business. Regulatory
costs include direct regulatory expenses and certain indirect expenses
for work allocated in support of the regulatory function. The direct
expenses include in-house and third party service provider costs to
support the day to day regulatory work such as surveillances,
investigations and examinations. The indirect expenses include support
from such areas as human resources, legal, information technology and
accounting. These indirect expenses are estimated to be approximately
6% of C2 Options' total regulatory costs for 2018. Thus, direct
expenses are estimated to be approximately 94% of total regulatory
costs for 2018. In addition, it is C2 Options' practice that revenue
generated from ORF not exceed more than 75% of total annual regulatory
costs. These expectations are estimated, preliminary and may change.
There can be no assurance that our final costs for 2018 will not differ
materially from these expectations and prior practice; however, the
Exchange believes that revenue generated from the ORF, when combined
with all of the Exchange's other regulatory fees and fines, will cover
a material portion, but not all, of the Exchange's regulatory costs.
The Exchange also notes that its regulatory responsibilities with
respect to TPH compliance with options sales practice rules have
largely been allocated to FINRA under a 17d-2 agreement.\4\ The ORF is
not designed to cover the cost of that options sales practice
regulation.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 76309 (October 29,
2015), 80 FR 68361 (November 4, 2015).
---------------------------------------------------------------------------
The Exchange will continue to monitor the amount of revenue
collected from the ORF to ensure that it, in combination with its other
regulatory fees and fines, does not exceed the Exchange's total
regulatory costs. The Exchange monitors its regulatory costs and
revenues at a minimum on a semi-annual basis. If the Exchange
determines regulatory revenues exceed or are insufficient to cover a
material portion of its regulatory costs, the Exchange will adjust the
ORF by submitting a fee change filing to the Commission. The Exchange
notifies TPHs of adjustments to the ORF via regulatory circular. The
Exchange endeavors to provide TPHs with such notice at least 30
calendar days prior to the effective date of the change.
The Exchange lastly proposes a couple of minor clean up changes to
the Fees Schedule. Particularly, the ORF is listed as being $.0015 per
contract through January 31, 2018 and $0.0014 per contract effective
February 1, 2018. As these dates have passed and the ORF is now simply
$0.0011 per contract, the Exchange proposes to delete the reference to
the ORF being $0.0015 per contract through January 31, 2018 and the
February 1, 2018 effective date of the $0.0014 per contract ORF.
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.\5\ Specifically, the
Exchange believes the proposed rule change is consistent with Section
6(b)(4) of the Act,\6\ which provides that Exchange rules may provide
for the equitable allocation of reasonable dues, fees, and other
charges among its TPHs and other persons using its facilities.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \7\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4).
\7\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed fee change is reasonable because
it would help ensure that revenue collected from the ORF, in
combination with other regulatory fees and fines, does not exceed the
Exchange's total regulatory costs. Moreover, the Exchange believes the
ORF ensures fairness by assessing higher fees to those TPHs that
require more Exchange regulatory services based on the amount of
customer options business they conduct. Regulating customer trading
activity is much more labor intensive and requires greater expenditure
of human and technical resources than regulating non-customer trading
activity, which tends to be more automated and less labor-intensive. As
a result, the costs associated with administering the customer
component of the Exchange's overall regulatory program are materially
higher than the costs associated with administering the non-customer
component (e.g., TPH proprietary transactions) of its regulatory
program.\8\ The Exchange believes the proposed fee change is equitable
and not unfairly discriminatory in that it is charged to all
[[Page 42725]]
TPHs on all their transactions that clear in the customer range at the
OCC.
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\8\ If the Exchange changes its method of funding regulation or
if circumstances otherwise change in the future, the Exchange may
decide to modify the ORF or assess a separate regulatory fee on TPH
proprietary transactions if the Exchange deems it advisable.
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The Exchange believes the proposal to eliminate obsolete language
with respect to past ORF rates maintains clarity in the rules and
alleviates potential confusion, thereby protecting investors and the
public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. This proposal does not create
an unnecessary or inappropriate intra-market burden on competition
because the ORF applies to all customer activity, thereby raising
regulatory revenue to offset regulatory expenses. It also supplements
the regulatory revenue derived from non-customer activity. This
proposal does not create an unnecessary or inappropriate inter-market
burden on competition because it is a regulatory fee that supports
regulation in furtherance of the purposes of the Act. The Exchange is
obligated to ensure that the amount of regulatory revenue collected
from the ORF, in combination with its other regulatory fees and fines,
does not exceed regulatory costs.
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 \9\ and paragraph (f) of Rule 19b-4 \10\
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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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 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 No. SR-C2-2018-017 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File No. SR-C2-2018-017. 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 No. SR-C2-2018-017, and should be submitted on or
before September 13, 2018.
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\11\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-18161 Filed 8-22-18; 8:45 am]
BILLING CODE 8011-01-P
