15432 Federal Register / Vol. 77, No. 51 / Thursday, March 15, 2012 / Notices 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 34–66266 

(January 27, 2012), 77 FR 5284 (February, 2012). In 

its filing with the Commission, OCC included 

statements concerning the purpose of and basis for 

the proposed rule change. The text of these 

statements is incorporated into the discussion of the 

proposed rule change in Section II below. 

4 15 U.S.C. 78s(b)(2)(B). 

5 15 U.S.C. 78q–1(b)(3)(C). 

6 15 U.S.C. 78q–1(b)(3)(F). 

7 15 U.S.C. 78s(b)(2). 

8 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition and capital formation. 

15 U.S.C. 78c(f). 

9 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3A Member is any registered broker or dealer, or 

any person associated with a registered broker or 

dealer, that has been admitted to membership in the 

Exchange. 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NYSEAmex–2012–16 and should be 

submitted on or before April 5, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6239 Filed 3–14–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66560; File No. SR–OCC– 

2012–01] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Order 

Approving Proposed Rule Change 

Relating to Public Directors 

March 9, 2012. 

I. Introduction 

On January 20, 2012, The Options 

Clearing Corporation (‘‘OCC’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule change SR–OCC–2012–01 pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder.2 The proposed rule 

change was published for comment in 

the Federal Register on February 2, 

2012.3 The Commission received no 

comment letters regarding the proposal. 

For the reasons discussed below, the 

Commission is granting approval of the 

proposed rule change. 

II. Description 

The proposed rule change would 

modify the corporate governance 

structure of OCC by: (i) Increasing the 

number of public directors on OCC’s 

Board of Directors from one to three, (ii) 

creating a staggered term system for the 

public directors, and (iii) adding a 

public director to the Nominating 

Committee. 

III. Discussion 

Section 19(b)(2)(B) of the Act directs 

the Commission to approve a proposed 

rule change of a self-regulatory 

organization if it finds that such 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to such organization.4 In 

particular, Section 17A(b)(3)(C)5 of the 

Act requires that the rules of a clearing 

agency assure a fair representation of its 

shareholders and participants in the 

selection of its directors and 

administration of its affairs. 

The proposed change would allow 

OCC to increase the number of public 

directors from one to three, to create a 

staggered term system for the public 

directors, and to add a public director 

to the Nominating Committee. In 

proposing these changes to the 

composition of its Board of Directors, 

OCC stated that the changes would 

enhance the corporate governance 

structure at OCC. As such, the 

Commission finds that the proposed 

rule change is consistent with OCC’s 

obligation under Section 17A(b)(3)(F) 6

of the Act’s requirement that the rules 

of OCC be designed to remove 

impediments and perfect the 

mechanism of a national system for the 

clearance and settlement of securities 

transactions. 

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposal is 

consistent with the requirements of the 

Act and in particular with the 

requirements of Section 17A of the Act 

and the rules and regulations 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) 7 of the Act, that the 

proposed rule change (File No. SR– 

OCC–2012–01) be, and hereby is, 

approved.8

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6238 Filed 3–14–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66558; File No. SR–EDGX– 

2012–06] 

Self-Regulatory Organizations; EDGX 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Amendments 

to the EDGX Exchange, Inc. Fee 

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 February 

29, 2012 the EDGX Exchange, Inc. (the 

‘‘Exchange’’ or the ‘‘EDGX’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which items 

have been prepared by the selfregulatory organization. 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 and rebates applicable to Members 3

of the Exchange pursuant to EDGX Rule 

15.1(a) and (c). All of the changes 

described herein are applicable to EDGX 

Members. The text of the proposed rule 

change is available on the Exchange’s 

Internet Web site at http:// 

www.directedge.com, at the Exchange’s 

principal office, and at the Public 

Reference Room of the Commission. 

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 

self-regulatory organization 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 self-regulatory organization has 

prepared summaries, set forth in 

sections A, B and C below, of the most 

significant aspects of such statements. 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 51 / Thursday, March 15, 2012 / Notices 15433 

4See Securities and Exchange Act Release No. 

65225 (August 30, 2011), 76 FR 55148 (September 

6, 2011) (SR–BATS–2011–018). 

5See EDGX Exchange Rule 11.9(b)(3)(n). 

6See Securities Exchange Act Release No. 65903 

(December 6, 2011), 76 FR 77284 (December 12, 

2011) (SR–EDGX–2011–37). 

