[Federal Register Volume 80, Number 20 (Friday, January 30, 2015)]
[Notices]
[Pages 5182-5188]
[FR Doc No: 2015-01753]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74134; File No. SR-CBOE-2015-005]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend the Fees Schedule

January 26, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 14, 2015, Chicago Board Options Exchange, Incorporated
(the ``Exchange'' or ``CBOE'') 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend its Fees Schedule. The text of the
proposed rule change is available on the Exchange's Web site (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 make a number of changes to its Fees
Schedule.\3\
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    \3\ The Exchange initially filed the proposed fee changes on
December 31, 2014 (SR-CBOE-2014-097). On January 14, 2015, the
Exchange withdrew that filing and submitted this filing.
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COB Taker Surcharge
    The Exchange proposes to implement a Complex Order Book (``COB'')
Taker Surcharge. Specifically, the Exchange proposes to adopt a $0.05
per contract per side surcharge for non-customer complex order
executions that take liquidity from the COB in all underlying classes
except OEX, XEO, SPX (including SPXW), SPXpm, SRO, VIX, VXST,
Volatility Indexes and binary options (``Underlying Symbol List A'')
and mini-options. Additionally, the Exchange proposes to provide that
the COB Taker Surcharge will not be assessed on non-customer complex
order executions in the Complex Order Auction (``COA''), the Automated
Aim Mechanism (``AIM''), orders originating from a Floor Broker PAR, or
electronic

executions against single leg markets. The purpose of the COB Taker
Surcharge is to help offset the rebate given to complex orders under
the Volume Incentive Program (``VIP''). The Exchange notes that even
with the additional surcharge, the amount of Exchange fees assessed for
non-customer complex order-to-complex order executions that take
liquidity are less than those assessed for similar transactions on
certain other exchanges.\4\
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    \4\ See e.g., NYSE Arca, Inc. (``Arca'') Options Fees Schedule,
page 7 (Electronic Complex Order Executions) which provides that for
complex order-to-complex order transactions, non-customers are
assessed $0.50 in penny pilot options and $0.85 in non-penny pilot
options. Depending upon the type of market participant a CBOE TPH
is, non-customer CBOE TPHs would be assessed between $0.08 and $0.65
(which includes the proposed surcharge) for such transactions (see
CBOE Fees Schedule).
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CBOE Proprietary Products Sliding Scale
    The CBOE Proprietary Products Sliding Scale table provides that
Clearing Trading Permit Holder Proprietary transaction fees and
transaction fees for Non-Clearing Trading Permit Holder Affiliates in
OEX, XEO, SPX, SPXpm, VIX, VXST, and VOLATILITY INDEXES are reduced
provided a Clearing Trading Permit Holder (``Clearing TPH'') reaches
certain average daily volume (``ADV'') thresholds in all underlying
symbols excluding Underlying Symbol List A and mini-options on the
Exchange in a month. The Exchange proposes to implement two changes to
the CBOE Proprietary Products Sliding Scale. First, the Exchange
proposes to increase the current qualifying ADV thresholds.
Specifically, the threshold 18,000 ADV to 71,999 ADV would be changed
to 20,000 ADV to 79,999 ADV, and the threshold 72,000 ADV and above
would be changed to 80,000 ADV and above. The purpose of the proposed
change is to account for increased trading volume in multi-listed
products across the industry. The Exchange also proposes to make
corresponding changes related to the ADV thresholds to Footnote 23,
which Footnote relates to the CBOE Proprietary Products Sliding Scale.
The Exchange next proposes to increase the rates set forth in the B3
and B2 tiers (for Proprietary Product Volume from 0.00% to 8.50% of
total Monthly Proprietary Product Firm (F) volume) by 2 cents and 5
cents, respectively, and the rate in the A2 tier (for Proprietary
Product Volume from 0.00% to 6.50% of total Monthly Proprietary Product
Firm (F) volume) by 1 cent. The proposed changes are further detailed
below.

