Daily Rules, Proposed Rules, and Notices of the Federal Government
The Exchange proposes to amend the Fees Schedule for its CBOE Stock Exchange ("CBSX"). 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 most significant aspects of such statements.
CBSX proposes to amend its Fees Schedule. First, the Exchange proposes to eliminate the Maker fee tier for Makers that add 2,500,000-4,999,999 shares of liquidity in one day (for which such Makers were assessed a $0.0016 per share rate) and make the lowest Maker tier (and corresponding $0.0018 per share fee) apply to any Maker that adds 4,999,999 shares or less of liquidity in one day (all Maker and Taker fees discussed in this filing relate to transactions in securities priced $1 or greater). CBSX also proposes increasing the per share rates for the remaining Maker tiers (aside from the lowest Maker tier) by $0.0002. These changes are proposed for economic and competitive reasons as CBSX attempts to create a continuum of incentives that will allow CBSX to compete for liquidity provision and order flow. As such, the proposed Maker fees for transactions in securities priced $1 or greater would be as follows:
As before, these rates apply to all transactions in securities priced $1 or greater made by the same market participant in any day in which such participant adds the established amount of shares or more of liquidity that is determined in the chart above for each tier. Market participants who share a trading acronym or MPID may aggregate their trading activity for purposes of these rates. Qualification for these rates will require that a market participant appropriately indicate his trading acronym and/or MPID in the appropriate field on the order.
CBSX also proposes amending its Taker rebate structure for transactions in securities priced $1 or greater.
Rejected orders will not count towards determining this Execution Rate. Canceled orders will count towards determining the total number of orders sent to CBSX, but not the total number of orders filled or partially filled. Orders that rest on the CBSX Book until they trade will incur the Maker fee when they trade, but because they executed, will count towards improving the market participant's Execution Rate. The Execution Rate achieved by a market participant for the previous calendar month will apply to the calendar month that immediately follows it. For example, if a market participant achieves an Execution Rate of above 85% for the month of July, then in the month of August, on any day in which that market participant removes 10,000,000 shares of liquidity or more, that market participant will receive the $0.0017 per share rebate for all executions that remove liquidity.
These rates apply to all transactions in securities priced $1 or greater made by the same market participant in any day in which such participant removes the established amount of shares or more of liquidity that is determined in the chart above for each tier. Market participants who share a trading acronym or MPID may aggregate their trading activity for purposes of these rates. Qualification for these rates will require that a market participant appropriately indicate his trading acronym and/or MPID in the appropriate field on the order.
The purpose of the change is to encourage market participants to Take at a greater volume and also to achieve a higher Execution Rate. CBSX wants to incentivize a higher Execution Rate because CBSX believes that participants who route order flow that is likely to remove liquidity will only achieve an 85% or higher Execution Rate if such participants route such orders to CBSX first (as opposed to routing such orders to dark pools or other trading centers prior to seeking execution at "lit" exchanges). CBSX desires to create an incentive for Take orders to be sent to CBSX before being sent to other trading centers because orders that scrape through multiple trading centers before CBSX are likely to achieve a lower Execution Rate when the remainder of such orders make it to CBSX because the market may have changed by the time such orders (or remainder of such orders) reach CBSX.
Because all orders sent by a market participant to CBSX will be taken into account when calculating the Execution Rate (except rejected orders), CBSX desires to incentivize the sending of orders that are likely to execute to CBSX. Orders that are sent to CBSX and rest on the CBSX Book will count towards raising the market participant's Execution Rate when the orders execute. This rewards and incentivizes the sending of orders that are likely to execute. Reaching an 85% Execution Rate will mean that a market participant is regularly sending in orders that are likely to execute and is therefore adding useful liquidity to the market. Indeed, this 85% Execution Rate rewards market participants who send orders to CBSX with the intention of either trading immediately or letting the orders rest on the CBSX Book until they execute, thereby incentivizing passive, as well as active, liquidity provision.
CBSX proposes to increase the fee for a cross trade that is the stock component of a qualified contingent trade from $0.0012 per share to $0.0015 per share and to increase the maximum fee for such transactions from $25 per trade to $30 per trade for economic and competitive reasons.
Finally, CBSX proposes to add a fee of $0.0025 per share (minimum rate of $1 per trade, maximum rate of $30 per trade) for two-day settlement of cross trades. CBSX adopted two-day settlement in 2011
The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
Amending the Taker fee structure for transactions in securities priced $1 or greater to provide that a Taker that removes 10,000,000 shares or more of liquidity in one day and achieved an 85% Execution Rate in the previous calendar month is reasonable because those Takers who qualify for this tier will be receiving a larger rebate than they would have prior to this proposed change. This proposed new Taker fee structure is equitable and not unfairly discriminatory because the higher rebate for market participants who hit the new tier will provide an incentive for market participants to attempt to execute more trades on CBSX, which in turn will provide for greater volume and liquidity for all CBSX market participants. The 85% Execution Rate threshold is further equitable and not unfairly discriminatory because it encourages market participants who desire to reach this tier to send orders that are likely to execute to CBSX and allow orders to rest on the CBSX Book until such orders execute, both of which benefit all
Increasing the per-share and maximum fees for a cross trade that is the stock component of a qualified contingent trade is reasonable because the increases are minimal and within the range of other cross trade fees assessed by CBSX, and is equitable and not unfairly discriminatory because the new per-share and maximum fees will be assessed to all market participants equally. Adopting fees for two-day settlement of cross trades is reasonable because the amount of the fees are the same as those being assessed for next-day settlement, and is equitable and not unfairly discriminatory because the new two-day settlement fees will be assessed to all market participants equally.
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.
The Exchange has neither solicited nor received written comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) 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 Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.