Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Options Regulatory Fee, 40445-40447 [2019-17384]

Download as PDF Federal Register / Vol. 84, No. 157 / Wednesday, August 14, 2019 / Notices 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–PEARL–2019–23, and should be submitted on or before September 4, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–17387 Filed 8–13–19; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–86604; File No. SR–CBOE– 2019–040] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Options Regulatory Fee jspears on DSK3GMQ082PROD with NOTICES August 8, 2019. 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 1, 2019, 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. CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 217 CFR 240.19b–4. 18:56 Aug 13, 2019 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. 1. Purpose The Exchange proposes to increase the Options Regulatory Fee (‘‘ORF’’) from $0.0045 per contract to $0.0046 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. The ORF is assessed by Cboe 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.3 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, Cboe Options 3 The ORF also applies to customer-range transactions executed during Extended Trading Hours. 115 VerDate Sep<11>2014 Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) proposes to amend its Fees Schedule relating to the Options Regulatory Fee. 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/CBOELegal RegulatoryHome.aspx), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION 16 17 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Jkt 247001 PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 40445 reimburses its routing broker providing Routing Services pursuant to Cboe Options Rule 6.14B 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 10% of Cboe Options’ total regulatory costs for 2019. Thus, direct expenses are estimated to be approximately 90% of total regulatory costs for 2019. In addition, it is Cboe Options’ practice that revenue generated from ORF not exceed more than 75% of total annual 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 also notifies TPHs of adjustments to the ORF via regulatory circular.4 Based on the Exchange’s most recent semi-annual review, the Exchange is proposing to increase the amount of ORF that will be collected by the Exchange from $0.0045 per contract side to $0.0046 per contract side. The proposed increase is based on the Exchange’s estimated projections for its regulatory costs, balanced with recent options volumes. These expectations are estimated, preliminary and may change. There can be no assurance that the Exchange’s final costs for 2019 will not differ materially from these expectations and prior practice, nor can the Exchange predict with certainty whether options volume will remain at the current level going forward; however, the Exchange believes that revenue generated from the 4 The Exchange endeavors to provide TPHs with such notice at least 30 calendar days prior to the effective date of the change. The Exchange notified TPHs of the proposed rate change for August 1, 2019 on June 25, 2019. See Cboe Options Regulatory Circular RF19–023 ‘‘Modification of the Options Regulatory Fee.’’ E:\FR\FM\14AUN1.SGM 14AUN1 40446 Federal Register / Vol. 84, No. 157 / Wednesday, August 14, 2019 / Notices ORF (as amended), when combined with all of the Exchange’s other regulatory fees and fines, would cover a material portion, but not all, of the Exchange’s regulatory costs.5 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. 2. Statutory Basis jspears on DSK3GMQ082PROD with NOTICES The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ‘‘Act’’) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.6 Specifically, the Exchange believes the proposed rule change is consistent with Section 6(b)(4) of the Act,7 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) 8 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 the modest increase is necessary to offset the anticipated regulatory costs, and which, in combination with other regulatory fees and fines, still is not expected to exceed the Exchange’s total regulatory costs. The Exchange has designed the ORF to generate revenues that would be less than or equal to 75% of the Exchange’s regulatory costs, which is consistent with the view of the Commission that regulatory fees be used for regulatory purposes and not to support the Exchange’s business side. As discussed above, the Exchange determined to increase ORF after its semi-annual review of its regulatory costs and regulatory revenues, which includes revenues from ORF and other regulatory fees and fines. When taking into account recent options volume, coupled with the anticipated regulatory fees, the Exchange believes it’s reasonable to increase the ORF amount by $0.0001 per contract side. 5 The Exchange 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. The ORF is not designed to cover the cost of that options sales practice regulation. 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(4). 