[Federal Register Volume 78, Number 4 (Monday, January 7, 2013)]
[Notices]
[Pages 931-932]
[FR Doc No: 2013-00018]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Project No. 2686-074]

Duke Energy Carolinas, LLC; Notice of Application Accepted For
Filing, Soliciting Comments, Motions To Intervene, and Protests

    Take notice that the following hydroelectric application has been
filed with the Commission and is available for public inspection:
    a. Application Type: Shoreline Management Plan.
    b. Project No: 2686-074.
    c. Date Filed: June 29, 2012.
    d. Applicant: Duke Energy Carolinas, LLC.
    e. Name of Project: West Fork Project.
    f. Location: The West Fork Project is located on the West Fork of
the Tuckasegee River in Jackson County, North Carolina. The project
does not occupy any federal lands.
    g. Filed Pursuant to: Federal Power Act, 16 U.S.C. 791a-825r.
    h. Applicant Contact: Dennis J. Whitaker, Manager, Northern Region,
Duke Energy Lake Services, Duke Energy Carolinas, LLC, P.O. Box 1006,1
Charlotte, NC 28201; Phone:<PHONE_NUMBER>.
    i. FERC Contact: Jade Alvey at<PHONE_NUMBER>, or email:
<EMAIL_ADDRESS>    j. Deadline for filing comments, motions to intervene, and
protests: January 22, 2013.
    All documents may be filed electronically via the Internet. See 18
CFR 385.2001(a)(1)(iii) and the instructions on the Commission's Web
site at http://www.ferc.gov/docs-filing/efiling.asp. Commenters can
submit brief comments up to 6,000 characters, without prior
registration, using the eComment system at http://www.ferc.gov/docs-filing/ecomment.asp. You must include your name and contact information
at the end of your comments. For assistance, please contact FERC Online
Support at<EMAIL_ADDRESS>or toll

free at 1-866-208-3676, or for TTY,<PHONE_NUMBER>. Although the
Commission strongly encourages electronic filing, documents may also be
paper-filed. To paper-file, mail an original and seven copies to:
Secretary, Federal Energy Regulatory Commission, 888 First Street NE.,
Washington, DC 20426. Please include the project number (P-2686-074) on
any comments, motions, or recommendations filed.
    The Commission's Rules of Practice and Procedure require all
intervenors filing documents with the Commission to serve a copy of
that document on each person whose name appears on the official service
list for the project. Further, if an intervenor files comments or
documents with the Commission relating to the merits of an issue that
may affect the responsibilities of a particular resource agency, they
must also serve a copy of the document on that resource agency.
    k. Description of Request: As required by article 408 of the
license, Duke Energy Carolinas, LLC requests Commission approval of a
proposed shoreline management plan (SMP) for the project. The SMP
defines shoreline management classifications for the shorelines within
the project boundary, identifies allowable uses and prohibited uses
within the shoreline areas, and describes the shoreline use evaluation
process.
    l. Locations of the Application: A copy of the application is
available for inspection and reproduction at the Commission's Public
Reference Room, located at 888 First Street, NE., Room 2A, Washington,
DC 20426, or by calling<PHONE_NUMBER>. This filing may also be viewed
on the Commission's Web site at http://www.ferc.gov using the
``eLibrary'' link. Enter the docket number excluding the last three
digits in the docket number field (P-2686) to access the document. You
may also register online at http://www.ferc.gov/docs-filing/esubscription.asp to be notified via email of new filings and issuances
related to this or other pending projects. For assistance, call 1-866-
208-3676 or email<EMAIL_ADDRESS>for TTY, call (202) 502-
8659. A copy is also available for inspection and reproduction at the
address in item (h) above.
    m. Individuals desiring to be included on the Commission's mailing
list should so indicate by writing to the Secretary of the Commission.
    n. Comments, Protests, or Motions to Intervene: Anyone may submit
comments, a protest, or a motion to intervene in accordance with the
requirements of Rules of Practice and Procedure, 18 CFR 385.210, .211,
.214, respectively. In determining the appropriate action to take, the
Commission will consider all protests or other comments filed, but only
those who file a motion to intervene in accordance with the
Commission's Rules may become a party to the proceeding. Any comments,
protests, or motions to intervene must be received on or before the
specified comment date for the particular application.
    o. Filing and Service of Documents: Any filing must (1) bear in all
capital letters the title ``COMMENTS'', ``PROTEST'', or ``MOTION TO
INTERVENE'' as applicable; (2) set forth in the heading the name of the
applicant and the project number of the application to which the filing
responds; (3) furnish the name, address, and telephone number of the
person commenting, protesting or intervening; and (4) otherwise comply
with the requirements of 18 CFR 385.2001 through 385.2005. All
comments, motions to intervene, or protests must set forth their
evidentiary basis. Any filing made by an intervenor must be accompanied
by proof of service on all persons listed in the service list prepared
by the Commission in this proceeding, in accordance with 18 CFR
385.2010.

    Dated: December 21, 2012.
Kimberly D. Bose,
Secretary.
[FR Doc. 2013-00018 Filed 1-4-13; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register: June 7, 2007 (Volume 72, Number 109)]
[Notices]
[Page 31631-31636]
[DOCID:fr07jn07-118]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27843; 813-306]

Stephens Inc., et al.; Notice of Application

May 29, 2007.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under sections 6(b) and
6(e) of the Investment Company Act of 1940 (the ``Act'') granting an
exemption from all provisions of the Act, except section 9 and sections
36 through 53, and the rules and regulations under the Act. With
respect to sections 17 and 30 of the Act, and the rules and regulations
thereunder, and rule 38a-1 under the Act, the exemption is limited as
set forth in the application.

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Summary of Application: Applicants request an order to exempt certain
limited liability companies and other entities (``Companies'') formed
for the benefit of key employees of Stephens Inc. (``Stephens'') and
its affiliates from certain provisions of the Act. Each Company will be
an ``employees' securities company'' within the meaning of section
2(a)(13) of the Act.

Applicants: Stephens; Stephens Investment Partners 2001 LLC, Stephens
Investment Partners 2001A LLC, Stephens Investment Partners 2001B LLC,
Stephens Investment Partners 2001C LLC, Stephens Investment Partners
2003 LLC, Stephens Investment

Partners 2003A LLC, Stephens Investment Partners 2003B LLC, Stephens
Investment Partners 2004 LLC, Stephens Investment Partners 2004A LLC,
Stephens Investment Partners 2004B LLC, Stephens Investment Partners
2006 LLC, Stephens Investment Partners 2006A LLC, and Stephens
Investment Partners 2006B LLC (collectively, the ``Initial
Companies'').

Filing Dates: The application was filed on October 4, 2000, and amended
on February 22, 2007 and April 27, 2007. Applicants have agreed to file
an amendment during the notice period, the substance of which is
reflected in this notice.

Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on June 25, 2007, and should be accompanied by proof of service on
applicants, in the form of an affidavit or, for lawyers, a certificate
of service. Hearing requests should state the nature of the writer's
interest, the reason for the request, and the issues contested. Persons
who wish to be notified of a hearing may request notification by
writing to the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090; Applicants, 111 Center Street, Suite
2300, Little Rock, AR 72201.

FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at
(202) 551-6811 or Mary Kay Frech, Branch Chief, at<PHONE_NUMBER>
(Division of Investment Management, Office of Investment Company
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference Branch, 100 F Street, NE., Washington, DC
20549-0102 (telephone<PHONE_NUMBER>).

