Daily Rules, Proposed Rules, and Notices of the Federal Government
This proposal submitted by Chicago Board Options Exchange, Incorporated ("CBOE" or "Exchange") is to codify a fee schedule for the sale by Market Data Express, LLC ("MDX"), an affiliate of CBOE, of 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 purpose of the proposed rule change is to establish fees that MDX will charge for 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.
The fees that MDX would assess for the Data are set forth in the following table which would be included on the Price List on the MDX Web site (
MDX would charge a fee per option per day for the Data. The amount of the fee would be reduced based on the number of options purchased. A subscriber would pay $1.25 per option per day for each option purchased up to 50 options, $1.00 per option per day for each option purchased from 51 to 100 options, $0.75 per option per day for each option purchased from 101 to 500 options, and $.050 [sic] per option per day for each option purchased over 500 options. For example, a subscriber that purchases values for 150 options per day would pay $1.25 per option per day for the first 50 options ($62.50), $1.00 per option per day for the next 50 options ($50.00) and $0.75 per option per day for the remaining 50 options ($37.50) for a total of $150 per day.
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 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 Exchange Act of 1934 (the "Act")
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 also believes that the proposed fees for the Data are consistent with the requirements of the Act because competition provides an effective constraint on the market data fees that the Exchange, through MDX, has the ability and the incentive to charge. CBOE has a compelling need to attract order flow from market participants in order to maintain its share of trading volume. This compelling need to attract order flow imposes significant pressure on CBOE to act reasonably in setting its fees for market data, particularly given that the market participants that will pay such fees often will be the same market participants from whom CBOE must attract order flow. These market participants include broker-dealers that control the handling of a large volume of customer and proprietary order flow. Given the portability of order flow from one exchange to another, any exchange that sought to charge unreasonably high data fees would risk alienating many of the same customers on whose orders it depends for competitive survival. CBOE currently competes with eight options
CBOE is constrained in pricing the Data by the availability to market participants of alternatives to purchasing the Data. CBOE must consider the extent to which market participants would choose one or more alternatives instead of purchasing the exchange's data. As noted above, SuperDerivatives, Markit, Prism, and Bloomberg are some of the market data vendors that offer market data products that would compete with the Service Also, OCC makes similar data available at no cost, thus constraining CBOE's ability to price the Data. The vendor proprietary data and the OCC data are significant alternatives to the MDX Data. Further, other self-regulatory organizations as well as broker-dealers and alternative trading systems can potentially produce their own option valuation products and thus are sources of potential competition for MDX.
The number of market data vendors that sell valuations is relatively limited. The Exchange believes that MDX can be a low cost provider of valuations in this competitive environment.
For the reasons cited above, the Exchange believes the CBOE Customized Option Valuation Service offering, including the proposed fees, is equitable, reasonable and not unfairly discriminatory. In addition, the Exchange believes that no substantial countervailing basis exists to support a finding that the proposed terms and fees for the Service fails to meet the requirements of the Act.
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)
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.