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                                      Current                                                                     Proposed
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                                          Proprietary product     Transaction fee                               Proprietary product     Transaction fee
                 Tier                      volume thresholds        per contract              Tier               volume thresholds        per contract
--------------------------------------------------------------------------------------------------------------------------------------------------------
>=18,000 ADV <=71,999 ADV in multi list products                                    >=20,000 ADV <=79,999 ADV in multi list products
--------------------------------------                          ---------------------------------------------
    B3...............................  0.00%-6.50%.............              $0.18    B3                      0.00%-6.50%............              $0.20
    B2...............................  6.51%-8.50%.............               0.05    B2                      6.51%-8.50%............               0.10
    B1...............................  Above 8.50%.............               0.02    B1                      Above 8.50%............               0.02
----------------------------------------------------------------                   ---------------------------------------------------
>=72,000 ADV in multi list products                                                 >=80,000 ADV in multi list products
--------------------------------------                          ---------------------------------------------
    A2...............................  0.00%-6.50%.............               0.15    A2                      0.00%-6.50%............               0.16
    A1...............................  Above 6.50%.............               0.01    A1                      Above 6.50%............               0.01
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The purpose of increasing the Transaction Fee Per Contract rates
(and thereby reducing the amount of the discount Clearing TPHs may
receive on proprietary products) is to moderate the discount levels for
these products in view of their growth and performance. Particularly,
the Exchange does not believe it's necessary to maintain the existing
discounted rates for these tiers, but seeks to maintain an incremental
incentive for Clearing TPHs to strive for the highest tier level.
Volume Incentive Program
    The Exchange next proposes to amend the VIP rebate schedule. By way
of background, under VIP, the Exchange credits each Trading Permit
Holder (``TPH'') the per contract amount set forth in the VIP table
resulting from each public customer (``C'' origin code) order
transmitted by that TPH (with certain exceptions) which is executed
electronically on the Exchange in all underlying symbols excluding
Underlying Symbol List A, RUT, DJX, XSP, XSPAM, credit default options,
credit default basket options and mini-options, provided the TPH meets
certain volume thresholds in a month.\5\
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    \5\ Excluded from the VIP credit are options in Underlying
Symbol List A, RUT, DJX, XSP, XSPAM, credit default options, credit
default basket options, mini-options, QCC trades, public customer to
public customer electronic complex order executions, and executions
related to contracts that are routed to one or more exchanges in
connection with the Options Order Protection and Locked/Crossed
Market Plan referenced in Rule 6.80 (see CBOE Fees Schedule, Volume
Incentive Program).
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    The Exchange first proposes to reduce the VIP credit for complex
orders in Tiers 2 and 3 from $0.17 per contract to $0.16. The purpose
of this change is to adjust the incentive tiers accordingly as
competition requires while maintaining an incremental incentive for
TPH's to strive for the highest tier level.
    The Exchange next proposes to implement a cap on VIP credits at
1,000 contracts per simple order executed electronically in AIM and
1,000 contracts per leg per complex order executed electronically in
AIM.\6\ The Exchange also proposes to cap orders executed
electronically in the Hybrid Agency Liaison (``HAL'') mechanism at
1,000 contracts per auction quantity.\7\ The Exchange is proposing to
implement the cap on executions via AIM because the vast majority of
orders over 1,000 contracts executed via AIM are traded primarily
against the submitting contra party, for which the Exchange collects
minimal revenue. Additionally, in HAL, the Exchange provides a HAL
Step-Up Rebate \8\ which reduces the collected net Exchange