Applicants' Representations

    1. Stephens is an investment banking firm organized under the laws
of the State of Arkansas. Stephens is a wholly owned subsidiary of SI
Holdings Inc., a holding company for a limited number of financial and
insurance related companies. Stephens engages in municipal
underwriting, mergers and acquisitions, corporate underwriting, private
placements, trading, discretionary portfolio management, and offers a
full range of investment banking services. Stephens is a broker-dealer
registered under the Securities Exchange Act of 1934 (the ``Exchange
Act'') and an investment adviser registered under the Investment
Advisers Act of 1940 (the ``Advisers Act''). Stephens and its
``affiliates,'' as defined in rule 12b-2 under the Exchange Act, are
referred to collectively as the ``Stephens Group'' and each entity
within the Stephens Group is referred to individually as a ``Stephens
Group Entity.''
    2. Stephens has established the Initial Companies as limited
liability companies organized under the laws of the state of Arkansas
and may in the future establish additional pooled investment vehicles
identical in all material respects to the Initial Companies (other than
investment objectives and strategies and form of organization) (the
``Subsequent Companies'' and collectively with the Initial Companies,
the ``Companies'') for the benefit of current or former key employees,
officers, directors and consultants of the Stephens Group and certain
entities and individuals affiliated with employees of the Stephens
Group (``Members''). The Companies are designed primarily to create
capital building opportunities that are competitive with those at other
investment banking firms for the Members and to facilitate the
recruitment and retention of high caliber professionals.
    3. Each Company will operate as a closed-end, management investment
company and may be diversified or non-diversified. The Initial
Companies are organized in a ``master-feeder'' structure, in which
several feeder Companies invest all of their assets in a master Company
(``Master Company'') that invests directly or indirectly in portfolio
companies. Each Company, including the Master Company, will be an
``employees' securities company'' within the meaning of section
2(a)(13) of the Act. The investment objectives and policies for each
Company may vary from Company to Company. Participation in the
Companies is voluntary, except with respect to Plan Interest Holders
(as defined below) who will receive an award of interests in the
Companies on an involuntary basis (as described below).
    4. The Initial Companies are managed by a committee of ten managers
(collectively, the ``Managers''). Each Manager is a senior executive of
Stephens and an Accredited Investor (as defined below) who is eligible
to invest in a Company. It is currently anticipated that Subsequent
Companies will be managed by the Managers, however, Stephens may in the
future organize one or more Stephens Group Entities to serve as the
Manager of one or more Subsequent Companies. The Managers will register
as investment advisers under the Advisers Act, if required under
applicable law.
    5. Interests in the Companies (``Interests'') will be offered
without registration in reliance on section 4(2) of the Securities Act
of 1933 (the ``Securities Act'') or Regulation D under the Securities
Act, and will be offered and sold only to (a) certain officers,
directors, employees and ``Consultants'' \1\ of the Stephens Group who
meet the standards set forth below (``Stephens Employees''), and (b)
trusts or other investment vehicles of which the trustees or grantors
are Stephens Employees or Stephens Employees together with their
Qualified Family Members (as defined below), trusts or other investment
vehicles established solely for the benefit of Stephens Employees or
their Qualified Family Members, or partnerships, corporations or other
entities all of the voting power of which is controlled by Stephens
Employees (``Qualified Investment Vehicles'' and collectively with
Stephens Employees, ``Eligible Investors''). Qualified Family Members
include any parent, child, spouse of a child, spouse, brother, sister
or grandchild, and includes any step and adoptive relationships. Each
Eligible Investor must have, in the reasonable belief of the Managers,
the knowledge, sophistication and experience in business and financial
matters to be capable of evaluating the merits and risks of investing
in a Company and be able to bear the economic risk of such investment,
and be able to afford a complete loss of the investment. In the future,
Stephens Group Entities may invest in a Company and Interests in a
Company may be offered and sold to Qualified Family Members.
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    \1\ A ``Consultant'' is a person or entity whom a Stephens Group
Entity has engaged on retainer to provide services and professional
expertise on an ongoing basis as a regular consultant or as a
business or legal adviser and who shares a community of interest
with the Stephens Group and its employees.
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    6. To be a Stephens Employee, an individual must (a) meet the
standards of an accredited investor under rule 501(a)(5) or 501(a)(6)
of Regulation D under the Securities Act (an ``Accredited Investor'')
or (b) be one of 35 Stephens Employees who (i) is a Managing Employee
(as defined below) or (ii) has a minimum of three years business
experience in management, consulting, accounting, finance, law or

investment banking; will have a reportable income from all sources
(including any profit share or bonus) in the calendar year immediately
preceding his or her admission as a Member of at least $100,000 and a
reasonable expectation of reportable income of at least $100,000 in
each year in which he or she invests in a Company; and has a graduate
degree in business, law, finance or accounting (``Sophisticated
Employee''); except that a Managing Employee who is an Accredited
Investor is not counted toward the 35 employee limit referred to in (b)
above. A Managing Employee is an employee of Stephens Group who meets
the definition of ``knowledgeable employee'' in rule 3c-5(a)(4) under
the Act (with the Company treated as though it were a ``Covered
Company'' for purposes of the rule). Each Sophisticated Employee will
not be permitted to invest in any year more than 10% of such person's
income from all sources for the immediately preceding year in the
aggregate in a Company and in all other Companies in which he or she
has previously invested.
    7. To be a Stephens Employee, an entity must (a) be a current or
former Consultant of a Stephens Group Entity and (b) meet the standards
of an accredited investor under rule 501(a) of Regulation D. To be a
Qualified Family Member, a person must be an Accredited Investor. A
Stephens Employee or a Qualified Family Member may purchase an Interest
through a Qualified Investment Vehicle only if either (a) the Qualified
Investment Vehicle is an accredited investor, or (b) the Qualified
Investment Vehicle, which is not an accredited investor, (i) has a
Stephens Employee or Qualified Family Member as the settlor \2\ and
principal investment decision-maker, and (ii) is counted toward the
limit on the 35 non-accredited investors that may invest in a Company.
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    \2\ If a Qualified Investment Vehicle is an entity other than a
trust, the reference to ``settler'' shall be construed to mean a
person who created the vehicle, alone or together with others, and
who contributed funds to the vehicle.
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    8. Certain employees of the Stephens Group who do not qualify as
Eligible Investors may receive Interests from Stephens without payment
as part of an employee benefit plan in order to reward and retain these
employees (``Plan Interest Holders''). Interests awarded to Plan
Interest Holders will not be registered under the Securities Act and,
because these employees will not be investing their own funds and will
not have discretion over whether or not they receive Interests, these
employees will not meet the sophistication and salary requirements to
which Eligible Investors are subject. Plan Interest Holders will
receive Interests at no cost and will neither make, nor be permitted to
make, any financial contribution in order to acquire Interests. Plan
Interest Holders will not be permitted to elect to receive an
equivalent cash payment or other compensation in lieu of Interests.
Plan Interest Holders will have no control or input as to whether they
are awarded Interests, and the Interests given to Plan Interest Holders
will not replace any part of, or reduce in any manner, the compensation
of, or other benefits provided to, the Plan Interest Holders.
    9. The investment objectives and strategies for each Company will
be set forth in offering documents relating to the Interests offered by
the Company. Prior to being invited to participate in a Company or
receiving an Interest in a Company, each Eligible Investor or Plan
Interest Holder will receive a copy of the offering documents and the
operating agreement (or other organizational document) of the Company
or an offering memorandum, which will set forth all the terms of
participation in the Company. The Managers will send an annual report
to each Member not later than 120 days after the close of the fiscal
year, which will contain financial statements of the Company that have
been audited by independent accountants. In addition, the Members will
receive at least annually all information necessary to enable the
Members to prepare their federal and state income tax returns.
    10. Interests in the Companies will be non-transferable by a Member
except with the express consent of the Managers or to the Eligible
Investor's estate in the event of his or her death. No person will be
admitted as a Member of a Company unless the person is an Eligible
Investor, a Plan Interest Holder, a Stephens Group Entity, a Qualified
Family Member, or a Qualified Investment Vehicle, except that a legal
representative may hold an Interest in order to settle the estate of a
deceased Member or administer its property. No fee of any kind will be
charged in connection with the sale of Interests.
    11. A Member's Interests in a Company may be subject to a vesting
schedule that will provide that such Interests will initially be
unvested or only partially vested and will vest over time at specified
percentages and specified intervals as set out in the Company's
operating agreement or other constitutive document. A Member's
Interests in a Company will be subject to repurchase or cancellation
if: (a) The Member's employment relationship with the Stephens Group is
terminated for cause, (b) the Member becomes a consultant to or joins
any firm that the Managers determine, in their reasonable discretion,
is competitive with any business of the Stephens Group, or (c) the
Member voluntarily resigns from employment with the Stephens Group.
Upon the occurrence of one of the events specified above, the relevant
Company or a Stephens Group Entity will have the right to repurchase
all of the terminating Member's Interests in exchange for a payment
equal to the amount actually paid by the Member to acquire the
Interests less the fair market value of any distributions received by
that Member from the Fund, plus interest. This repurchase right also
applies upon any attempted transfer of Interests (whether vested or
not) in violation of the transfer restrictions. Following termination
where the Company's repurchase option does not apply, the terminating
Member (or, following the death of the Member, the Member's estate or
beneficiary) has the right to continue to hold the Interests purchased
or awarded prior to termination and to receive distributions on the
same terms as other Interest holders in the relevant Companies.
    12. Certain of the Companies may leverage their investments through
loans from a Stephens Group Entity. Each such Company loan will be made
at an interest rate no less favorable than that which could be obtained
on an arm's length basis. The Companies will not borrow from any person
if the borrowing would cause any person not named in section 2(a)(13)
of the Act to own outstanding securities of the Company (other than
short-term paper). Any Company loan made to a Company will be non-
recourse to the Members.
    13. A Company will not acquire any security issued by a registered
investment company if immediately after the acquisition, the Company
would own more than 3% of the outstanding voting stock of the
registered investment company.
    14. The Managers may charge the Companies an administrative fee or
a management fee, including a performance fee.\3\ The Managers may
receive reimbursement of their out-of-pocket expenses, including

