15436 Federal Register / Vol. 77, No. 51 / Thursday, March 15, 2012 / Notices 

17 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3For reference, the February 2012 settlement 

value for VIX options was $20.44. Compare with the 

February 2012 settlement values for NASDAQ 100 

index options ($2586.93), Russell 2000 index 

options (($833.16) and S&P 500 index options 

($1363.80). 

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. 

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 rulecomments@sec.gov. Please include File 

Number SR–EDGX–2012–06 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–EDGX–2012–06. 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 a.m. and 3 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–EDGX– 

2012–06 and should be submitted on or 

before April 5, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6236 Filed 3–14–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66556; File No. SR–CBOE– 

2012–022] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend Its Fees 

Schedule 

March 9, 2012. 

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 March 1, 

2012, the 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. 

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 amend its 

Fees Schedule. First, the Exchange 

proposes to amend the Customer Large 

Trade Discount (the ‘‘Discount’’) to state 

that regular customer transaction fees 

will only be assessed for the first 10,000 

CBOE Volatility Index (‘‘VIX’’) options 

contracts in a qualifying customer 

transaction. The Discount is intended to 

cap fees on large customer trades. 

Currently, there is no separate carve-out 

for VIX options, which means that 

regular customer transaction fees are 

currently assessed for the first 5,000 VIX 

options contracts in a qualifying 

customer transaction (the threshold for 

all index options is set at 5,000 

contracts other than S&P 500 index 

options, for which the threshold is 

10,000 contracts). The Exchange offers 

the Discount in order to encourage 

growth of new products. VIX options 

trading volume has increased greatly 

since it began trading, and due to 

increased demand, the Exchange 

proposes to raise increase [sic] the 

threshold before which customers cease 

paying transaction fees for qualifying 

VIX options transactions in order to 

recoup costs from developing VIX 

options, as well as other administrative 

costs. Moreover, because VIX options 

trade at a significantly lower price than 

the vast majority of other highly-traded 

index options, the notional value of 

10,000 VIX options contracts is still 

much lower than the notional value of 

5,000 contracts of nearly all other 

highly-traded index options (and 10,000 

contracts of S&P 500 index options).3

The Exchange also proposes to lower 

the Hybrid Agency Liaison (‘‘HAL’’) 

Step-Up Rebate to $0.10 per contract. 

The HAL system allows CBOE MarketMakers to step up to meet the National 

Best Bid/Offer (‘‘NBBO’’) before an 

order is routed to another exchange 

through the Options Order Protection 

and Locked/Crossed Market Plan 

referenced in Rule 6.80 (‘‘Linkage’’). The 

HAL Step-Up Rebate is the rebate a 

Market-Maker receives per each contract 

against transaction fees generated from 

a transaction on the HAL system in a 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 51 / Thursday, March 15, 2012 / Notices 15437 

4See Amex Fee Schedule, Routing Surcharge. 

5 15 U.S.C. 78f(b). 

6 15 U.S.C. 78f(b)(4). 

7See Note 3. 

8See Note 4. 

9Prior to this proposed rule change, the Exchange 

also offered different Linkage fees for customer 

orders of 100 or more contracts (passing through 

Linkage fees, minus $0.05 per contract) than for 

orders of 99 or fewer contracts (no Linkage fees) 

(See Exchange Fees Schedule, Section 20). 

penny pilot class, provided that at least 

60% of the market-maker’s quotes in 

that class (excluding quotes in LEAPS 

series) in the prior calendar month were 

on one side of the NBBO. Currently, the 

rebate is $0.15 per contract. The 

Exchange proposes lowering it to $0.10 

per contract as a change in the 

Exchange’s competitive offering and in 

order to recoup costs related to Linkage 

and Exchange administrative fees. 

Further, the Exchange is not aware of 

any other exchanges that offer MarketMakers a rebate for stepping up to meet 

the NBBO. 

The Exchange also proposes to amend 

its Linkage fees for customer orders. 

Currently, when CBOE sends a customer 

order with an original size of 100 or 

more contracts to another exchange(s) 

through the Linkage, CBOE passes 

through the actual transaction fee 

assessed by the exchange(s) to which 

the order was routed, minus $0.05 per 

contract. Also, when CBOE currently 

sends a customer order with an original 

size of 99 or fewer contracts to another 

exchange(s) through the Linkage, CBOE 

assesses no fee (thereby ‘‘eating’’ 

whatever fee is assessed by the 

exchange(s) to which the order was 

routed). As orders continue to be routed 

through Linkage, the Exchange finds 

that it is not currently financially 

prudent to continue to ‘‘eat’’ fees or pay 

for orders executed at other exchanges 

to the current extent. 