transaction fees to those market participants that qualify. The
Exchange notes that generally, the parties which collect this credit
have greater participation in larger orders. As such, it would not be
viable for the Exchange to pay credits on contracts that do not create
corresponding and offsetting revenue for the Exchange. The Exchange
notes that all contracts executed in AIM (including complex AIM) and
all contracts executed in HAL will continue to be counted towards the
qualifying percentage thresholds, as the Exchange would like to
continue to encourage the use of these price improvement mechanisms.
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    \6\ For example, a 750-lot butterfly spread would total 3,000
contracts. As each leg of the order is below 1,000 contracts, the
Exchange would pay credits for each contract of each leg, totaling
3,000 contacts. If for example leg 1 of a complex order was for 600
contracts and leg 2 of the order was for 1,200 contracts, the
Exchange would pay a VIP credit for a total of 1,600 contracts
(i.e., all 600 contracts on leg 1 and 1,000 contracts on leg 2).
    \7\ To demonstrate this cap, consider the following: a TPH
submits an order for 1500 contracts. Of the 1500 contracts, 400
contracts execute electronically against a Market-Maker quote. The
remaining 1,100 contracts are executed via HAL. The Exchange would
pay credits for a total of 1,400 contracts (i.e., the 400 contracts
executed outside of HAL and 1,000 contracts executed in HAL).
    \8\ See CBOE Fees Schedule, Hybrid Agency Liaison (``HAL'') Step
Up Rebate.
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    Finally with respect to VIP, the Exchange proposes to provide that
multiple simple orders from the same TPH in the same series on the same
side of the market that are received within three hundred (300) seconds
and executed in AIM or HAL will be aggregated for purposes of
determining the order quantity subject to the cap discussed above. For
this aggregation, activity in AIM and HAL will be aggregated
separately. The AIM aggregation timer will begin with an order entered
into AIM and continue for 300 seconds, aggregating any other orders
entered into AIM in the same series on the same side of the market by
the same affiliated TPH. The HAL aggregation timer will begin at the
start of a HAL auction and continue for 300 seconds, aggregating any
other orders executed in HAL in the same series on the same side of the
market for the same affiliated TPH. Any portion of the original order
quantity that is executed outside of HAL will not be part of the
aggregation or counted towards the 1,000 contract threshold. The
Exchange believes this change should prevent TPHs from breaking up
their orders in order to avoid the fee cap.
    Finally, the Exchange proposes to relocate the language currently
set forth in the Notes section of the VIP table to a new footnote
(Footnote 36). In light of the additional language being added to the
current Notes section of the VIP table, the Exchange believes the
relocation of the existing language to a new and separate footnote will
make the Fees Schedule easier to read. No substantive changes to the
relocated language are being made.
SPX Customer Large Trade Discount
    The Customer Large Trade Discount program (the ``Discount'')
provides a discount in the form of a cap on the quantity of customer
(``C'' origin code'') contracts that are assessed transactions fees in
certain options classes. The Discount table in the Fees Schedule sets
forth the quantity of contracts necessary for a large customer trade to
qualify for the Discount, which varies by product. Currently, under the
``Products'' section in the Discount table, the following S&P products
for which the Discount is in effect are listed: ``SPX, SPXw, SPXpm,
SRO.'' Customer transaction fees for each of these products are
currently only charged up to the first 10,000 contracts. The Exchange
proposes to raise the quantity of SPX, SPXw, SPXpm, and SRO contracts
necessary for a large customer trade to qualify for the Discount from
10,000 contracts per order to 15,000 contracts per order. The purpose
of the proposed rule change is to moderate the discount level for
Customer (C) orders in the SPX product group in view of its mature and
established position in the industry.
Facility Fees Communications
    The Exchange proposes to increase the Exchangefone relocation fee
from $116 to $129. The Exchange contracts with a vendor to provide the
Exchangefone relocations, and this vendor has increased its fees, so
the Exchange proposes to increase the Exchangefone relocation fee to
reflect the increased vendor cost.
    The Exchange also proposes to eliminate certain telecommunication
fees. The Exchange currently assesses monthly fees for three types of
services the Exchange offers related to PhoneMail: (i) Basic Service,
(ii) PhoneMail with Outcall and (iii) PhoneMail with Outcall & Pager.
The Exchange notes that no TPHs have availed themselves of these
services in a number of years. As such, the Exchange believes offering
such services is no longer necessary and proposes to accordingly delete
all fees for and references to such services from the Fees Schedule.
Floor Broker Workstation and PULSe Workstation
    The Exchange proposes raising the Floor Broker Workstation
(``FBW'') fee from $350 per month (per login ID) to $400 per month (per
login ID). The Exchange's vendor that provides the FBW charges the
Exchange more than $350 per month (per login ID) for the FBW (actually,
more than $350 per month (per login ID), and the Exchange had been
subsidizing those costs for FBW users. However, it is no longer
economically feasible to subsidize those costs to that great an extent.
As such, the Exchange proposes increasing the FBW fee to $400 per month
(per login ID), which still includes a subsidy for FBW users (though
smaller).
    Additionally, the Exchange proposes to establish a FBW fee for an
updated version of FBW (``FBW2''), which will be made available shortly
to all TPHs. The fee for FBW2 will be the same as the existing FBW fee
(i.e., $400 per month (per login ID). The Exchange also proposes
adopting a fee waiver for the months of January and February 2015.
Additionally, the Exchange proposes to provide that, after March 1,
2015 the monthly fee for FBW2 login IDs will be waived for the first
month.\9\ The purpose of the proposed fee waivers is to give new users
time to become familiar with and fully acclimated to the new FBW
workstation functionality. The Exchange notes that after February 2015
(and absent an applicable fee waiver noted above), TPHs will be charged
each of $400 for FBW and FBW2 (i.e., total of $800) if such users
continue to use both FBW and FBW2.
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    \9\ For example, if a user adds a new login ID in March 2015,
the user will receive a fee waiver for that login ID for March 2015.
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    The Exchange also proposes raising the PULSe On-Floor Workstation
(``PULSe'') fee. Currently, the Exchange charges a fee of $350 per
month for the first 10 users of a TPH workstation and $100 per month
for all subsequent users. TPHs may also make the workstation available
to their customers, which may include non-broker dealer public
customers and non-TPH broker dealers (referred to herein as ``non-
TPHs''). For such non-TPH workstations, the Exchange charges a fee of
$350 per month per workstation. The Exchange proposes raising the PULSe
On-Floor Workstation fee from $350 per month to $400 per month for both
TPH and non-TPH workstations. The Exchange expended significant
resources developing PULSe, and intends to recoup some of those costs.
Further, because PULSe and FBW serve similar functions, the Exchange
desires to assess equivalent fees for each so as not to offer a pricing
advantage for one over the other.
Proprietary Registration Fees
    The Exchange next proposes to raise the Initial Proprietary
Registration fee from $50 to $65 and the Annual Proprietary
Registration fee from $25 to $40. The Initial Proprietary Registration
fee is payable by any TPH organization for the registration of any
associated person on WebCRD \10\ with the Proprietary Trader
registration. The Annual Proprietary Registration fee is payable
annually by any TPH organization for each associated person

