Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange proposes to amend its Fees Schedule. The text of the proposed rule change is available on the Exchange's Web site (
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 Exchange proposes to amend its Fees Schedule, to be effective October 1, 2014. Specifically, the Exchange proposes to increase the Customer Priority Surcharge fee assessed to contracts executed in VIX volatility index options (“VIX options”). Currently, the VIX Customer Priority Surcharge (“Surcharge”) is assessed on all Customer (C) VIX contracts executed electronically that are Maker and not Market Turner. Additionally, the surcharge is only assessed on such contracts that have a premium of $0.11 or greater. The Exchange proposes to increase the Surcharge from $0.05 per contract to $0.10 per contract on such contracts that have a premium of $0.11 or greater.
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.
The Exchange believes that the VIX Customer Priority Surcharge increase is reasonable because the amount of the new fee is within the range of surcharges assessed for customer transactions in other CBOE proprietary products (for example customers are currently assessed a $0.20 Hybrid 3.0 Execution Surcharge (which essentially acts as a customer priority surcharge) in SPX options).
The Exchange believes that it is equitable and not unfairly discriminatory to assess the VIX Priority Surcharge to Customers and not other market participants because Customers are not subject to additional costs for effecting transactions in VIX which are applicable to other market participants, such as license surcharges. Additionally, Customers are not subject to fees applicable to other market participants such as connectivity fees and fees relating to Trading Permits, and are not subject to the same obligations as other market participants, including regulatory and compliance requirements and quoting obligations. The Exchange believes that it is equitable and not unfairly discriminatory to only assess the Surcharge to Maker Non-Turners because the Exchange wants to encourage improving the market (“turning”).
The Exchange believes that it is equitable and not unfairly discriminatory to only assess this fee when the contract premium is at least $0.11 because the Exchange wants to reduce costs on low priced VIX options to encourage Customers to close and roll over positions close to expiration at low premium levels. Currently, such Customers are less likely to do this because the transaction fee is closer to the premium level. The Exchange believes that maintaining lowered fees overall for VIX options trading with a premium of $0.00–$0.10 will encourage the trading of such options. As such, the Exchange does not wish to assess Customer Priority Surcharge on such options in order to keep the costs low.
The Exchange believes that increasing the customer priority surcharge for VIX options and not VXST is equitable and not unfairly discriminatory because VXST is a relatively new product that the Exchange has expended significant resources in developing and believes that not assessing a higher surcharge will encourage trading in VXST.
CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because, while different electronic transaction fees are assessed to different market participants, different market participants have different obligations and circumstances as noted above. The Exchange believes that the proposal to increase the surcharge amount assessed to Customers for executions in VIX contracts will not cause an unnecessary burden on intermarket competition because the proposed change was not motivated by intermarket competition. Additionally, VIX is only traded 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.
The Exchange neither solicited nor received comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.