7As defined in Rule 1.5(ee). 

8These flags account for all postable destinations 

that are not already accounted for by other flags on 

the fee schedule. 

9This occurs when two orders presented to the 

Exchange from the same Member (i.e., MPID) are 

presented separately and not in a paired manner, 

but nonetheless inadvertently match with one 

another. Members are advised to consult Rule 12.2 

respecting fictitious trading. 

10 15 U.S.C. 78f. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to make a 

technical amendment to the description 

of Footnote 9 and Flag CL to reflect the 

Commission’s approval of the BATS 

BZX Exchange (‘‘BATS BZX’’) as a 

primary listing exchange.4 Therefore, 

Footnote 9 will state that Flag O will be 

yielded and a fee of $0.0005 per share 

will be assessed if an order is routed to 

NYSE Arca & BATS BZX’s closing 

process. This fee in footnote 9 ($0.0005 

per share) gives a flat rate for the NYSE 

Arca & BATS BZX’s closing processes, 

which is lower than other primary 

listing markets. Flag CL will apply to 

orders routed to a primary listing 

market’s closing process except NYSE 

Arca and BATS BZX. In addition, the 

Exchange proposes to revise the 

descriptions on Flags CL, 8, and 9 to 

broaden their applicability to several 

routing strategies rather than just 

ROOC.5 Therefore, the Exchange 

proposes that Flag CL state ‘‘Routed to 

listing market closing process except 

NYSE Arca & BATS BZX.’’ The 

Exchange proposes conforming 

amendments to Flags 8 and 9 to delete 

the ROOC routing strategy from the 

descriptions of these flags. 

The Exchange proposes to amend Flag 

9 and Flag 10 of its fee schedule. At this 

time, NYSE Arca offers its Members a 

rebate of $0.0021 for orders that add 

liquidity on Tapes A or C and a rebate 

of $0.0022 for orders that add liquidity 

on Tape B. The Exchange proposes to 

amend Flag 9 to account for the passthrough of the NYSE Arca rebate for 

adding liquidity through Tapes A or C 

and to create Flag 10 to account for the 

pass-through of the NYSE Arca rebate 

for adding liquidity on Tape B. 

The Exchange proposes to make a 

technical amendment by re-naming Flag 

H as Flag HA, which represents all nondisplayed orders that add liquidity (not 

including Midpoint Match orders). Flag 

HA will identify all non-displayed 

orders that add liquidity to EDGX, not 

including Midpoint Match orders, and 

the Exchange will continue to provide a 

rebate of $0.0015 per share. Finally, the 

Exchange proposes to make technical 

amendments to Flags G, L, N, and 3 to 

replace the ‘‘and’’ connector with ‘‘or’’ 

(i.e., ‘‘Tapes A or C’’ instead of ‘‘Tapes 

A and C’’) to make these references 

accurate. 

In SR–EDGX–2011–37,6 the Exchange 

amended several routing options 

contained in Rule 11.9(b)(3) to allow 

Users 7 more discretion if shares remain 

unexecuted after routing. In particular, 

Rule 11.9(b)(3)(c)(i)–(iii) was amended 

to provide that Users may elect that any 

remainder of an order be posted to 

another destination on the System 

routing table. In conjunction with this 

amendment, the Exchange proposes to 

create the following new flags: 8

The Exchange proposes to add Flag 

RB for orders that are routed from EDGX 

to Nasdaq OMX BX and add liquidity. 

The Exchange proposes to assess a 

charge of $0.0018 per share to account 

for the pass-through of the Nasdaq OMX 

BX fee for adding liquidity. 

The Exchange proposes to add Flag 

RC for orders that are routed from EDGX 

to the National Stock Exchange, Inc. 

(‘‘NSX’’) and add liquidity. The 

Exchange proposes to offer Members a 

rebate of $0.0026 per share to account 

for the pass-through of the NSX rebate 

for adding liquidity. 

The Exchange proposes to add Flag 

RM for orders that are routed from 

EDGX to the Chicago Stock Exchange, 

LLC (‘‘CHX’’) and add liquidity. The 

Exchange proposes to assess no charge 

to account for the pass-through of no 

CHX fee for adding liquidity. 