that the TPH organization maintains registered on WebCRD with the
Proprietary Trader registration. By way of background, the Exchange
adopted these fees in conjunction with the implementation of the then
new Proprietary Trading registration requirement (the ``Proprietary
Trading Registration Program'' or ``Program''). These fees were adopted
to recoup some of the costs expended to maintain the Program. The
Exchange notes that the Proprietary Trading Registration Program
continues to require on-going work, including testing and monitoring of
the WebCRD system, as well as consideration of new applicants. In order
to offset these increasing costs, the Exchange proposes to increase the
Initial Proprietary Registration fee and the Annual Proprietary
Registration fee.
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    \10\ WebCRD is the Central Registration Depository system which
is operated by the Financial Industry Regulatory Authority,
Incorporated (``FINRA'').
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CBOE Command Connectivity Changes
    Next, the Exchange proposes to increase Network Access Port fees.
By way of background, CBOE market participants can access the
Exchange's trading systems via Network Access Ports, and can elect for
a Network Access Port (or Ports) of either 1 gigabit per second
(``Gbps'') or 10 Gbps. Currently, the Exchange assesses a fee of $500
per month for a 1 Gbps Network Access Port and a fee of $3,000 per
month for a 10 Gbps Network Access Port. The Exchange has expended
significant resources setting up, providing and maintaining this
connectivity, and the costs related to such provision and maintenance
has increased. The Exchange desires to recoup such increased costs.
Therefore, the Exchange proposes to amend its Network Access Port fees
to increase the fee for a 1 Gbps Network Access Port to $750 per month
and for a 10 Gbps Network Access Port to $3,500 per month. These new
fee amounts are still within the range of, and in some cases less than,
similar fees assessed by other exchanges.\11\
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    \11\ See International Securities Exchange, LLC (``ISE'')
Schedule of Fees, Section VIII.B., which lists Network Ethernet fees
of $750 per month for 1 Gigabit and $4,000 per month for 10
Gigabits, and a Network Ethernet--Low Latency fee of $7,000 per
month for 10 Gigabits, and see also Miami International Securities
Exchange LLC (``MIAX'') Options Fees Schedule, Section 5(a), which
lists connectivity fees of $1,000 per month for 1 Gbps and $5,000
per month for 10 Gbps.
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    The ``Notes'' section that describes the Network Access Port fees
provides detail which states that ``Separate Network Access Port fees
are assessed for unicast (orders, quotes) and multicast (market data)
connectivity (i.e., if a TPH uses the 1 Gbps Network Access Port for
unicast and multicast connectivity, the TPH will be charged $1,000 per
month and if a TPH uses the 1 Gbps Disaster Recovery Network Access
Port for unicast and multicast connectivity, the TPH will be charged
$500 per month.)''. The example provided above that states that, if a
TPH uses the 1 Gbps Network Access Port for unicast and multicast
connectivity, the TPH will be charged $1,000 per month, is based on the
current 1 Gbps Network Access Port fee of $500 per month. Because the
Exchange herein proposes to increase the fee for a 1 Gbps Network
Access Port to $750 per month, the Exchange needs to also update the
example to state that ``if a TPH uses the 1 Gbps Network Access Port
for unicast and multicast connectivity, the TPH will be charged $1,500
per month . . .'' The proposed change will accurately reflect the
proposed new fee amount and provide correct guidance to market
participants reading the Fees Schedule.
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.\12\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \13\ 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 facilitation
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,\14\ which requires that Exchange rules
provide for the equitable allocation of reasonable dues, fees, and
other charges among its Trading Permit Holders and other persons using
its facilities.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposal to adopt a $0.05 per
contract per side surcharge for noncustomer complex order executions
that remove liquidity from the COB is reasonable because although a
surcharge is being added, the total amount assessed to these
transactions is still within the range of fees paid by other market
participants for similar transactions.\15\ Further, other exchanges
assess higher fees for complex orders than for noncomplex ones.\16\
Applying the COB Taker Surcharge to all market participants except
customers is equitable and not unfairly discriminatory because other
market participants generally prefer to execute their orders against
customer orders. By exempting customer orders, the COB Taker Surcharge
will not discourage the sending of customer orders, and therefore there
should still be plenty of customer orders for other market participants
to trade with. Further, the options industry has a long-standing
practice of assessing preferable fee structures to customers. Excluding
from the COB Taker Surcharge options in Underlying Symbol List A is
equitable and not unfairly discriminatory because the Exchange has
devoted a lot of resources to develop its proprietary options classes,
and therefore does not desire to risk discouraging the trading of such
proprietary singly-listed options classes. Excluding mini-options from
the COB Taker Surcharge is reasonable because the Exchange does not
currently pay VIP credit for mini-options, so the economic differential
which the COB taker fee is addressing (i.e., offsetting the VIP complex
order credits) is not present for mini-options. Excluding mini-options
from the COB Taker Surcharge is not unfairly discriminatory because it
will apply to all TPHs. Limiting the COB Taker Surcharge to orders
entered electronically is equitable and not unfairly discriminatory
because the Exchange has expended considerable resources to develop its
electronic trading platforms and seeks to recoup the costs of such
expenditures. The Exchange believes it is reasonable and not unfairly
discriminatory to exclude complex orders that originate from a Floor
Broker PAR station because such transactions are already subject to
Floor Brokerage fees.\17\ Additionally, Floor Brokers ensure that the
difficult-to-execute orders (such as large and complex