reimbursement for the allocable portion of the salaries of the Stephens
Group employees who participate in any of the Companies' affairs.
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    \3\ Any performance fee payable by a Company to the Managers may
be charged only to the extent permitted by rule 205-3 under the
Advisers Act (in the case of Managers registered under the Advisers
Act) or will comply with section 205(b)(3) of the Advisers Act (in
the case of Managers exempt from registration under the Advisers
Act), with the Company treated as a business development company
solely for the purpose of that section.
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Applicants' Legal Analysis

    1. Section 6(b) of the Act provides, in part, that the Commission
will exempt employees' securities companies from the provisions of the
Act to the extent that the exemption is consistent with the protection
of investors. Section 6(b) provides that the Commission will consider,
in determining the provisions of the Act from which the company should
be exempt, the company's form of organization and capital structure,
the persons owning and controlling its securities, the price of the
company's securities and the amount of any sales load, how the
company's funds are invested, and the relationship between the company
and the issuers of the securities in which it invests. Section 2(a)(13)
defines an employees' securities company as any investment company all
of whose securities (other than short-term paper) are beneficially
owned (a) by current or former employees, or persons on retainer, of
one or more affiliated employers, (b) by immediate family members of
such persons, or (c) by such employer or employers together with any of
the persons in (a) or (b).
    2. Section 7 of the Act generally prohibits investment companies
that are not registered under section 8 of the Act from selling or
redeeming their securities. Section 6(e) provides that, in connection
with any order exempting an investment company from any provision of
section 7, certain provisions of the Act, as specified by the
Commission, will be applicable to the company and other persons dealing
with the company as though the company were registered under the Act.
Applicants request an order under sections 6(b) and 6(e) of the Act
exempting the Companies from all provisions of the Act, except section
9 and sections 36 through 53 of the Act, and the rules and regulations
under the Act. With respect to sections 17 and 30 of the Act, and the
rules and regulations thereunder, and rule 38a-1 under the Act, the
exemption is limited as set forth in the application.
    3. Section 17(a) generally prohibits any affiliated person of a
registered investment company, or any affiliated person of an
affiliated person, acting as principal, from knowingly selling or
purchasing any security or other property to or from the company.
Applicants request an exemption from section 17(a) to permit: (a) A
Stephens Group Entity, or an affiliated person of a Stephens Group
Entity (``Stephens Affiliate''), acting as principal, to engage in any
transaction directly or indirectly with any Company or any entity
controlled by the Company; (b) a Company to invest in or engage in any
transaction with any entity, acting as principal (i) in which the
Company, any company controlled by the Company or any entity in which a
Stephens Group Entity has invested or will invest or (ii) with which
the Company, any company controlled by the Company, or a Stephens Group
Entity is or will otherwise become affiliated; (c) a partner or other
investor in any entity in which a Company invests, acting as principal,
to engage in transactions directly or indirectly with a Company or any
company controlled by a Company; or (d) a sale by a Company as a
selling security holder in a public offering in which a Stephens Group
Entity or a Stephens Affiliate acts as a member of the selling group.
    4. Applicants state that an exemption from section 17(a) is
consistent with the protection of investors and the purposes of the
Act. Applicants state that the Members in each Company will be informed
of the possible extent of the Company's dealings with Stephens Group
Entities and of the potential conflicts of interest that may exist.
Applicants also state that, as professionals engaged in the investment
banking business, the Members will be able to understand and evaluate
the attendant risks. Applicants assert that the community of interest
among the Members and Stephens will serve to reduce any risk of abuse
in transactions involving a Company and a Stephens Group Entity.
    5. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
any affiliated person or principal underwriter of a registered
investment company, or any affiliated person of an affiliated person or
principal underwriter, acting as principal, from participating in any
joint arrangement unless authorized by the Commission. Applicants
request relief to permit affiliated persons of each Company, or
affiliated persons of such persons, to participate in any joint
arrangement in which the Company or an entity controlled by the Company
is a participant.
    6. Applicants submit that it is likely that suitable investments
will be brought to the attention of a Company because of its
affiliation with the Stephens Group and Stephen Group's experience in
investment and merchant banking. Applicants also submit that the types
of investment opportunities considered by a Company often require each
investor to make funds available in an amount that may be substantially
greater than what a Company may make available on its own. Applicants
contend that, as a result, the only way in which a Company may be able
to participate in these opportunities may be to co-invest with other
persons, including its affiliates. Applicants note that each Company
will be primarily organized for the benefit of Members as an incentive
for them to remain with the Stephens Group and for the generation and
maintenance of goodwill. Applicants believe that, if co-investments
with the Stephens Group Entities are prohibited, the appeal of the
Companies would be substantially eliminated.
    7. Applicants state that the possibility that permitting co-
investments by a Stephens Group Entity and a Company might lead to less
advantageous treatment of the Company is mitigated by (a) the community
of interest between the Stephens Group and the Members in the Company
and (b) the fact that officers and directors of Stephens Group Entities
will be investing in the Company. In addition, applicants assert that
compliance with section 17(d) could cause a Company to forego
attractive investment opportunities simply because an affiliated person
of the Company has made, or may make, the same investment.
    8. Section 17(e) of the Act and rule 17e-1 under the Act limit the
compensation an affiliated person may receive when acting as agent or
broker for a registered investment company. Applicants request an
exemption from section 17(e) to permit a Stephens Group Entity, acting
as agent or broker, to receive placement fees, advisory fees, or other
compensation from a Company in connection with the purchase or sale by
a Company of securities, subject to the requirement that the fees or
other compensation must be deemed ``usual and customary.'' Applicants
state that for the purposes of the application, fees or other
compensation that is charged or received by a Stephens Group Entity
will be deemed ``usual and customary'' only if (a) the Company is
purchasing or selling securities alongside other unaffiliated third
parties who also are similarly purchasing or selling securities, (b)
the fees or compensation being charged to the Company are also being
charged to the unaffiliated third parties, and (c) the amount of
securities being purchased or sold by the Company does not exceed 50%
of the total amount of securities being purchased or sold by the
Company and the unaffiliated third parties. Applicants assert that,
because the Stephens Group does not wish it to appear as if it is