The Exchange proposes to add Flag 

RS for orders that are routed from EDGX 

to the Nasdaq OMX PSX (‘‘PSX’’) and 

add liquidity. The Exchange proposes to 

offer Members a rebate of $0.0024 per 

share to account for the pass-through of 

the PSX rebate for adding liquidity. 

The Exchange proposes to add Flag 

RW for orders that are routed from 

EDGX to the CBOE Stock Exchange, LLC 

(‘‘CBSX) and add liquidity. The 

Exchange proposes to assess a charge of 

$0.0017 per share to account for the 

pass-through of the CBSX fee for adding 

liquidity. 

The Exchange proposes to add Flag 

RY for orders that are routed from EDGX 

to the BATS BYX and add liquidity. The 

Exchange proposes to assess a charge of 

$0.0003 per share to account for the 

pass-through of the BATS BYX fee for 

adding liquidity. 

The Exchange proposes to add Flag 

RA for orders that are routed from EDGX 

to EDGA Exchange, Inc. (‘‘EDGA’’) and 

add liquidity. The Exchange proposes to 

offer Members a rebate of $0.0004 per 

share to account for the pass-through of 

the EDGA fee for adding liquidity. 

The Exchange proposes to add Flag 

RZ for orders that are routed from EDGX 

to the BATS BZX and add liquidity. The 

Exchange proposes to offer Members a 

rebate of $0.0025 per share to account 

for the pass-through of the BATS BZX 

rebate for adding liquidity to BATS 

BZX. 

Additional Changes to the EDGX Fee 

Schedule 

The Exchange proposes to add three 

additional rebates to the fee schedule: 

First, Members can qualify for the 

Mega Tape B Tier and be provided a 

$0.0034 rebate per share for liquidity 

added on EDGX if the Member on a 

daily basis, measured monthly: (i) Posts 

greater than or equal to .10% of the TCV 

in ADV more than their January 2012 

ADV added to EDGX; and (ii) posts 

greater than or equal to .10% of the TCV 

in ADV in Tape B securities more than 

their January 2012 ADV added to EDGX. 

Secondly, Members can qualify for 

the Mini Tape B Tier and be provided 

a $0.0030 rebate per share for liquidity 

added on EDGX if the Member on a 

daily basis, measured monthly: (i) Posts 

greater than or equal to .05% of the TCV 

in ADV more than their January 2012 

ADV to EDGX; and (ii) posts greater 

than or equal to .05% of the TCV in 

ADV in Tape B securities more than 

their January 2012 ADV added to EDGX. 

Finally, the Exchange proposes to 

amend footnote 11 on its fee schedule 

to provide that if a Member internalizes 

more than 4% of their ADV on EDGX 

(added, removed, and routed liquidity) 

and the Member, at a minimum, meets 

the criteria for the Mega Tier rebate of 

$0.0032 per share in footnote 1, then the 

Member’s internalization 9 rate would 

be a rebate of $0.00015 per share, 

instead of a fee of $0.0001 per share if 

they met the tier provided in footnote 11 

(posting 10,000,000 shares of more of 

ADV to EDGX) or a fee of $0.00035 per 

share if a Member did not meet the tier. 

The Exchange proposes to implement 

these amendments to its fee schedule on 

March 1, 2012. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule changes are consistent 

with the objectives of Section 6 of the 

Act,10 in general, and furthers the 


srobinson on DSK4SPTVN1PROD with NOTICES
15434 Federal Register / Vol. 77, No. 51 / Thursday, March 15, 2012 / Notices 

11 15 U.S.C. 78f(b)(4). 

12See Nasdaq OMX Rule 7018 [sic]. 

13See NYSE Arca Equities, Inc. Schedule of Fees 

and Charges for ExchangeServices. 

objectives of Section 6(b)(4),11 in 

particular, as it is designed to provide 

for the equitable allocation of reasonable 

dues, fees and other charges among its 

members and other persons using its 

facilities. 

The Exchange believes that the 

proposed technical amendment to 

Footnote 9 and Flag CL to include BATS 

BZX as one of the primary listing 

exchanges adds additional transparency 

to its fee schedule for investors as it 

brings the schedule up-to-date to 

account for a new listing exchange. The 

Exchange also believes that the 

amendments to Flags 8,9, and CL to 

remove the specific ‘‘ROOC routing 

strategy’’ from those flags descriptions 

provides additional transparency to the 

fee schedule by broadening those flags 

applicability to several routing 

strategies. This encourages Members to 

utilize the Exchange to route to various 

destinations. The Exchange believes that 

the proposed technical amendment to 

delete Flag H and replace it with Flag 

HA promotes market transparency and 

improves investor protection by adding 

additional transparency to its fee 

schedule by alerting Members of the 

name change for the flag. 