orders) are able to be executed manually by accessing the CBOE's in-
person market-maker crowds, while also helping to achieve price
improvement and the Exchange does not want to discourage this activity.
The Exchange notes that a similar exemption exists for the Hybrid 3.0
Surcharge. The Exchange believes that it is equitable and not unfairly
discriminatory to only assess this surcharge to those removing
liquidity from the market (``Takers'') and not Makers because the
Exchange wants to continue to encourage market participation and price
improvement. The Exchange next notes that when a Market-Maker submits a
quote, the Market-Maker does not know whether it will trade with a
simple or complex order. As such, the Exchange believes it is
reasonable, equitable and not unfairly discriminatory to exclude
electronic executions against single leg markets because it wants to
encourage Market-Makers to continue to provide trading opportunities
and tight spreads, which they may be discouraged to do if there is a
possibility they will be assessed a surcharge if and when their quotes
fills against a complex order. Finally, the Exchange believes it's
reasonable, equitable and not unfairly discriminatory to exclude from
the COB Taker Surcharge executions in COA and AIM because the Exchange
wants to continue to encourage price improvement via these
functionalities and because this exclusion is applicable to all TPHs.
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    \15\ See e.g., NYSE Arca, Inc. (``Arca'') Options Fees Schedule,
page 7 (Electronic Complex Order Executions) which provides that for
complex order-to-complex order transactions, non-customers are
assessed $0.50 in penny pilot options and $0.85 in non-penny pilot
options. Depending upon the type of market participant a CBOE TPH
is, non-customer CBOE TPHs would be assessed between $0.08 and $0.65
(which includes the proposed surcharge) for such transactions (see
CBOE Fees Schedule).
    \16\ See ISE Schedule of Fees, Section I (which lists regular
Maker rebates and fees and Taker fees for Select Symbols) as
compared to Section II (which lists complex order fees and rebates
for Select Symbols). Market participants are assessed higher fees
for executing complex orders.
    \17\ See CBOE Fees Schedule, Floor Brokerage Fees.
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    The Exchange believes the proposal to change the qualifying volume
thresholds for the reduced fees in the CBOE Proprietary Products
Sliding Scale is reasonable because the changes account for the
increase in multi-listed trading volumes since the ADV thresholds were
established. The Exchange believes it is equitable and not unfairly
discriminatory because the proposed changes to the qualifying volume
thresholds apply to all Clearing TPHs.
    The Exchange believes increasing the rates in the B3, B2 and A2
tiers of the CBOE Proprietary Products Sliding Scale (and thereby
reducing the overall discount) is reasonable because it still provides
Clearing TPHs an opportunity to receive notable discounted rates on
classes in Underlying Symbol list A for reaching certain qualifying
volume thresholds that they would not otherwise receive (now just a
smaller discount). Additionally, the Exchange notes that lower fees for
executing more contracts is equitable and not unfairly discriminatory
because it provides market participants with an incentive to execute
more contracts on the Exchange. This brings greater liquidity and
trading opportunity, which benefits all market participants. The
Exchange believes that the proposed change is not unfairly
discriminatory because it will apply to all Clearing TPHs that meet the
qualifying volume thresholds. The Exchange also believes offering lower
fees under the CBOE Proprietary Products Sliding Scale to Clearing TPHs
and not other CBOE market participants is equitable and not unfairly
discriminatory because Clearing TPHs must take on certain obligations
and responsibilities, such as clearing and membership with the Options
Clearing Corporation, as well as significant regulatory burdens and
financial obligations, that other market participants are not required
to undertake.
    The Exchange believes it's reasonable to reduce the VIP credit for
complex orders in Tiers 2 and 3 from $0.17 per contract to $0.16
because it is decreasing a mere $0.01 and it still provides an
opportunity for TPHs to receive credits for complex orders for reaching
certain qualifying volume thresholds that they would not otherwise
receive (now just a smaller discount). The Exchange believes the
proposed change is equitable and not unfairly discriminatory because it
applies to all TPHs that meet the qualifying volume thresholds.
    The Exchange believes that the proposal to implement a cap on VIP
credits at 1,000 contracts per simple order and 1,000 contracts per leg
per complex order for orders executed electronically in AIM and a cap
of 1,000 contracts per auction quantity for orders executed in HAL is
reasonable because in both cases the exchange collects little or no net
transaction fees from the contra parties, and as such, the Exchange
does not wish to also provide a credit on these transactions as it
would result in the Exchange paying for such transactions without
collecting any revenue (a net negative), which would not be
economically prudent. Additionally, the Exchange believes the proposed
cap is equitable and not unfairly discriminatory because it applies to
all TPHs.
    The Exchange believes it's reasonable, equitable and not unfairly
discriminatory to provide that all contracts executed in AIM (including
complex AIM) and all contracts executed in HAL will continue to be
counted towards the percentage thresholds because the Exchange would
like to continue to encourage the use of these price improvement
mechanisms and because the proposed change would apply to all TPHs. The
Exchange also believes its reasonable, equitable and not unfairly
discriminatory to provide that multiple simple orders from the same TPH
in the same series on the same side of the market that are received
within three hundred (300) seconds will be aggregated for purposes of
determining the order quantity subject to the cap, as the Exchange
believes this should prevent TPHs from breaking up their orders in
order to avoid the fee cap and it would apply to all TPHs.
    The Exchange believes the relocation of the current language in the
Notes section of the VIP table to a new Footnote of the Fees Schedule
will make the Fees Schedule easier to read and avoid potential
confusion, thereby removing impediments to and perfecting the mechanism
of a free and open market and a national market system, and, in
general, protecting investors and the public interest.
    The Exchange believes that raising the discount threshold for SPX
(including SPXw), SPXPM and SROs is reasonable because customers will
still be receiving a discount for large trades that they would not
otherwise receive. This change is equitable and not unfairly
discriminatory because all customers whose large trades qualify for the
Discount will still receive it and the SPX product group has reached a
mature and established level since its introduction while other
products, such as VIX, have not.
    The Exchange believes that the increased Exchangefone relocation
fee is reasonable because the increase is being enacted to reflect an
increase in the amount that a vendor charges the Exchange to provide
the Exchangefone relocations. The Exchange believes that this change is
equitable and not unfairly discriminatory because the increased
Exchangefone relocation fee will apply to all market participants who
request an Exchangefone relocation. Additionally, the Exchange believes
the deletion of the PhoneMail services and fees is reasonable,
equitable and not unfairly discriminatory because it merely removes
fees associated with outdated services that have not been used by TPHs
in a number of years.
    Increasing the PULSe fee from $350 per month to $400 per month for
the first 10 users of a TPH workstation and from $350 to $400 per month
per workstation for non-TPH workstations is reasonable because the
Exchange expended significant resources developing PULSe and desires to
recoup some of those costs. Moreover, the Exchange will be assessing
the same amount for the FBW, which is a similar product. This change is
equitable and