As such, CBOE now proposes to 

eliminate the $0.05 discount for the 

routing of customer orders with an 

original size of 100 or more contracts to 

another exchange(s) through the 

Linkage, and instead simply pass 

through the actual transaction fee 

assessed by the exchange(s) to which 

the order is routed. For customer orders 

with an original size of 99 contracts or 

fewer routed to another exchange(s) 

through Linkage, CBOE proposes to pass 

through the actual transaction fees 

assessed by the exchange(s) to which 

the order was routed, minus $0.05 per 

contract (provided that such exchange(s) 

assess transaction fees). As such, the 

CBOE will no longer be paying for 

executions of customer orders with an 

original size of 100 or more contracts 

routed to another exchange through 

Linkage, or eating the entire costs of 

customer orders with an original size of 

99 contracts or fewer routed to another 

exchange(s) through Linkage. These 

changes put CBOE on a more even 

financial footing with other exchanges 

that do not subsidize the costs of 

customer orders routed through 

Linkage. Even after instituting the 

proposed changes, CBOE still offers 

favorable Linkage pricing compared to 

other exchanges. For example, NYSE 

Amex, LLC (‘‘Amex’’) passes through 

fees for customer orders routed to other 

exchanges through Linkage and assesses 

its own $0.11 per contract fee on top.4

The proposed changes are to take 

effect March 1, 2012. 

2. Statutory Basis 

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.5 Specifically, 

the Exchange believes the proposed rule 

change is consistent with Section 6(b)(4) 

of the Act,6 which provides that 

Exchange rules may provide for the 

equitable allocation of reasonable dues, 

fees, and other charges among its 

Trading Permit Holders and other 

persons using its facilities. Raising the 

Discount threshold for VIX options to 

10,000 customer contracts is reasonable 

because customers will still be receiving 

a discount for large trades that they 

would not otherwise receive, and 

because that amount is within the range 

of Discount thresholds for other 

products (the SPX threshold is 10,000). 

This change is equitable and not 

unfairly discriminatory because, while 

the threshold is lower for some 

products, it is the same as for SPX, and 

because all customers whose large 

trades qualify for the Discount will still 

receive it. Moreover, because VIX 

options trade at a significantly lower 

price than the vast majority of other 

highly-traded index options, the 

notional value of 10,000 VIX options 

contracts is still much lower than the 

notional value of 5,000 contracts of 

nearly all other highly-traded index 

options (and 10,000 contracts of S&P 

500 index options).7 Finally, raising the 

Discount threshold to 10,000 for VIX 

options is equitable and not unfairly 

discriminatory also because the 

Exchange expended considerable 

resources in developing VIX options 

and needs to recoup those and other 

related expenses. 

Lowering the HAL Step-Up Rebate is 

reasonable because Market-Makers will 

still be receiving a rebate for stepping 

up to the NBBO. This change is 

equitable and not unfairly 

discriminatory because it will apply to 

all qualifying Market-Makers equally, 

and because it is still favorable to other 

exchanges, which offer no similar 

rebates for stepping up (to the 

Exchange’s knowledge). 

Eliminating the $0.05 discount for the 

routing of customer orders with an 

original size of 100 or more contracts to 

another exchange(s) through Linkage, 

and instead simply passing through the 

actual transaction fee assessed by the 

exchange(s) to which the order is 

routed, is reasonable because a customer 

will now merely be charged by CBOE 

the amount that CBOE is charged by the 

exchange(s) that execute the customer’s 

order. This change is equitable and not 

unfairly discriminatory for the same 

reason; it is certainly equitable and not 

unfairly discriminatory to merely pass 

through the costs being assessed for a 

trade (indeed, it is equitable because 

that is the exact amount being assessed 

for the trade). Further, this fee will be 

applied equally; all customer orders 

with an original size of 100 or more 

contracts that are routed to another 

exchange(s) through Linkage will accrue 

the pass-through amount. Finally, 

merely passing through the costs is 

favorable to the Linkage arrangement on 

other exchanges such as Amex (which 

passes through fees for customer orders 

routed to other exchanges through 

Linkage and assesses its own $0.11 per 

contract fee on top).8

Passing through the Linkage fees for 

customer orders with an original size of 

99 contracts or less, minus $0.05 per 

contract, is reasonable because a 

customer will still be assessed a lower 

amount than the cost to CBOE for 

routing such orders to another 

exchange(s). This is equitable and not 

unfairly discriminatory because it is 

certainly not unfair to pass through the 

costs being assessed for a trade 

(especially not when the Exchange is 

eating $0.05 per contract). Further, this 

fee will be applied equally; all customer 

orders with an original size of 99 

contracts or less that are routed to 

another exchange(s) through Linkage 

will be assessed the actual transaction 

fees assessed by the exchange(s) that 

execute the orders, minus $0.05 per 

contract. 