8 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 18:56 Aug 13, 2019 Jkt 247001 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 noncustomer trading activity, which tends to be more automated and less laborintensive. 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 noncustomer component (e.g., TPH proprietary transactions) of its regulatory program.9 The Exchange believes the proposed fee change is equitable and not unfairly discriminatory in that it is charged to all TPHs on all their transactions that clear in the customer range at the OCC. 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 noncustomer activity. The Exchange notes, however, the proposed change is not designed to address any competitive issues. Indeed, 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. 9 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. PO 00000 Frm 00065 Fmt 4703 Sfmt 4703 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 10 and paragraph (f) of Rule 19b–4 11 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 No. SR– CBOE–2019–040 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–CBOE–2019–040. 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 10 15 11 17 E:\FR\FM\14AUN1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). 14AUN1 Federal Register / Vol. 84, No. 157 / Wednesday, August 14, 2019 / Notices 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–CBOE–2019–040, and should be submitted on or before September 4, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–17384 Filed 8–13–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–86611; File No. SR– CboeEDGX–2019–051] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Options Regulatory Fee August 8, 2019. jspears on DSK3GMQ082PROD with NOTICES 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 1, 2019, Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) 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 Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) proposes to amend its fee schedule related to the Options Regulatory Fee. 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 12 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 18:56 Aug 13, 2019 Jkt 247001 website (https://markets.cboe.com/us/ options/regulation/rule_filings/edgx/), 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 modify the fee schedule applicable to the Exchange’s options platform (‘‘EDGX Options’’) to amend the rate of its Options Regulatory Fee (‘‘ORF’’).3 Currently, the Exchange charges an ORF in the amount of $0.0001 per contract side. The Exchange proposes to increase the amount of ORF from $0.0001 per contract side to $0.0002 per contract side. The proposed change to ORF should continue to balance the Exchange’s regulatory expenses against the anticipated revenue. The ORF is assessed by the Exchange on each Member for options transactions cleared by the Member 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 Member, 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 Member or non-Clearing Member that ultimately clears the transaction. With respect to linkage transactions, the Exchange reimburses its routing broker providing Routing Services for options regulatory fees it incurs in connection with the Routing Services it provides. 3 The Exchange initially filed the proposed fee change on August 1, 2018 (SR–CboeEDGX–2018– 028) for August 1, 2018 effectiveness. On business date August 9, 2018, the Exchange withdrew that filing and submitted this filing. [sic] PO 00000 Frm 00066 Fmt 4703 Sfmt 4703 40447 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 Member 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 37% of EDGX Options’ total regulatory costs for 2019. Thus, direct expenses are estimated to be approximately 63% of total regulatory costs for 2019. In addition, it is EDGX Options’ practice that revenue generated from ORF not exceed more than 75% of total annual 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 also notifies Members of adjustments to the ORF via regulatory circular.4 Based on the Exchange’s most recent semi-annual review, the Exchange is proposing to increase the amount of ORF that will be collected by the Exchange from $0.0001 per contract side to $0.0002 per contract side. The proposed increase is based on the Exchange’s estimated projections for its regulatory costs, balanced with recent options volumes. These expectations are estimated, preliminary and may change. There can be no assurance that the Exchange’s final costs for 2019 will not differ materially from these expectations and prior practice, nor can the Exchange predict with certainty whether options volume will remain at the current level going forward; however, the Exchange believes that revenue generated from the ORF (as amended), when combined with all of the Exchange’s other regulatory fees and fines, would cover a 4 The Exchange provides Members with such notice at least 30 calendar days prior to the effective date of the change. The Exchange notified Members of the proposed rate change for August 1, 2019 on June 25, 2019. See EDGX Regulatory Circular RG19– 020 ‘‘Modification of the Options Regulatory Fee.’’ E:\FR\FM\14AUN1.SGM 14AUN1