not unfairly discriminatory because all market participants who desire
to use PULSe will be assessed the same fee, and because the same amount
is being assessed for use of a similar product, the FBW.
    Increasing the FBW fee from $350 per month (per login ID) to $400
per month (per login ID) is reasonable because the Exchange is charged
by the vendor that provides the FBW more than $350 per month (per login
ID) and simply wants to reduce the extent to which the Exchange
subsidizes such costs. This change is equitable and not unfairly
discriminatory because all market participants who desire to use the
FBW will be assessed the same fee.
    Implementing a $400 per month (per login ID) for FBW2 is reasonable
because the Exchange will be charged by the vendor that provides FBW2
more than $400 per month (per login ID) and again simply wants to
reduce the extent to which the Exchange subsidizes these costs. This
change is equitable and not unfairly discriminatory because all market
participants who desire to use FBW2 will be assessed the same fee. The
Exchange believes it is reasonable to provide a waiver for the months
of January 2015 and February 2015 because it allows new users time to
become familiar with and fully acclimated to the new FBW functionality
and incentivizes the users to begin this process as soon as the new
functionality becomes available. The Exchange believes it is reasonable
to provide a waiver for the first month for a new login ID beginning
March 1, 2015, because it allows a new user after February 2015 to
fully acclimate to the new FBW functionality. The Exchange believes
that the proposed changes regarding the fee waivers are equitable and
not unfairly discriminatory because it applies to all new users of
FBW2.
    Increasing the Initial Proprietary Registration Fee from $50 to $65
and the Annual Proprietary Registration fee from $25 to $40 is
reasonable because the Exchange continually expends resources in
maintaining the Proprietary Trading Registration Program and desires to
recoup some of the increasing costs. This change is equitable and not
unfairly discriminatory because all market participants who register
for the Proprietary Trader registration will be assessed the same fee.
    The Exchange believes that the proposed changes to the Network
Access Port fees are reasonable because the Exchange has expended
significant resources setting up, providing and maintaining this
connectivity, and the costs related to such provision and maintenance
have increased. The Exchange merely desires to recoup such increased
costs. The Exchange believes that the proposed changes to the Network
Access Port fees are equitable and not unfairly discriminatory because
the newly-increased fees will, as before, be applied in the same manner
to all CBOE market participants (in that all CBOE market participants
who seek a 1 Gbps Network Access Port will be assessed the new $750 per
port per month fee, and all CBOE market participants who seek a 10 Gbps
Network Access Port will be assessed the new $3,500 per port per month
fee). Assessing a higher fee for 10 Gbps connectivity than for 1 Gbps
connectivity is equitable and not unfairly discriminatory because 10
Gbps connectivity is more robust than 1 Gbps connectivity, and requires
more costly equipment and maintenance, and the Exchange must recoup the
costs related to providing such connectivity. Further, these new fee
amounts are still within the range of, and in some cases less than,
similar fees assessed by other exchanges.\18\
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    \18\ See ISE Schedule of Fees, Section VIII.B., which lists
Network Ethernet fees of $750 per month for 1 Gigabit and $4,000 per
month for 10 Gigabits, and a Network Ethernet--Low Latency fee of
$7,000 per month for 10 Gigabits, and see also MIAX Options Fees
Schedule, Section 5(a), which lists connectivity fees of $1,000 per
month for 1 Gbps and $5,000 per month for 10 Gbps.
---------------------------------------------------------------------------

