Daily Rules, Proposed Rules, and Notices of the Federal Government
The Exchange proposes to make available, through its affiliate Market Data Express, LLC ("MDX"), a data product that includes option valuations. 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.
The Exchange proposes to make available, through MDX, a new market data product, referred to as the CBOE Customized Option Valuation Service (the "Service"). The Service would provide subscribers with an "end-of-day" file
The Data would consist of indicative
A small number of market data vendors produce option value data that is similar to the Data.
CBOE market-makers that meet the following objective qualification criteria would be allowed to contribute values to MDX for purposes of producing Data for the Service. Interested CBOE market-makers must be approved by the Exchange, have the ability to provide daily valuations to MDX in a timely manner each day after the close of trading, and sign a services agreement with CBOE.
In order to help ensure that MDX receives numerous values from multiple market-makers on a consistent basis, MDX would share revenue from the sale of the Data with qualifying CBOE market-makers that participate in this program. The amount of revenue that MDX would share with participating market-makers would not exceed thirty percent (30%) of the total revenue received by MDX from the sale of the Data. The revenue sharing would be based on the following table:
If only three market-makers participate, MDX would share 21% of total revenue with each market-maker receiving a 7% share. If four market-makers participate, MDX would share 24% of total revenue with each market-maker receiving a 6% share. If five or more market-makers participate, MDX would share 30% of total revenue divided equally among the market-makers.
In order to help ensure that participating market-makers submit values to MDX on 100% of the series to be valued, a market-maker's revenue share would be reduced as follows:
* There is one "grace day" per month, i.e., if a market-maker does not submit values for 100% of the series on just one day within a given month, that market-maker will not lose any portion of its revenue share for that month.
* If a market-maker submits values for less than 100% of the series on any two days within a month, that market-maker will forfeit 10% of its revenue share for that month.
* If a market-maker submits values for less than 100% of the series on any three days within a month, that market-maker will forfeit 25% of its revenue share for that month.
* If a market-maker submits values for less than 100% of the series on any four days within a month, that market-maker will forfeit 50% of its revenue share for that month.
* If a market-maker submits values for less than 100% of the series on any five days within a month, that market-maker will forfeit 75% of its revenue share for that month.
* If a market-maker submits values for less than 100% of the series on any six or more days within a month, that market-maker will forfeit 100% of its revenue share for that month.
Subscribers would be able to purchase options daily, weekly, monthly or quarterly through the MDX Web site. TPHs and non-TPHs would be charged the same fees for the Data. The Exchange will file a separate proposed rule change to establish the fees to be charged by MDX for the Service. The Data would be delivered to subscribers via File Transfer Protocol (FTP) or secure copy shortly after the close of trading each day. MDX expects to launch the Service during the fourth quarter of 2012.
The Exchange believes the proposed rule change is consistent with the provisions of Section 6 of the Securities
The Exchange believes the proposal to share revenue from the sale of the Data with qualifying CBOE market-makers that decide to contribute values to MDX for purposes of producing the Data is reasonable in that the Exchange believes it will encourage market-makers to provide values for the Service, which should enhance the quality of the Service. The Exchange believes using values produced by CBOE market-makers would not only differentiate the Service from the services of competing market data vendors, but would also add validity to the Data since the Data would be more closely related to tradable prices. The Exchange believes the proposal is equitable in that the revenue shared by MDX would be divided equally among participating market-makers. Further, the Exchange believes the proposal is not unfairly discriminatory in that CBOE market-makers would be selected to participate in this program based on objective qualifying criteria.
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. To the contrary, the Exchange believes the proposed rule change is pro-competitive in that it would allow the Exchange, through MDX, to disseminate a new data service on a voluntary basis. The Service is voluntary on the part of the Exchange, which is not required to offer such services, and voluntary on the part of prospective subscribers that are not required to use it. The Exchange believes that the Service would help attract new users and new order flow to the Exchange, thereby improving the Exchange's ability to compete in the market for options order flow and executions.
The Exchange neither solicited nor received comments on the proposed rule change.
Because the foregoing proposed rule change does not:
A. Significantly affect the protection of investors or the public interest;
B. Impose any significant burden on competition; and
C. Become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)
At any time within 60 days of the filing of this 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.
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.