favoring the Companies, compliance with section 17(e) would prevent a
Company from participating in a transaction where the Company is being
charged lower fees than the unaffiliated third parties. Applicants
assert that the fees or other compensation paid by a Company to a
Stephens Group Entity will be the same as those negotiated at arm's
length with unaffiliated third parties.
    9. Rule 17e-1(b) requires that a majority of directors who are not
``interested persons'' (as defined by section 2(a)(19) of the Act) take
actions and make approvals regarding commissions, fees, or other
remuneration. Rule 17e-1(c) requires each Company to comply with the
fund governance standards defined in rule 0-1(a)(7). Applicants request
an exemption from rule 17e-1(b) to the extent necessary to permit each
Company to comply with the rule without having a majority of the
Managers of the Company who are not interested persons take actions and
make determinations as set forth in the rule. Applicants state that
because the Managers of a Company will be deemed interested persons of
the Company, without the relief requested, a Company could not comply
with rule 17e-1(b). Applicants state that each Company will comply with
rule 17e-1(b) by having a majority of the Managers take actions and
make approvals as set forth in rule 17e-1. Applicants also request an
exemption from rule 17e-1(c). Applicants state that each Company will
otherwise comply with the requirements of rule 17e-1.
    10. Section 17(f) designates the entities that may act as
investment company custodians, and rule 17f-1 imposes certain
requirements when the custodian is a member of a national securities
exchange. Applicants request an exemption from section 17(f) and rule
17f-1(a) to permit Stephens to act as custodian of a Company's assets
without a written contract. Applicants also request an exemption from
the rule 17f-1(b)(4) requirement that an independent accountant
periodically verify the assets held by the custodian. Applicants
further request an exemption from rule 17f-1(c)'s requirement of
transmitting to the Commission a copy of any contract executed pursuant
to rule 17f-1. Applicants believe that, because of the community of
interest between the Stephens Group and the Companies and the existing
requirement for an independent audit, compliance with these
requirements would be unnecessary. Applicants state that they will
comply with rule 17f-1(d), provided that ratification by the Managers
of any Company will be deemed to be ratification by a majority of the
board of directors of that Company. Applicants state that each Company
will comply with all other requirements of rule 17f-1.
    11. Section 17(g) and rule 17g-1 generally require the bonding of
officers and employees of a registered investment company who have
access to its securities or funds. Rule 17g-1 requires that a majority
of directors who are not interested persons take certain actions and
give certain approvals relating to fidelity bonding. Paragraph (g) of
rule 17g-1 sets forth certain materials relating to the fidelity bond
that must be filed with the Commission and certain notices relating to
the fidelity bond that must be given to each member of the investment
company's board of directors. Paragraph (h) of rule 17g-1 provides that
an investment company must designate one of its officers to make the
filings and give the notices required by paragraph (g). Paragraph (j)
of rule 17g-1 exempts a joint insured bond provided and maintained by
an investment company and one or more other parties from section 17(d)
of the Act and the rules thereunder. Rule 17g-1(j)(3) requires that the
board of directors of an investment company satisfy the fund governance
standards defined in rule 0-1(a)(7). Applicants request an exemption
from section 17(g) and rule 17g-1 to the extent necessary to permit
each Company to comply with rule 17g-1 without the necessity of having
a majority of the disinterested directors take such action and make the
determinations set forth in the rule. Specifically, each Company will
comply with rule 17g-1 by having the Managers take such actions and
make such approvals as are set forth in rule 17g-1. Applicants state
that, because the Managers will be interested persons of each Company,
a Company could not comply with rule 17g-1 without the requested
relief. Applicants also request an exemption from the requirements of
rule 17g-1(g) and (h) relating to the filing of copies of fidelity
bonds and related information with the Commission and provision of
notices to the board of directors and from the requirements of rule
17g-1(j)(3). Applicants believe the filing requirements are burdensome
and unnecessary as applied to the Companies. The Managers will maintain
the materials otherwise required to be filed with the Commission by
rule 17g-1(g) and agree that all such material will be subject to
examination by the Commission and its staff. The Managers will
designate a person to maintain the records otherwise required to be
filed with the Commission under paragraph (g) of the rule. Applicants
also state that the notices otherwise required to be give to the board
of directors would be unnecessary as the Companies will not have boards
of directors. The Companies will comply with all other requirements of
rule 17g-1.
    12. Section 17(j) and paragraph (b) of rule 17j-1 make it unlawful
for certain enumerated persons to engage in fraudulent or deceptive
practices in connection with the purchase or sale of a security held or
to be acquired by a registered investment company. Rule 17j-1 also
requires that every registered investment company adopt a written code
of ethics and that every access person of a registered investment
company report personal securities transactions. Applicants request an
exemption from the provisions of rule 17j-1, except for the anti-fraud
provisions of paragraph (b), because they are unnecessarily burdensome
as applied to the Companies.
    13. Applicants request an exemption from the requirements in
sections 30(a), 30(b) and 30(e), and the rules under those sections,
that registered investment companies prepare and file with the
Commission and mail to their shareholders certain periodic reports and
financial statements. Applicants contend that the forms prescribed by
the Commission for periodic reports have little relevance to the
Companies and would entail administrative and legal costs that outweigh
any benefit to the Members. Applicants request exemptive relief to the
extent necessary to permit each Company to report annually to its
Members. Applicants also request also an exemption from section 30(h)
to the extent necessary to exempt the Managers of each Company and any
other person who may be deemed to be a member of an advisory board of a
Company from filing Forms 3, 4, and 5 under section 16(a) of the
Exchange Act with respect to their ownership of Interests in a Company.
Applicants assert that, because there will be no trading market and the
transfers of Interests will be severely restricted, these filings are
unnecessary for the protection of investors and burdensome to those
required to make them.
    14. Rule 38a-1 requires investment companies to adopt, implement
and periodically review written policies and procedures reasonably
designed to prevent violation of the federal securities laws and to
appoint a chief compliance officer. Each Company will comply with rule
38a-1(a), (c) and (d), except that (a) because the Companies

do not have boards of directors, the Managers of each Company will
fulfill the responsibilities assigned to a Company's board of directors
under the rule, and (b) because all Managers would be considered
interested persons of the Companies, approval by a majority of
disinterested directors required by rule 38a-1 will not be obtained.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will
be subject to the following conditions:
    1. Each proposed transaction involving a Company otherwise
prohibited by section 17(a) or section 17(d) of the Act and rule 17d-1
thereunder (each, a ``Section 17 Transaction'') will be effected only
if the Managers determine that:
    (a) The terms of the Section 17 Transaction, including the
consideration to be paid or received, are fair and reasonable to the
Members and do not involve overreaching of the Company or its Members
on the part of any person concerned; and
    (b) the Section 17 Transaction is consistent with the interests of
the Members, the Company's organizational documents and the Company's
reports to its Members.
    In addition, the Managers will record and preserve a description of
all Section 17 Transactions, their findings, the information or
materials upon which their findings are based, and the basis therefor.
All such records will be maintained for the life of the Companies and
at least six years thereafter, and will be subject to examination by
the Commission and its staff. Each Company will preserve the accounts,
books, and other documents required to be maintained in an easily
accessible place for the first two years.
    2. In connection with the Section 17 Transactions, the Managers
will adopt, and periodically review and update, procedures designed to
ensure that reasonable inquiry is made, before the consummation of any
such transaction, with respect to the possible involvement in the
transaction of any affiliated person or promoter of or principal
underwriter for the Companies, or any affiliated person of an
affiliated person, promoter, or principal underwriter.
    3. The Managers of each Company will not invest the funds of any
Company in any investment in which an Affiliated Co-Investor (as
defined below) has acquired or proposes to acquire the same class of
securities of the same issuer, where the investment involves a joint
enterprise or other joint arrangement within the meaning of rule 17d-1
in which the Company and an Affiliated Co-Investor are participants,
unless any such Affiliated Co-Investor, prior to disposing of all or
part of its investment, (a) gives the Managers sufficient, but not less
than one day's, notice of its intent to dispose of its investment and
(b) refrains from disposing of its investment unless the Company has
the opportunity to dispose of the Company's investment prior to or
concurrently with, on the same terms as, and pro rata with the
Affiliated Co-Investor. The term ``Affiliated Co-Investor'' with
respect to a Company means: (a) An ``affiliated person,'' as such term
is defined in the Act, of the Company; (b) the Stephens Group; (c) an
officer, director or employee of the Stephens Group; (d) an investment
vehicle offered, sponsored or managed by the Stephens Group, or (e) an
entity in which a member of the Stephens Group acts as a general
partner or has a similar capacity to control the sale or other
disposition of the entity's securities. The restrictions contained in
this condition, however, will not be deemed to limit or prevent the
disposition of an investment by an Affiliated Co-Investor: (a) To its
direct or indirect wholly-owned subsidiary, to any company (a
``Parent'') of which the Affiliated Co-Investor is a direct or indirect
wholly-owned subsidiary, or to a direct or indirect wholly-owned
subsidiary of its Parent; (b) to Immediate Family Members of the
Affiliated Co-Investor or a trust established for any Affiliated Co-
Investor or any such family member; or (c) when the investment is
comprised of securities that are (i) listed on any national securities
exchange registered under section 6 of the Exchange Act; (ii) national
market system securities pursuant to section 11A(a)(2) of the Exchange
Act and rule 11Aa2-1 thereunder; or (iii) government securities as
defined in section 2(a)(16) of the Act.
    4. Each Company and its Managers will maintain and preserve, for
the life of each Company and at least six years thereafter, all
accounts, books, and other documents as constitute the record forming
the basis for the audited financial statements that are to be provided
to the Members, and each annual report of such Company required to be
sent to the Members, and agree that all such records will be subject to
examination by the Commission and its staff.\4\
---------------------------------------------------------------------------

