Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Options Regulatory Fee, 40452-40454 [2019-17385]
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40452
Federal Register / Vol. 84, No. 157 / Wednesday, August 14, 2019 / Notices
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executing clearing firm or ultimate
clearing firm. The Exchange does not
assess the ORF to non-Members. Once,
however, the ORF is assessed to a
Member for a particular transaction, the
ORF may be collected from the Member
or a non-Member, depending on how
the transaction is cleared at OCC. If
there was no change to the clearing
account of the original transaction, the
ORF would be collected from the
Member. If there was a change to the
clearing account of the original
transaction and a non-Member becomes
the ultimate clearing firm for that
transaction, then the ORF will be
collected from that non-Member. The
Exchange believes that this collection
practice continues to be reasonable and
appropriate, and was originally
instituted for the benefit of clearing
firms that desired to have the ORF be
collected from the clearing firm that
ultimately clears the transaction.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
MIAX Emerald 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, and is designed to
enable the Exchange to recover a
material portion of the Exchange’s cost
related to its regulatory activities. It also
supplements the regulatory revenue
derived from non-customer activity.
This proposal does not create an
unnecessary or inappropriate intermarket 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. Unilateral
action by MIAX Emerald in establishing
fees for services provided to its
Members and others using its facilities
will not have an impact on competition.
As a new entrant in the highly
competitive environment for equity
options trading, MIAX Emerald does not
have the market power necessary to set
prices for services that are unreasonable
or unfairly discriminatory in violation
of the Act. The Exchange’s ORF, as
described herein, is comparable to fees
charged by other options exchanges for
the same or similar services. The
Exchange believes that continuing to
limit the changes to the ORF to twice a
year on specific dates with advance
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Jkt 247001
notice is not intended to address a
competitive issue but rather to provide
Members with better notice of any
change that the Exchange may make to
the ORF.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
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)(ii) of the Act,14 and Rule
19b–4(f)(2) 15 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 shall
institute proceedings to determine
whether the proposed rule 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–
EMERALD–2019–29 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–EMERALD–2019–29. 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–EMERALD–2019–29, 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. 2019–17386 Filed 8–13–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86605; File No. SR–C2–
2019–018]
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 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 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
16 17
14 15
U.S.C. 78s(b)(3)(A)(ii).
15 17 CFR 240.19b–4(f)(2).
PO 00000
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CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 84, No. 157 / Wednesday, August 14, 2019 / Notices
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 C2 Exchange, Inc. (the
‘‘Exchange’’ or ‘‘C2 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://markets.cboe.com/us/
options/regulation/rule_filings/ctwo/),
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
jspears on DSK3GMQ082PROD with NOTICES
1. Purpose
The Exchange proposes to increase
the Options Regulatory Fee (‘‘ORF’’)
from $0.0012 per contract to $0.0013 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 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
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18:56 Aug 13, 2019
Jkt 247001
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 4% of C2 Options’
total regulatory costs for 2019. Thus,
direct expenses are estimated to be
approximately 96% of total regulatory
costs for 2019. In addition, it is C2
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.3 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 $0.0012
per contract side to $0.0013 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
3 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 C2 Options Regulatory
Circular RG19–023 ‘‘Modification of the Options
Regulatory Fee.’’
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40453
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.4
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.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 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
4 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.
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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40454
Federal Register / Vol. 84, No. 157 / Wednesday, August 14, 2019 / Notices
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.8 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.
jspears on DSK3GMQ082PROD with NOTICES
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.
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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18:56 Aug 13, 2019
Jkt 247001
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.
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–C2–
2019–018 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–C2–2019–018. 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–C2–2019–018, and should be
submitted on or before September 4,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–17385 Filed 8–13–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86610; File No. SR–Phlx–
2019–27]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend SCAR Credits
at Equity 7, Section 3(a)
August 8, 2019.
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 July 25,
2019, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘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
SCAR credits at Equity 7, Section 3(a),
as described further below. While these
amendments are effective upon filing,
the Exchange has designated the
proposed amendments to be operative
on August 1, 2019. The text of the
proposed rule change is available on the
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
9 15
U.S.C. 78s(b)(3)(A).
10 17 CFR 240.19b–4(f).
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]]>Agencies
[Federal Register Volume 84, Number 157 (Wednesday, August 14, 2019)]
[Notices]
[Pages 40452-40454]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-17385]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86605; File No. SR-C2-2019-018]
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 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 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
[[Page 40453]]
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
Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2 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://markets.cboe.com/us/options/regulation/rule_filings/ctwo/), 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 $0.0012 per contract to $0.0013 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 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
4% of C2 Options' total regulatory costs for 2019. Thus, direct
expenses are estimated to be approximately 96% of total regulatory
costs for 2019. In addition, it is C2 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.\3\ 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
$0.0012 per contract side to $0.0013 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 material
portion, but not all, of the Exchange's regulatory costs.\4\
---------------------------------------------------------------------------
\3\ 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 C2 Options Regulatory Circular RG19-023
``Modification of the Options Regulatory Fee.''
\4\ 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.\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.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4).
\7\ 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
[[Page 40454]]
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 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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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 \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-C2-2019-018 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-C2-2019-018. 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-C2-2019-018, and should be submitted on or
before September 4, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-17385 Filed 8-13-19; 8:45 am]
BILLING CODE 8011-01-P