In addition, the Exchange believes 

that the proposed pass-through of rates 

for Flags 9, 10, RA, RB, RC, RM, RS, 

RW, RY, and RZ represent an equitable 

allocation of reasonable dues, fees and 

other charges since it reflects the passthrough of the rates associated with 

transactions done on other exchanges, 

as described above. In addition, EDGX 

believes that it is reasonable and 

equitable to pass-through certain rates to 

its Members. The Exchange also 

believes that the proposed pass-through 

of rates is non-discriminatory because it 

applies to all Members. 

In addition, the Exchange believes 

that adding an additional method to 

achieve rebates of $0.0034 per share and 

$0.0030 per share, respectively, that are 

tied to January 2012 baselines and Tape 

B volume also represents an equitable 

allocation of reasonable dues, fees, and 

other charges since it encourages 

Members, based on growth over new 

baselines and in a new subset of 

securities (Tape B), to add increasing 

amounts of liquidity to EDGX each 

month. Such increased volume 

increases potential revenue to the 

Exchange, and would allow the 

Exchange to spread its administrative 

and infrastructure costs over a greater 

number of shares, leading to lower per 

share costs. These lower per share costs 

would allow the Exchange to pass on 

the savings to Members in the form of 

higher rebates. The increased liquidity 

also benefits all investors by deepening 

EDGX’s liquidity pool, offering 

additional flexibility for all investors to 

enjoy cost savings, supporting the 

quality of price discovery, promoting 

market transparency and improving 

investor protection. Volume-based 

rebates such as the ones proposed 

herein have been widely adopted in the 

cash equities markets, and are equitable 

because they are open to all Members on 

an equal basis and provide discounts 

that are reasonably related to the value 

to an exchange’s market quality 

associated with higher levels of market 

activity, such as higher levels of 

liquidity provision and introduction of 

higher volumes of orders into the price 

and volume discovery processes. In 

addition, the rebates specific for Tape B 

securities are also reasonable in that 

other exchanges also employ similar 

pricing mechanisms. For example, 

Nasdaq OMX charges $0.0027 per share 

for market participant identifiers 

(‘‘MPIDs’’) removing 1.50% and adding 

0.50% of Tape B consolidated volume, 

and MPIDs that remove 0.50% and add 

0.25% of Tape B consolidated volume 

are charged $0.0028 per share. All other 

MPIDs are charged $0.0030 per share.12

Similarly, NYSE Arca has rebates and 

fees that are specific to adding/removing 

in Tape B securities throughout their fee 

schedule.13

Finally, the Exchange believes that 

the rebates of $ 0.0034 per share and 

$0.0032 [sic] per share for the new Tape 

B tiers also represent an equitable 

allocation of reasonable dues, fees, and 

other charges since higher rebates are 

directly correlated with more stringent 

criteria. 

Currently, the Mega Tier rebates of 

$0.0034/$0.0032 per share have the 

most stringent criteria associated with 

them, and are $0.0003/$0.0001 greater 

than the Ultra Tier rebate ($0.0031 per 

share) and $0.0006/$0.0004 greater than 

the Super Tier rebate ($0.0028 per 

share). 

For example, in order for a Member to 

qualify for the Mega Tier rebate of 

$0.0034, the Member would have to add 

or route at least 4,000,000 shares of 

average daily volume during pre and 

post-trading hours and add a minimum 

of 20,000,000 shares of ADV on EDGX 

in total, including during both market 

hours and pre and post-trading hours. 

The criteria for this tier is the most 

stringent as fewer Members generally 

trade during pre and post-trading hours 

because of the limited time parameters 

associated with these trading sessions. 

The Exchange believes that this higher 

rebate awarded to Members would 

incent liquidity during these trading 

sessions. 