Agencies

[Federal Register Volume 84, Number 157 (Wednesday, August 14, 2019)]
[Notices]
[Pages 40445-40447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-17384]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86604; File No. SR-CBOE-2019-040]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Options Regulatory Fee

August 8, 2019.
    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 1, 2019, 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to amend its Fees Schedule relating to the Options Regulatory Fee. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to increase the Options Regulatory Fee 
(``ORF'') from $0.0045 per contract to $0.0046 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.
    The ORF is assessed by Cboe 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.\3\ 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, Cboe Options reimburses its routing broker providing 
Routing Services pursuant to Cboe Options Rule 6.14B for options 
regulatory fees it incurs in connection with the Routing Services it 
provides.
---------------------------------------------------------------------------

    \3\ The ORF also applies to customer-range transactions executed 
during Extended Trading Hours.
---------------------------------------------------------------------------

    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 
10% of Cboe Options' total regulatory costs for 2019. Thus, direct 
expenses are estimated to be approximately 90% of total regulatory 
costs for 2019. In addition, it is Cboe Options' practice that revenue 
generated from ORF not exceed more than 75% of total annual 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 also notifies TPHs of 
adjustments to the ORF via regulatory circular.\4\ Based on the 
Exchange's most recent semi-annual review, the Exchange is proposing to 
increase the amount of ORF that will be collected by the Exchange from 
$0.0045 per contract side to $0.0046 per contract side. The proposed 
increase is based on the Exchange's estimated projections for its 
regulatory costs, balanced with recent options volumes. These 
expectations are estimated, preliminary and may change. There can be no 
assurance that the Exchange's final costs for 2019 will not differ 
materially from these expectations and prior practice, nor can the 
Exchange predict with certainty whether options volume will remain at 
the current level going forward; however, the Exchange believes that 
revenue generated from the

[[Page 40446]]

ORF (as amended), when combined with all of the Exchange's other 
regulatory fees and fines, would cover a material portion, but not all, 
of the Exchange's regulatory costs.\5\
---------------------------------------------------------------------------

    \4\ The Exchange endeavors to provide TPHs with such notice at 
least 30 calendar days prior to the effective date of the change. 
The Exchange notified TPHs of the proposed rate change for August 1, 
2019 on June 25, 2019. See Cboe Options Regulatory Circular RF19-023 
``Modification of the Options Regulatory Fee.''
    \5\ The Exchange 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. 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.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\6\ Specifically, the 
Exchange believes the proposed rule change is consistent with Section 
6(b)(4) of the Act,\7\ 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) \8\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

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

    The Exchange believes the proposed fee change is reasonable because 
the modest increase is necessary to offset the anticipated regulatory 
costs, and which, in combination with other regulatory fees and fines, 
still is not expected to exceed the Exchange's total regulatory costs. 
The Exchange has designed the ORF to generate revenues that would be 
less than or equal to 75% of the Exchange's regulatory costs, which is 
consistent with the view of the Commission that regulatory fees be used 
for regulatory purposes and not to support the Exchange's business 
side. As discussed above, the Exchange determined to increase ORF after 
its semi-annual review of its regulatory costs and regulatory revenues, 
which includes revenues from ORF and other regulatory fees and fines. 
When taking into account recent options volume, coupled with the 
anticipated regulatory fees, the Exchange believes it's reasonable to 
increase the ORF amount by $0.0001 per contract side.
    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.\9\ The Exchange 
believes the proposed fee change is equitable and not unfairly 
discriminatory in that it is charged to all TPHs on all their 
transactions that clear in the customer range at the OCC.
---------------------------------------------------------------------------

    \9\ 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.
---------------------------------------------------------------------------

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. The Exchange 
notes, however, the proposed change is not designed to address any 
competitive issues. Indeed, 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 \10\ and paragraph (f) of Rule 19b-4 \11\ 
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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File No. SR-CBOE-2019-040 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-CBOE-2019-040. 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

[[Page 40447]]

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-CBOE-
2019-040, and should be submitted on or before September 4, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-17384 Filed 8-13-19; 8:45 am]
BILLING CODE 8011-01-P
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