    \4\ Each Company will preserve the accounts, books and other
documentsrequired to be maintained in an easily accessible place for
the first two years.
---------------------------------------------------------------------------

    5. The Managers will send to each Member who had an Interest in the
Company, at any time during the fiscal year then ended, Company
financial statements that have been audited by that Company's
independent accountants. At the end of each fiscal year, the Managers
will make a valuation or have a valuation made of all of the assets of
the Company as of such fiscal year end in a manner consistent with
customary practice with respect to the valuation of assets of the kind
held by the Company. In addition, within 120 days after the end of each
fiscal year of the Company or as soon as practicable thereafter, the
Managers of the Company shall send a report to each person who was a
Member at any time during the fiscal year then ended setting forth tax
information necessary for the preparation by the Member of his or her
federal and state income tax returns and a report of the investment
activities of the Company during that year.
    6. Whenever a Company makes a purchase from or sale to an entity
that is affiliated with the Company by reason of a Stephens Group
director, officer, or employee (a) serving as an officer, director,
general partner or investment adviser of the entity or (b) having a 5%
or more investment in the entity, that individual will not participate
in the determination by the Managers of whether or not to effect the
purchase or sale.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-10924 Filed 6-6-07; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 86, Number 219 (Wednesday, November 17, 2021)]
[Notices]
[Pages 64283-64290]
[FR Doc No: 2021-25016]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93552; File No. SR-CBOE-2021-065]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule

November 10, 2021.
    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 November 1, 2021, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the Exchange. The
Commission is publishing this

notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------

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

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

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend its Fees Schedule. The text of the proposed rule change is
provided in Exhibit 5.
    The text of the proposed rule change is also available on the
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend its Fees Schedule in connection
with: The Global Trading Hours (``GTH'') Executing Agent Subsidy
Program; surcharges applicable to Non-Customer orders executed in long-
term index options series (``LEAPS'') for S&P 500 Index (``SPX'')
options; a waiver applicable to transaction fees for Customer orders
executed in Cboe Volatility Index (``VIX'') options during GTH; and the
GTH VIX/VIX Weekly (``VIXW'') Lead Market-Maker (``LMM'') Incentive
Program, effective November 1, 2021.
GTH Executing Agent Subsidy Program
    The proposed rule change amends the GTH Executing Agent Subsidy
Program to adopt volume-based tiers that correspond to increasingly
higher subsidies. In particular, the GTH Executing Agent Subsidy
Program offers a monthly subsidy to Trading Permit Holders (``TPHs'')
with executing agent operations \3\ during the GTH trading session.
Pursuant to the current program, a designated GTH executing agent will
receive a $5,000 monthly subsidy if it executes at least 1,000
contracts executed on behalf of customers (including public and broker-
dealer customers) during GTH in a calendar month. To become a
designated GTH executing agent, a TPH must submit a form to the
Exchange no later than 3:00 p.m. on the second to last business day of
a calendar month to be designated an GTH executing agent under the
program, and thus eligible for the subsidy, beginning the following
calendar month. The TPH must include on or with the form information
demonstrating it maintains an GTH executing agent operation: (1)
Physically staffed throughout each entire GTH trading session and (2)
willing to accept and execute orders on behalf of customers, including
customers for which the agent does not hold accounts. The designation
will be effective the first business day of the following calendar
month, subject to the Exchange's confirmation the TPH's GTH executing
agent operations satisfies these two conditions and will remain in
effect until the Exchange receives an email from the TPH terminating
its designation or the Exchange determines the TPH's GTH executing
agent operation no longer satisfies these two conditions. Within two
business days following the end of a calendar month, in order to
receive the subsidy for that month, the designated GTH executing agent
must submit to the Exchange (in a form and manner determined by the
Exchange) documentation and other evidence it executed at least 1,000
contracts on behalf of customers during GTH that month.
---------------------------------------------------------------------------

    \3\ An executing agent operation is one that accepts orders from
customers (who may be public or broker-dealer customers and
including customers for which the agent does not hold accounts) and
submits the orders for execution (either directly to the Exchange or
through another TPH).
---------------------------------------------------------------------------

    As stated above, the Exchange now proposes to adopt volume-based
tiers that correspond to increasingly higher monthly subsidies for
designated GTH executing agents. Specifically, as proposed, a
designated GTH executing agent will receive the monthly subsidy amount
that corresponds to the number of contracts executed on behalf of
customers (including public and broker-dealer customers) during GTH in
a calendar month per the GTH Executing Agent Subsidy Program table, as
follows:

------------------------------------------------------------------------
                GTH monthly customer volume                    Subsidy
------------------------------------------------------------------------
0-999 contracts............................................        $0.00
1,000-4,999 contracts......................................        5,000
5,000-29,999 contracts.....................................       15,000
30,000+ contracts..........................................       20,000
------------------------------------------------------------------------

    The proposed rule change removes the language related to the
requirement that a designated GTH executing agent must submit to the
Exchange (in a form and manner determined by the Exchange)
documentation and other evidence of the number of contracts it executed
on behalf of customers in a month, as the Exchange has automated the
process for documenting this for designated GTH executing agents each
month. The current timing, process, requirements and all other
documentation applicable to designated GTH executing agent under the
GTH Executing Agent Subsidy Program will continue to apply in the same
manner.
    The proposed volume-based tiers are designed to encourage
designated GTH executing agents to increase their order flow executed
as agent in the symbols that trade during GTH (SPX and VIX) to meet the
proposed volume thresholds in order to receive the proposed
corresponding subsidies, as the proposed tiers present additional
opportunities for designated GTH agents to receive larger subsidies
than that which is currently offered by the program. As such, the
proposed tiers may also incentivize more TPHs to become designated GTH
executing agents that may submit customer (including public and broker-
dealer customer) order flow during GTH to meet the proposed volume
thresholds and receive the corresponding subsidies. The Exchange notes
that incentivizing TPHs to conduct executing agent operations willing
to accept orders from all customers during GTH is designed to increase
customer accessibility to the GTH trading session. The Exchange
believes that increased order flow through designated GTH executing
agents would allow the Exchange to grow participation during GTH, which
may benefit all market participants, as additional liquidity to the
Exchange during GTH would create more trading opportunities during GTH,
and in turn attract market participants to submit additional order flow
during GTH.
SPX LEAPS Surcharge
    The Exchange intends to begin listing SPX LEAPS options with
expirations more than three years out on November 1, 2021. Index LEAPS
are index options series that expire from 12 to 180 months

from the date of issuance.\4\ In connection with the planned listing of
SPX LEAPS options, the Exchange proposes to adopt surcharge fees for
Non-Customer \5\ orders executed in SPX LEAPS options that vary
according to time-to-expiration in Rate Table--Underlying Symbol List A
of the Fees Schedule, as follows:
---------------------------------------------------------------------------

    \4\ See Rule 4.13(b).
    \5\ Non-Customers include all capacities except for ``C''
(Customer), specifically: ``M'' capacity (Market-Maker); ``N''
capacity (Non-TPH Market-Maker); ``F'' capacity (Clearing TPH);
``L'' capacity (Non-Clearing TPH Affiliates); ``J'' capacity (Joint
Back-Office); ``U'' capacity (Professional); and ``B'' capacity
(Broker-Dealer).
---------------------------------------------------------------------------