In order to qualify for an equivalent 

rebate of $0.0034 per share (Mega Tape 

B tier), a Member would have to (i) post 

greater than or equal to .10% of the TCV 

in ADV more than their January 2012 

ADV added to EDGX; and (ii) post 

greater than or equal to .10% of the TCV 

in ADV in Tape B securities more than 

their January 2012 ADV (baseline) 

added to EDGX. Assuming a TCV for 

January 2012 of 8.0 billion and a 

January 2012 ADV of 1 million shares, 

the Member would have to post greater 

than or equal to 9 million shares (8 

million shares more than their January 

2012 baseline of 1 million shares in 

ADV added to EDGX), and post greater 

than or equal to 9 million shares in Tape 

B securities to EDGX). 

Another way a Member can qualify 

for the Mega Tier (with a rebate of 

$0.0032 per share) would be to post 

0.75% of TCV. Assuming an average 

TCV for January 2012 (8.0 billion), this 

would be 60 million shares on EDGX. A 

second method to qualify for the rebate 

of $0.0032 per share would be to post 

0.12% of the TCV (9.6 million shares) 

more than the Member’s February 2011 

or (as proposed, December 2011) ADV 

added to EDGX. Assuming the 

Member’s February 2011/December 

2011 ADVs are 1 million shares, the 

Exchange believes that requiring 

Members to post 10.6 million more 

shares than a February or December 

2011 baseline ADV encourages Members 

to add increasing amounts of liquidity 

to EDGX each month. Such increased 

volume increases potential revenue to 

the Exchange, and would allow the 

Exchange to spread its administrative 

and infrastructure costs over a greater 

number of shares, leading to lower per 

share costs. These lower per share costs 

would allow the Exchange to pass on 

the savings to Members in the form of 

higher rebates. The increased liquidity 

also benefits all investors by deepening 

EDGX’s liquidity pool, offering 

additional flexibility for all investors to 

enjoy cost savings, supporting the 

quality of price discovery, promoting 

market transparency and improving 

investor protection. Volume-based 

rebates such as the ones proposed 

herein have been widely adopted in the 

cash equities markets, and are equitable 

because they are open to all Members on 

an equal basis and provide discounts 

that are reasonably related to the value 

to an exchange’s market quality 

associated with higher levels of market 

activity, such as higher levels of 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 51 / Thursday, March 15, 2012 / Notices 15435 

14 In SR–EDGX–2011–13 (April 29, 2011), the 

Exchange represented that ‘‘it will work promptly 

to ensure that the internalization fee is no more 

favorable than each prevailing maker/taker spread.’’ 

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

16 17 CFR 19b–4(f)(2). 

liquidity provision and introduction of 

higher volumes of orders into the price 

and volume discovery processes. 

A Member can also qualify for the 

Mega Tier rebate of $0.0032 per share by 

adding or routing at least 4,000,000 

shares of ADV prior to 9:30 a.m. or after 

4 p.m. (includes all flags except 6) and 

adding a minimum of .20% of the TCV 

on a daily basis measured monthly, 

including during both market hours 

and/or pre and post-trading hours. 

Based on an average TCV for January 

2012 (8.0 billion shares), a Member 

would qualify by adding 16 million 

shares during both market hours and/or 

pre and post-trading hours and adding 

or routing at least 4,000,000 shares of 

ADV during pre and post trading hours. 

The Exchange notes that fewer Members 

generally trade during pre and posttrading hours because of the limited 

time parameters associated with these 

trading sessions. Therefore, the amount 

of shares that the Exchange requires to 

be added or routed to satisfy this tier is 

less than for the Ultra Tier, for example, 

which is based on posting liquidity to 

EDGX during regular trading hours. The 

Exchange believes that this higher 

rebate awarded to Members would 

incent liquidity during these trading 

sessions. Such increased volume 

increases potential revenue to the 

Exchange, and would allow the 

Exchange to spread its administrative 

and infrastructure costs over a greater 

number of shares, leading to lower per 

share costs. These lower per share costs 

would allow the Exchange to pass on 

the savings to Members in the form of 

a higher rebate. 

In order to qualify for the Ultra Tier, 

which has less stringent criteria than the 

Mega Tier and Mega Tape B Tier, and 

be provided a rebate of $0.0031 per 

share, the Member would have to post 

0.50% of TCV. Based on average TCV 

for January 2012 (8.0 billion shares), this 

would be 40 million shares on EDGX. 

Members can qualify for the Mini 

Tape B Tier and be provided a $0.0030 

rebate per share for liquidity added on 

EDGX if the Member on a daily basis, 

measured monthly: (i) posts greater than 

or equal to .05% of the TCV in ADV 

more than their January 2012 ADV 

added to EDGX; and (ii) posts greater 

than or equal to .05% of the TCV in 

ADV in Tape B securities more than 

their January 2012 ADV added to EDGX. 