Finally, the Exchange believes that it 

is equitable and not unfairly 

discriminatory to continue to assess 

different Linkage fees for customer 

orders of 100 or more contracts than are 

assessed for orders of 99 or fewer 

contracts 9 because customer orders of 


srobinson on DSK4SPTVN1PROD with NOTICES
15438 Federal Register / Vol. 77, No. 51 / Thursday, March 15, 2012 / Notices 

10See Note 9 and also Exchange Fees Schedule, 

footnote (9), in which the Exchange waives 

transaction fees for customer orders of 99 contracts 

or less in ETF, ETN and HOLDRs options. 

11 15 U.S.C. 78s(b)(3)(A). 

12 17 CFR 240.19b–4(f). 13 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b-4. 

3See Securities Exchange Act Release No. 66131 

(January 11, 2012), 77 FR 2595 (January 18, 2012) 

(‘‘Notice’’). 

4 In Amendment No. 1, the Exchange represented 

that it will provide to the Commission the same 

data that the Chicago Board of Options Exchange, 

Incorporated provides to the Commission in 

connection with that exchange’s AIM. See 

Securities Exchange Act Release No. 53222 

(February 3, 2006), 71 FR 7089 (February 10, 2006). 

Amendment No. 1 is technical in nature, and 

therefore the Commission is not publishing 

Amendment No. 1 for public comment. 

5The term ‘‘Participant’’ is defined in C2 Rule 

1.1. 

6See Rule 6.51(a)(2)–(3). See also Rule 6.51, 

Interpretations and Policies .03, noting that for at 

99 or fewer contracts are generally 

entered by small retail customers, 

whereas customer orders of 100 or 

greater contracts are generally entered 

by larger, more active customers. Such 

customers are largely more 

sophisticated than smaller retail 

customers and have the capability to 

‘‘link’’ orders themselves (send orders to 

the exchange displaying the NBBO), 

while smaller retail customers often do 

not have such capabilities. As such, 

CBOE does not want to unduly 

subsidize Linkage orders for parties that 

are capable of handling that function 

themselves. Moreover, different fee 

structures are appropriate for these 

different groups due to their different 

demographics and trading 

characteristics, and the Exchange 

currently has set this 100-contract 

threshold in multiple places in its Fees 

Schedule.10

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

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. 

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 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) 11 of the Act and paragraph 

(f) of Rule 19b–4 12 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. 

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 rulecomments@sec.gov. Please include File 

Number SR–CBOE–2012–022 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–CBOE–2012–022. 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 a.m. and 3 p.m. Copies of such filing 

will also 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 No. SR–CBOE– 

2012–022 and should be submitted on 

or before April 5, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6234 Filed 3–14–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66552; File No. SR–C2– 

2011–043] 

Self-Regulatory Organizations; C2 

Options Exchange, Incorporated; 

Order Approving Proposed Rule 

Change, as Modified by Amendment 

No. 1 Thereto, Relating to Changes to 

the Automated Improvement 

Mechanism 

March 9, 2012. 

I. Introduction 

On December 30, 2011, C2 Options 

Exchange, Incorporated (‘‘Exchange’’ or 

‘‘C2’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b-4 thereunder,2 a 

proposed rule change relating to its 

Automated Improvement Mechanism 

(‘‘AIM’’). The proposed rule change was 

published for comment in the Federal 

Register on January 18, 2012.3 On 

March 2, 2012, the Exchange filed 

Amendment No. 1 to the proposed rule 

change.4 The Commission received no 

comments on the proposal. This order 

approves the proposed rule change, as 

modified by Amendment No. 1 thereto. 

II. Description of the Proposal 

C2’s AIM allows a Participant 5 to 

cross an agency order it presents as 

agent (‘‘Agency Order’’) against 

principal interest or a solicited order, 

provided that it first exposes the Agency 

Order to a one-second auction. If the 

Agency Order is 50 contracts or greater, 

the Participant (‘‘Initiating Participant’’) 

must stop the Agency Order at the 

national best bid or offer (‘‘NBBO’’) (or 

the order’s limit price if better), and if 

it is less than 50 contracts, the 

Participant must stop the Agency Order 

at the NBBO improved by one minimum 

increment (or the order’s limit price if 

better).6 When initiating an auction, an 


srobinson on DSK4SPTVN1PROD with NOTICES