     Non-Customer orders executed in SPX LEAPS options that
expire three years to less than four years out will be assessed a
surcharge fee of $1.00 per contract;
     Non-Customer orders executed in SPX LEAPS options that
expire four years to less than five years out will be assessed a
surcharge fee of $1.50 per contract;
     Non-Customer orders executed in SPX LEAPS options that
expire five years to less than six years out will be assessed a
surcharge fee of $2.00; and
     Non-Customer orders executed in SPX LEAPS options that
expire six years out or more will be assessed a surcharge fee of $2.50.
    The Exchange anticipates SPX LEAPS may attract a different
customer-base and generally sustain lower volumes than that of standard
SPX options given the relatively higher premium prices, implied
volatility, and overall risk associated with trading SPX LEAPS as a
result of their long-dated expirations. Therefore, in order to
initially and continue to list SPX LEAPS, as well as attempt to grow
liquidity in these series, the Exchange must expend a number of
resources. As such, the proposed SPX LEAPS surcharge fees are designed
to assist the Exchange in recouping the resources expended in
developing and maintaining a market for SPX LEAPS options. The Exchange
notes that other index options are also subject to surcharge fees.\6\
---------------------------------------------------------------------------

    \6\ See generally Cboe Options Fees Schedule, Rate Table--
Underlying Symbol List A.
---------------------------------------------------------------------------

GTH VIX Transaction Fees Waiver
    The Exchange proposes to waive transaction fees for Customer orders
executed in VIX options during GTH through December 31, 2022. Pursuant
to the Rate Table--Underlying Symbol List A in the Fees Schedule,
Customer simple orders and Customer complex orders executed in VIX
options are assessed a transaction fee by premium price. Such
transaction fees are applicable during Regular Trading Hours (``RTH'')
and GTH. Customer simple orders in VIX options with a premium price
between $0.00 and $0.10 are assessed a transaction fee of $0.10 per
contract and complex orders with the same premium price range are
assessed a transaction fee of $0.05 per contract. Customer simple
orders in VIX options with a premium price between $0.11 and $0.99 are
assessed a transaction fee of $0.25 per contract and complex orders
with the same premium price range are assessed a transaction fee of
$0.17 per contract. Customer simple orders in VIX options with a
premium price between $1.00 and $1.99 are assessed a transaction fee of
$0.40 per contract and complex orders with the same premium price range
are assessed a transaction fee of $0.30 per contract. Both Customer
simple and complex orders in VIX options with a premium price of $2.00
or more are assessed a transaction fee of $0.45 per contract.
    Proposed footnote 32 provides that transactions fees will be waived
for Customer orders executed in VIX options during GTH through December
31, 2022 and the proposed rule change appends footnote 32 to the line
items in Rate Table--Underlying Symbol List A applicable to transaction
fees for Customer simple and complex orders in VIX options.\7\ The
proposed waiver is designed to encourage customer order flow in VIX
options during GTH. As described above, the Exchange wishes to promote
the growth of its GTH trading session. Additionally, the Exchange has
observed lower volume and participation in VIX options during GTH than
compared to volume and participation in SPX options (the other class
currently available for trading during GTH). As such, it believes that
incentivizing increased customer order flow in VIX options during GTH
would attract additional liquidity to the Exchange, providing market
participants with more trading opportunities and signaling an increase
in Market-Maker activity, which facilitates tighter spreads. This may
cause an additional corresponding increase in order flow from other
market participants, contributing overall towards a robust and well-
balanced market ecosystem, particularly in VIX options during GTH.
---------------------------------------------------------------------------

    \7\ For clarity, the proposed rule change also appends proposed
footnote 32 to the line item containing VIX in the Customer Large
Trade Discount table in the Fees Schedule.
---------------------------------------------------------------------------

GTH VIX/VIXW LMM Incentive Program
    The proposed rule change also amends the GTH VIX/VIXW LMM Incentive
Program. The GTH VIX/VIXW LMM Incentive Program provides a rebate to
TPHs appointed as LMMs to the program that meet certain quoting
standards in VIX and VIXW options series in a month. The Exchange notes
that meeting or exceeding the quoting standards (both current and as
proposed; described in further detail below) in VIX or VIXW to receive
the applicable rebate (both currently offered and as proposed;
described in further detail below) is optional for an LMM appointed to
the program. Rather, an LMM appointed to the program is eligible to
receive a rebate if it satisfies the applicable quoting standards,
which the Exchange believes encourages the LMM to provide liquidity in
VIX/VIXW options during GTH. The Exchange may consider other exceptions
to the programs' quoting standards based on demonstrated legal or
regulatory requirements or other mitigating circumstances. In
calculating whether an LMM appointed to the program meets the program's
basic and heightened quoting standards each month, the Exchange
excludes from the calculation for each set of quoting standards the
business day in which the LMM missed meeting or exceeding the quoting
standards in the highest number of the applicable series that month.\8\
---------------------------------------------------------------------------

    \8\ The Exchange recently implemented basic and heightened
quoting standards in the program. See Securities Exchange Act
Release No. 93348 (October 15, 2021), 86 FR 58335 (October 21, 2021)
(SR-CBOE-2021-058). The proposed rule change now makes a clarifying
update to the language regarding the Exchange's exclusion of an
LMM's worst quoting day in a month to account for the separate sets
of quoting requirements. Specifically, the proposed rule change
clarifies that an LMM's worst quoting day will be excluded from the
calculation applicable to each set of quoting standards for that
month.
---------------------------------------------------------------------------

    Currently, the program provides that if an LMM in VIX/VIXW provides
continuous electronic quotes during GTH that meet or exceed the basic
quoting standards in at least 99% of each of the VIX and VIXW series,
90% of the time in a given month, the LMM will receive a rebate for
that month in the amount of $15,000 for VIX and $5,000 for VIXW (or
pro-rated amount if an appointment begins after the first trading day
of the month or ends prior to the last trading day of the month) for
that month. Additionally, if the appointed LMM provides continuous
electronic quotes during GTH that meet or exceed the VIX heightened
quoting standards in at least 99% of the VIX series, 90% of the time in
a given

month, the LMM will receive a rebate for that month of $0.03 per VIX/
VIXW contract executed in its Market-Maker capacity during RTH.
    The proposed rule change seeks to amend the VIXW basic quoting
standards, which are currently as follows:

------------------------------------------------------------------------
                                                       Maximum allowable
                    Premium level                            width
------------------------------------------------------------------------
$0.00-$100.00........................................             $10.00
$100.01-$200.00......................................              16.00
Greater than $200.000................................              24.00
------------------------------------------------------------------------

    The proposed rule change amends the VIXW basic quoting standards to
reflect the following:

----------------------------------------------------------------------------------------------------------------
                                         Less than 21 days to expiration      21 days or greater to expiration
            Premium level            ---------------------------------------------------------------------------
                                            Width               Size              Width               Size
----------------------------------------------------------------------------------------------------------------
                                          VIX Value at Prior Close <18
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00.........................              $1.00                 10              $1.50                 10
$1.01-$3.00.........................               1.50                 10               2.50                 10
$3.01-$5.00.........................               2.50                  3               4.00                  3
$5.01-$10.00........................               4.00                  1               6.00                  1
$10.01-$30.00.......................               6.00                  1              10.00                  1
Greater than 30.00..................              10.00                  1              10.00                  1
----------------------------------------------------------------------------------------------------------------
                                       VIX Value at Prior Close from 18-25
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00.........................               1.50                  5               2.00                  5
$1.01-$3.00.........................               2.50                  5               4.00                  5
$3.01-$5.00.........................               4.00                  1               5.00                  1
$5.01-$10.00........................               6.00                  1               8.00                  1
$10.01-$30.00.......................              10.00                  1              10.00                  1
Greater than $30.00.................              10.00                  1              10.00                  1
----------------------------------------------------------------------------------------------------------------
                                   VIX Value at Prior Close from 25
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00.........................              10.00                  1              10.00                  1
$1.01-$3.00.........................              10.00                  1              10.00                  1
$3.01-$5.00.........................              10.00                  1              10.00                  1
$5.01-$10.00........................              10.00                  1              10.00                  1
$10.01-$30.00.......................              10.00                  1              10.00                  1
Greater than $30.00.................              10.00                  1              10.00                  1
----------------------------------------------------------------------------------------------------------------