    The Exchange believes that the proposed change to the example
provided in the Notes section that describes the Network Access Port
fees serves 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 by preventing any potential
confusion regarding the application of the Network Access Port fees and
the proposed new fee amounts.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will
impose any burden on competition that are not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because, while different fees
and rebates are assessed to different market participants in some
circumstances, these different market participants have different
obligations and different circumstances (as described in the
``Statutory Basis'' section above). For example, Clearing TPHs have
clearing obligations that other market participants do not have.
Market-Makers have quoting obligations that other market participants
do not have. There is a history in the options markets of providing
preferential treatment to Customers, as they often do not have as
sophisticated trading operations and systems as other market
participants, which often makes other market participants prefer to
trade with Customers. Further, the Exchange fees and rebates, both
current and those proposed to be changed, are intended to encourage
market participants to bring increased volume to the Exchange (which
benefits all market participants), while still covering Exchange costs
(including those associated with the upgrading and maintenance of
Exchange systems).
    The Exchange does not believe that the proposed rule changes will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
proposed changes are intended to promote competition and better improve
the Exchange's competitive position and make CBOE a more attractive
marketplace in order to encourage market participants to bring
increased volume to the Exchange (while still covering costs as
necessary). Further, the proposed changes only affect trading on CBOE.
To the extent that the proposed changes make CBOE a more attractive
marketplace for market participants at other exchanges, such market
participants are welcome to become CBOE market participants.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received written 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 \19\ and paragraph (f) of Rule 19b-4 \20\
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.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-CBOE-2015-005 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-2015-005. 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 Web site (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 Web site 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; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-CBOE-2015-005 and should be
submitted on or before February 20, 2015.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-01753 Filed 1-29-15; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 77, Number 38 (Monday, February 27, 2012)]
[Notices]
[Pages 11607-11608]
[FR Doc No: 2012-4421]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66434; File No. SR-ICEEU-2012-02]

Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing and Order Granting Accelerated Approval of Proposed Rule
Change To Revise Procedures Related to Certain Technical and
Operational Changes Relating to Operational Processing of Restructuring
Credit Events Under CDS Contracts

February 21, 2012.
    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 February 7, 2012, ICE Clear Europe Limited (``ICE Clear Europe'')
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 primarily by ICE Clear Europe. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons and to approve the proposed rule change
on an accelerated basis.
---------------------------------------------------------------------------

    \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

    ICE Clear Europe is in regular communication with representatives
of its Clearing Members, as that term is defined in the Rules of ICE
Clear Europe \3\ (the ``Rules''), in relation to the operation of
clearing processes and arrangements. ICE Clear Europe has published
these proposed technical procedural changes, has carried out a public
consultation process in respect of all of the changes described below,
and has presented and agreed to the changes described below with its
Clearing Members. These changes seek processes to be followed by ICE
Clear Europe and its Clearing Members on the occurrence of any
``restructuring credit event'' under applicable CDS Contracts (as
defined by ICE Clear Europe Rule 101). ICE Clear Europe takes the view
that the proposed rule changes are improvements in operational services
that implement changes that are principally administrative in nature.
---------------------------------------------------------------------------

    \3\ See ICE Clear Europe Rule 101. The Rules of ICE Clear Europe
are available on-line at: https://www.theice.com/Rulebook.shtml?clearEuropeRulebook=.
---------------------------------------------------------------------------

    Specifically, ICE Clear Europe makes amendments to its procedures
for the processing of restructuring credit events under CDS Contracts
submitted and accepted for clearing by ICE Clear Europe, to reflect
changes to systems used by the repository for recording such
instruments, for processing of notices relating to such credit events.
The repository presently used by ICE Clear Europe for these purposes is
The Depository Trust & Clearing Corporation (``DTCC'') Trade
Information Warehouse. These changes were published in ICE Clear Europe
circular no. C11/171 on November 25, 2011, available at: https://www.theice.com/publicdocs/clear_europe/circulars/C11171_att1.pdf.
    The proposed changes allow for more operationally efficient and
straight-through processing of the service of credit event notices and
other notices following the occurrence of a restructuring credit event.
The changes reflect changes made to the account structures and
processes for the service of notices within the DTCC and should
considerably reduce risks for the clearing house and its clearing
members.

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

    In its filing with the Commission, ICE Clear Europe 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. ICE Clear Europe has prepared summaries,
set forth in sections (A), (B), and (C) below, of the most significant
aspects of these statements.\4\
---------------------------------------------------------------------------

    \4\ The Commission has modified the text of the summaries
prepared by ICE Clear Europe.
---------------------------------------------------------------------------