Based on a TCV of 8.0 billion shares for 

January 2012 and a Member’s ADV for 

January 2012 of 1 million shares 

(baseline), this would amount to (i) 

posting greater than or equal to 5 

million shares to EDGX; and (ii) posting 

greater than or equal to 5 million shares 

in Tape B securities to EDGX. 

The Super Tier has the least stringent 

criteria of the tiers mentioned above. In 

order for a Member to qualify for this 

rebate, the Member would have to post 

at least 10 million shares on EDGX and 

would qualify for a rebate of $0.0028 per 

share. As stated above, these rebates 

also result, in part, from lower 

administrative and other costs 

associated with higher volume. The 

reduction in rebate would allow the 

Exchange to recoup additional revenue 

to recover increased infrastructure and 

administrative expenses. This rebate 

also results, in part, from lower 

administrative and ther costs associated 

with higher volume. 

Another way a Member can qualify 

for a rebate of $0.0028 per share is to 

post 0.065% of the TCV in ADV more 

than their February 2011 ADV added to 

EDGX. This tier allows Members even 

greater flexibility with respect to 

achieving an additional rebate and 

rewards growth patterns in volume by 

Members as this rebate’s conditions 

encourage Members to add increasing 

amounts of liquidity to EDGX each 

month. Based on an ADV in February 

2011 (baseline) of 1,000,000 shares, the 

Member would have to add 6.2 million 

shares total to qualify for such rebate. 

This rebate also results, in part, from 

lower administrative and other costs 

associated with higher volume. 

The Exchange believes that the rebate 

for the internalization tier of $0.00015 

per share represents an equitable 

allocation of reasonable dues, fees and 

other charges among its members and 

other persons using its facilities since it 

allows Members of the Exchange who 

inadvertently match against each other 

on both sides of a trade to avoid having 

to be penalized by paying an 

internalization fee of $0.00035 per share 

per side during regular or pre and post 

trading sessions (Flags E/5) or a fee of 

$0.0001 per share per side if they met 

the tier provided in footnote 11 of the 

fee schedule. 

Finally, the internalization rebate is 

equitable in that it is in line with the 

EDGX fee structure 14 which currently 

has a maker/taker spread of $0.0006 per 

share (the standard rebate to add 

liquidity on EDGX is $0.0023 per share, 

while the standard fee to remove 

liquidity is $0.0029 per share). EDGX 

also has a variety of tiered rebates 

ranging from $0.0023–$0.0034 per 

share, which makes its maker/taker 

spreads range from $.0006 (standard 

add¥standard removal rate), ¥$.0001 

(standard removal rate¥Super Tier 

rebate), ¥$0.0002, (standard removal 

rate¥Ultra Tier rebate), ¥$0.0003 

(standard removal rate¥Mega Tier 

rebate of $0.0032), and ¥$.0005 

(standard removal rate¥Mega Tier 

rebate of $0.0034 per share). As a result 

of the customer internalization rebate, 

Members who internalized and met the 

criteria to satisfy the Mega Tier and the 

volume threshold of 4% of their ADV on 

EDGX would be rebated $0.00015 per 

share per side of an execution (total 

rebate of $0.0003 per share), which 

would be an internalization rate that is 

no more favorable the prevailing maker/ 

taker spread by satisfying the Mega Tier 

rebate of $0.0032 ($¥0.0003). 

The Exchange also notes that it 

operates in a highly competitive market 

in which market participants can 

readily direct order flow to competing 

venues if they deem fee levels at a 

particular venue to be excessive. The 

proposed rule change reflects a 

competitive pricing structure designed 

to incent market participants to direct 

their order flow to the Exchange. The 

Exchange believes that the proposed 

rates are equitable and nondiscriminatory in that they apply 

uniformly to all Members. The 

Exchange believes the fees and credits 

remain competitive with those charged 

by other venues and therefore continue 

to be reasonable and equitably allocated 

to Members. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

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 has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

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) of 

the Act 15 and Rule 19b–4(f)(2) 16

thereunder. At any time within 60 days 

of the filing of such proposed rule 

change, the Commission summarily may 

temporarily suspend such rule change if 


srobinson on DSK4SPTVN1PROD with NOTICES
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