    The Exchange believes the proposed basic quoting requirements for
VIXW options under the GTH VIX/VIXW LMM Incentive Program are designed
to continue to encourage LMMs appointed to the program to provide
significant liquidity in VIXW options during GTH. The proposed basic
quoting standards for VIXW options provide for tighter widths than the
current basic quoting standards and implement size standards based on
finer premium ranges. As such, the proposed rule change offers LMMs
appointed to the program a more challenging opportunity, thus further
incentive, to strive to meet the VIXW basic quoting standards in order
to receive the applicable rebate. The Exchange notes that the proposed
rule change also seeks to tailor the VIXW basic quoting standards to
better reflect then-current market conditions and market
characteristics the Exchange has observed in VIXW options, as the
proposed VIXW basic quoting standards that are applicable depend on the
VIX Index value at the prior market close (i.e., at the close of the
preceding RTH session). Spreads in VIXW options generally widen when
the market experiences higher volatility (i.e., the VIX Index level is
higher in value). Therefore, to encourage LMMs to meet the proposed
basic quoting standards regardless of market volatility, the proposed
rule change adopts generally wider widths and smaller quote sizes where
the market may be experiencing higher volatility (i.e., when the value
of the VIX Index in the proposed VIX value categories becomes
relatively higher compared to the closing index value from the
preceding trading session). The proposed rule change also adopts
generally tighter widths in the nearer in term expiration category
(less than 21 days to expiration) than that of the longer in term
expiration category (21 days or greater to expiration). The Exchange
believes the proposed rule change provides a balance between providing
more challenging opportunities, thus greater quoting incentive, in the
expiration category that is nearer in term and easing the width
requirements in the expiration category that is longer in term, as the
Exchange understands that demand and participation is generally lower
for options that expire farther out, which may make it more difficult
for LMMs to quote within tighter widths. The Exchange notes that the
basic quoting standards currently in place for VIX options under the
program are tailored in a similar manner.

    The Exchange also proposes to update the rebate amount received for
meeting the VIXW basic quoting standards, as proposed, in a given
month, by slightly increasing the rebate amount from $5,000 to $10,000.
The proposed increase is designed to further incentivize LMMs appointed
to the program to provide significant liquidity in VIXW options in
order to meet the proposed basic quoting standards. Finally, the
proposed rule change marginally decreases the amount of the additional
rebate that applies to VIX/VIXW contracts executed in RTH where an
appointed LMM meets the VIX heightened quoting standards from $0.03 to
$0.02. The Exchange notes that it is not required to maintain this
additional incentive at any amount and that an LMM will continue to
have the opportunity to receive the additional rebate on its VIX/VIXW
orders executed in RTH, albeit at a marginally lower rate.
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.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with
Section 6(b)(4) of the Act,\11\ which requires that Exchange rules
provide for the equitable allocation of reasonable dues, fees, and
other charges among its TPHs and other persons using its facilities.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(b)(4).
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    First, the Exchange believes that the proposed rule changes are
reasonable. In particular, the Exchange believes that the proposed rule
change to adopt a volume-based tier structure for the GTH Executing
Agent Subsidy Program is reasonably designed to encourage designated
GTH executing agents to increase their customer order flow in the
symbols that trade during GTH and to incentivize more TPHs to become
designated GTH executing agents that may submit order flow during GTH,
to meet the proposed volume thresholds and receive the corresponding
subsidies. By incentivizing TPHs to conduct executing agent operations
willing to accept orders from all customers during GTH, the proposed
rule change is reasonably designed to increase customer accessibility
and increase order flow to the GTH trading session. The Exchange
believes that increased order flow would allow the Exchange to grow
participation in the GTH trading session to the benefit of all market
participants that trade during GTH, by providing greater trading
opportunities as a result of increased liquidity, thereby attracting
additional order flow from market participants during GTH. The Exchange
notes that the Fees Schedule currently offers many other programs with
similar volume-based incentive tier structures.\12\
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    \12\ See e.g., Cboe Options Fees Schedule, Liquidity Provider
Sliding Scale and Floor Broker Sliding Scale Rebate Program.
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    The Exchange believes that the proposed rule change to adopt
surcharge fees based on the time to expiration for SPX LEAPS (which the
Exchange intends to begin listing on November 1, 2021) is reasonable
because the surcharge fees will assist the Exchange in recouping some
of the resources it expends developing and maintaining a market for SPX
LEAPS, which the Exchange anticipates will have a different customer
base and sustain relatively lower volume than that of standard SPX
options. The Exchange notes that it also assesses other surcharge fees
on proprietary index options pursuant to Rate Table--Underlying Symbol
List A in the Fees Schedule for similar reasons. While the proposed
surcharge fees for SPX LEAPS are generally higher than the other
surcharges fees in Rate Table--Underlying Symbol List A, the Exchange
believes the proposed amounts are reasonably commensurate with the
market characteristics of SPX LEAPS, where relatively lower volumes
generally result in liquidity providers quoting wider spreads, which
may absorb higher premiums and costs.
    The Exchange believes that the proposed rule change to waive
transaction fees for Customer orders executed in VIX options during GTH
is reasonably designed to encourage customer order flow in VIX options
during GTH. The Exchange wishes to promote the growth of its GTH
trading session, and, as the Exchange has observed comparatively lower
volume and participation in VIX options during GTH, it believes that
incentivizing increased customer order flow in VIX options during GTH
would attract additional liquidity to the Exchange. As described above,
increased customer order flow facilitates increase trading
opportunities and attracts Market-Maker activity, which facilitates
tighter spreads and may ultimately signal an additional corresponding
increase in order flow from other market participants, contributing
overall towards a robust and well-balanced market ecosystem,
particularly in VIX options during GTH. The Exchange notes that it
similarly waives fees for other types of Customer orders in the Fees
Schedule.\13\
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    \13\ See Cboe Options Fees Schedule, footnote 8, which waives
the transaction fee for customer orders in ETF and ETN options
executed in open outcry or in AIM or as a QCC or as a FLEX Options
transaction, and footnote 9, which waives transaction fees for
customer orders that provide or remove liquidity that are 99
contracts or less in ETF and ETN options.
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    The Exchange believes that the proposed rule change to amend the
GTH VIX/VIXW LMM Incentive Program is reasonable. Particularly, the
Exchange believes the proposed basic quoting requirements are
reasonably designed to continue to encourage LMMs appointed to the
program to provide significant liquidity in VIXW options during GTH.
Additionally, the Exchange believes that it is reasonable to adopt
tighter widths and implement sizes based on finer premium categories in
the basic quoting standards for VIXW options in order to provide more
challenging opportunities, thus greater quoting incentive, for LMMs to
strive to meet the basic quoting standards and receive the
corresponding rebate, as proposed. As such, the Exchange believes the
proposed rule change is reasonably designed to encourage LMMs appointed
to the program to meet the VIXW basic quoting standards (and receive
the rebate, as amended) by increasing their quoting activity and
posting tighter spreads and more aggressive quotes in VIXW options. An
increase in quoting activity and tighter quotes tends to signal
additional corresponding increase in order flow from other market
participants, which benefits all investors by deepening the Exchange's
liquidity pool, potentially providing even greater execution incentives
and opportunities, offering additional flexibility for all investors to
enjoy cost savings, supporting the quality of price discovery,
promoting market transparency and improving investor