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

    The proposed rule changes consist of technical rule changes that
are designed to implement operational and process improvements that
have been discussed with and approved by the Clearing Members of ICE
Clear Europe. The principal purpose of the proposed rule change is for
the applicable rule or procedural provision to be updated to reflect
such improvement. In particular, the proposed rule changes relate to
the processing of restructuring credit events under the terms of
cleared CDS Contracts submitted and accepted for clearing by ICE Clear
Europe.
    Following consultation with its Clearing Members, ICE Clear Europe
determined that the CDS Procedures needed to be updated in order to
process a restructuring credit event in light of changes to DTCC's
systems. The proposed amended procedures modify the procedures for
processing of restructuring credit events, principally those for the
notification and processing of Matched Pairs (as defined below) in the
event of any restructuring credit event. The majority of the changes
relate to Section 8.4 of the procedures, which governs the allocation
and processing of Matched Pairs. Matched Pairs are constituted of two
clearing members who are matched with one another for purposes of
delivering credit event notices to ICE Clear Europe and receiving
credit event notices from ICE Clear Europe. While the proposed changes
to Section 8.4 do not modify the basic principles of netting (or
aggregation) of CDS Contracts prior to the processing of the applicable
restructuring credit event, of the allocation of Matched Pairs pursuant
to Rules 1507 and 1508, or of the obligation of ICE Clear Europe to
issue Matched Pairs notices promptly pursuant to those Rules, the
proposed amended procedures do modify: (a) The timing of transmission
of RMP Matching Reports,\5\ and the procedures and timing for checking
that any such RMP Matching Report reflects the applicable Clearing
Members' net Open Contract Position (as defined in the Rules) (at
Section 8.4(d)); (b) the timing, form, and method for delivery of
Matched Pairs notices (at Section 8.4(e)); (c) the timing and process
for the input of records of all CDS Contracts being replaced pursuant
to such matching process (at Section 8.4 (e)(v) and (vi)); (d) the
specification of electronic notice for restructuring credit event
notices (at Section 8.4(f)); and (e) changes to the Manual Notice
Process \6\ that specify procedures for reconciliation of the records
of ICE Clear Europe with those of the Clearing Members and with those
specified on the DTCC systems (at Sections 8.4(f)(v) and 8.4(g)). In
each case, the applicable procedure is modified to harmonize the pre-
existing

procedures with those of DTCC and the Clearing Members. No change is
made to the rights or obligations of Clearing Members in respect of CDS
Contracts, and no change is made to the custody or guarantee fund
functions of ICE Clear Europe.
---------------------------------------------------------------------------

    \5\ The term ``RMP Matching Report'' means the report given by
the Clearing House, as referred to in paragraph 8.4(e), to each CDS
Clearing Member identifying the RMPs and allocations of Matched
Pairs and the associated MP Amounts affecting the Open Contract
Position of that CDS Clearing Member, which report comprises Matched
Pair Notices for purposes of Rule 1508 in respect of each Matched
Pair.
    \6\ The term ``Manual Notice Process'' means the process for the
delivery, receipt and copying to the Clearing House of notices
pursuant to paragraph 8.4(g).
---------------------------------------------------------------------------

    ICE Clear Europe has engaged in a public consultation process in
relation to all the changes, pursuant to the circular referred to
above, as it was required to do under applicable U.K. law. This public
consultation involved the publication of such circular on a publicly
accessible portion of the Internet Web site of ICE Clear Europe. ICE
Clear Europe has received no opposing views from its Clearing Members
in relation to the proposed rule amendments and received no responses
to its public consultations during the consultation period. The
proposed rule change is not inconsistent with the existing rules of ICE
Clear Europe, including any other rules proposed to be amended.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed rule change would
have any impact, or impose any burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others

    Written comments relating to the proposed rule change have been
solicited by ICE Clear Europe pursuant to public consultation processes
in the circulars referred to above. No comments have been received,
presumably in light of the extensive discussions that preceded the
public consultations. The time period for the public consultation has
closed so ICE Clear Europe does not expect to receive any further
written comments as a result of this process.

III. 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_ADDRESS>Please include File Number
SR-ICEEU-2012-02 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-ICEEU-2012-02. 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 Web site (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 Web site viewing and
printing in the Commission's Public Reference Section, 100 F Street
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of such filings will also be available for
inspection and copying at the principal office of ICE Clear Europe and
on ICE Clear Europe's Web site at https://www.theice.com/publicdocs/regulatory_filings/ICE_Clear_Europe_Rule_Amendments_2012_02.pdf.
    All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-ICEEU-2012-02
and should be submitted on or before March 19, 2012.

IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change

    Section 19(b) of the Act \7\ directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization. The Commission finds that the proposed rule change is
consistent with the requirements of the Act, in particular the
requirements of Section 17A of the Act,\8\ and the rules and
regulations thereunder applicable to ICE Clear Europe. Specifically,
the Commission finds that the proposed rule change is consistent with
Section 17A(b)(3)(F) of the Act,\9\ which requires, among other things,
that the rules of a registered clearing agency be designed to promote
the prompt and accurate clearance and settlement of derivative
agreements, contracts, and transactions because it should permit ICE
Clear Europe to align its restructuring credit event processing with
the system used by the repository for processing notices related to
such credit events.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b).
    \8\ 15 U.S.C. 78q-1. In approving this proposed rule change, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    ICE Clear Europe has requested that the Commission approve the
proposed rule change on an accelerated basis for good cause shown. The
Commission finds good cause for accelerating approval because ICE Clear
Europe must have operational procedures that match the operational
procedures of the system used by the repository for processing notices
of restructuring credit events in order to process such credit events
efficiently and effectively.

V. Conclusion

    It is therefore ordered pursuant to Section 19(b)(2) of the Act
that the proposed rule change (SR-ICEEU-2012-02) be, and hereby is,
approved on an accelerated basis.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\10\
Kevin O'Neill,
Deputy Secretary.
[FR Doc. 2012-4421 Filed 2-24-12; 8:45 am]
BILLING CODE 8011-01-P