protection. The Exchange also believes that the proposed basic quoting
standards are reasonably tailored to reflect then-current market
conditions and market characteristics in VIXW options, as they relate
to volatility in the market (i.e., VIX Index level) as well as time-to-
expiration. The Exchange notes that the basic quoting standards
currently in place for VIX options under the program are tailored in a
similar manner.
    In addition to this, the Exchange believes that it is reasonable to
amend the monthly rebate amounts applicable to VIXW options under the
GTH VIX/VIXW LMM Incentive Program. The Exchange believes that the
proposed increased rebate amount (from $5,000 to $10,000) for VIXW
options is reasonably designed to continue to incentivize an appointed
LMM to meet the applicable quoting standards for VIXW options, thereby
providing liquid and active markets, which facilitates tighter spreads,
increased trading opportunities, and overall enhanced market quality to
the benefit of all market participants. The Exchange also believes that
the proposed increase is reasonably commensurate with the proposed
basic quoting standards for VIXW, which, as described above, present
more challenging opportunities for LMMs. The Exchange also believes
that the proposed rule change to reduce the additional rebate
applicable to an LMM's VIX/VIXW orders executed in RTH where an LMM
meets the VIX heightened quoting requirements in a month is reasonable
because an LMM will still be able to meet the heightened quoting
requirements and receive the additional rebate, albeit at a marginally
reduced rate (from $0.03 to $0.02). The Exchange notes that it is not
required to maintain this additional incentive at any amount.
    The Exchange also believes that the proposed rule changes are
equitable and not unfairly discriminatory. In particular, the Exchange
believes that offering volume-based incentives that correspond to
higher subsidies to designated GTH executing agents is equitable and
not unfairly discriminatory because TPHs that conduct executing agent
operations willing to accept orders from all customers take on
additional risks and potential costs (including those related to
staffing and clearing) associated with this type of business. Such TPHs
also provide benefits to investors during GTH, including increased
customer accessibility to the GTH trading session and increased order
flow. All TPHs that conduct this type of operation during GTH will
continue to have the opportunity to become a designated GTH executing
agent and thus eligible for the monthly subsidy.
    The Exchange believes that the proposed surcharge fees for SPX
LEAPS are equitable and not unfairly discriminatory because each
proposed surcharge will apply equally to all Non-Customer orders SPX
LEAPS in the corresponding expiry category. Likewise, the Exchange
believes that the proposed waiver for Customer orders executed in VIX
options in GTH is equitable and not unfairly discriminatory because the
waiver will apply equally to all Customer transactions in VIX options
during GTH. The Exchange also notes that, regarding the application of
the proposed surcharge fees to Non-Customer orders and the transaction
fee waiver to Customer orders, there is a history in the options
markets of providing preferential treatment to customers and, as
described herein, customer order flow tends to attract key liquidity
from other market participants.
    Regarding the VIX/VIXW LMM Incentive Program, the Exchange believes
that it is equitable and not unfairly discriminatory generally to
continue to offer this financial incentive, including as amended, to
LMMs appointed to the program, because it benefits all market
participants trading in the corresponding products during GTH. As
described above, the program encourages the appointed LMMs to satisfy
the quoting standards, which may increase liquidity and provide more
trading opportunities and tighter spreads. Indeed, the Exchange notes
that these LMMs serve a crucial role in providing quotes and the
opportunity for market participants to trade VIX/VIXW options, which
can lead to increased volume, providing for robust markets. The
Exchange ultimately offers the GTH VIX/VIXW LMM Incentive Program, as
amended, to sufficiently incentivize the appointed LMMs to provide key
liquidity and active markets in VIX/VIXW options during GTH, and
believes that the program, as amended, will continue to encourage
increased quoting to add liquidity in VIX/VIXW options to the benefit
of investors. The Exchange also notes that an LMM appointed to the
program may undertake added costs each month to satisfy that heightened
quoting standards (e.g., having to purchase additional logical
connectivity).
    In particular, the Exchange believes it is equitable and not
unfairly discriminatory to adopt new VIXW quoting standards because
such quoting standards will equally apply to any and all TPHs with LMM
appointments to the GTH VIX/VIXW LMM Incentive Program that seek to
meet the program's quoting standards in order to receive the rebates
offered. The Exchange believes the amended rebate for VIXW options and
the amended additional rebate applicable during RTH are equitable and
not unfairly discriminatory because they, too, will equally apply to
any TPH that is appointed as an LMM to the GTH VIX/VIXW LMM Incentive
Program. Additionally, if an LMM appointed to the GTH VIX/VIXW LMM
Incentive Program does not satisfy the quoting standards for any given
month, then it simply will not receive the corresponding rebate offered
by the program for that month.

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 intramarket or intermarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
Rather, as discussed above, the Exchange believes that the proposed
change would encourage the submission of additional liquidity to the
floor of a public exchange, thereby promoting market depth, price
discovery and transparency and enhancing order execution and price
improvement opportunities for all TPHs. As a result, the Exchange
believes that the proposed change furthers the Commission's goal in
adopting Regulation NMS of fostering competition among orders, which
promotes ``more efficient pricing of individual stocks for all types of
orders, large and small.'' \14\
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    \14\ Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    The Exchange does not believe that the proposed rule change will
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. As stated, all
TPHs that conduct executing agent operations willing to accept orders
from all customers will continue to have an opportunity to be eligible
for the GTH Executing Agent Subsidy program. Also, such TPHs that
conduct this type of operation take on additional risks and potential
costs (including those related to staffing and clearing) associated
with this type of business, and may provide benefits to investors
during GTH, including increased customer accessibility to, and
liquidity and trading opportunities during, the GTH trading session.
Additionally, the proposed surcharge

fees and fee waiver will apply equally to the applicable orders for all
similarly situated market participants (i.e., all Non-Customer orders
in SPX LEAPS in the corresponding expiry categories and all Customer
transactions in VIX options during GTH). The Exchange again notes that
there is a history in the options markets of providing preferential
treatment to customers and customer order flow tends to attract key
liquidity from other market participants. Further, the proposed changes
to the GTH VIXW/VIX LMM Incentive Program will apply to all LMMs
appointed to the program in a uniform manner. To the extent the LMMs
appointed to the program receive a benefit that other market
participants do not, as stated, these LMMs in their role as Market-
Makers on the Exchange have different obligations and are held to
different standards. For example, Market-Makers play a crucial role in
providing active and liquid markets in their appointed products,
thereby providing a robust market which benefits all market
participants. Such Market-Makers also have obligations and regulatory
requirements that other participants do not have. An LMM appointed to
the program may undertake added costs each month that it needs to
satisfy the quoting standards (e.g., having to purchase additional
logical connectivity). The program is ultimately designed to attract
additional order flow in VIX/VIXW options to the Exchange, wherein
greater liquidity benefits all market participants by providing more
trading opportunities, tighter spreads, and added market transparency
and price discovery, and signals to other market participants to direct
their order flow to those markets, thereby contributing to robust
levels of liquidity.
    The Exchange also does not believe that the proposed changes will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the Act because each of the proposed
changes applies only to fees and programs applicable to transactions in
products exclusively listed on the Exchange. Additionally, the Exchange
notes that it operates in a highly competitive market. TPHs have
numerous alternative venues that they may participate on and direct
their order flow, including 15 other options exchanges, many of which
offer substantially similar price improvement auctions. Based on
publicly available information, no single options exchange has more
than 16% of the market share.\15\ Therefore, no exchange possesses
significant pricing power in the execution of option order flow.
Indeed, participants can readily choose to send their orders to other
exchange, and, additionally off-exchange venues, if they deem fee
levels at those other venues to be more favorable. Moreover, the
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. Specifically, in Regulation NMS, the
Commission highlighted the importance of market forces in determining
prices and SRO revenues and, also, recognized that current regulation
of the market system ``has been remarkably successful in promoting
market competition in its broader forms that are most important to
investors and listed companies.'' \16\ The fact that this market is
competitive has also long been recognized by the courts. In
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit
stated as follows: ``[n]o one disputes that competition for order flow
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .''.\17\ Accordingly, the Exchange
does not believe its proposed fee change imposes any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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    \15\ See Cboe Global Markets U.S. Options Market Volume Summary,
Month-to-Date (October 25, 2021), available at https://markets.cboe.com/us/options/market_statistics/.
    \16\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
    \17\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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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 \18\ and paragraph (f) of Rule 19b-4 \19\
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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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please
include File Number SR-CBOE-2021-065 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2021-065. 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 (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments

received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2021-065 and should be submitted on
or before December 8, 2021.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25016 Filed 11-16-21; 8:45 am]
BILLING CODE 8011-01-P