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41See Rule 6.74B. 

42See CTC Letter, supra note 4, at 1. See also 

discussion at Section III.A regarding the threesecond RFR period for the AIM. 

43See Rule 24B.5(b)(3)(iii). 44The Commission also believes, for the same 

reasons described above for the AIM, that the 

proposed priority and allocation rules for electronic 

FLEX trading in the SAM are consistent with 

Section 11(a) of the Act. See supra note 38. 

45See CTC Letter, supra note 4, at 2. 

46See CBOE Response, supra note 5, at 4. CBOE, 

however, notes that with respect to the FLEX SAM 

auction, the mechanism uses an all-or-none type 

allocation methodology and, by design it is possible 

for an agency order to receive an execution at a 

price that is through a response price. This is 

consistent with how the existing SAM auction for 

non-FLEX Options currently operates. Id. 

47 15 U.S.C. 78s(b)(2). 

48 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

(excluding the initiating participant), 3 

participants (excluding the initiating 

participant), 4 participants (excluding the 

initiating participant), etc.; and 

(19) For the third Wednesday of each 

month: 

(a) The total number of FLEX AIM auctions 

on that date; 

(b) The number of FLEX AIM auctions 

where the order submitted to the AIM was 

fewer than 50 contracts; 

(c) The number of FLEX AIM auctions 

where the order submitted to the AIM was 50 

contracts or greater; 

(d) The number of FLEX AIM auctions (for 

orders of fewer than 50 contracts) with 0 

participants (excluding the initiating 

participant), 1 participant (excluding the 

initiating participant), 2 participants 

(excluding the initiating participant), 3 

participants (excluding the initiating 

participant), 4 participants (excluding the 

initiating participant), etc., and 

(e) The number of FLEX AIM auctions (for 

orders of 50 contracts or greater) with 0 

participants (excluding the initiating 

participant), 1 participant (excluding the 

initiating participant), 2 participants 

(excluding the initiating participant), 3 

participants (excluding the initiating 

participant), 4 participants (excluding the 

initiating participant), etc. 

B. Solicitation Auction Mechanism 

The Exchange is also proposing a 

SAM Auction for FLEX Options. The 

Commission believes that the proposal 

should allow for greater flexibility in 

pricing large-sized orders. The 

Commission further believes that the 

proposal includes appropriate terms and 

conditions to assure that the Agency 

Order is first exposed to FLEX Traders 

by RFR for the possibility of price 

improvement and that public customer 

orders on the Exchange are protected. 

The Commission also notes that the 

proposal is similar to requirements set 

forth in the CBOE SAM for non-FLEX 

Options.41

The Exchange proposes that the 

duration of the RFR response period 

would be established by the Exchange 

on a class-by-class basis and shall not be 

less than three seconds. As with the 

AIM, one commenter suggested that the 

response time in the SAM for newly 

added flex strikes be increased from 

three seconds to one minute.42 The 

Commission believes that the threesecond electronic auction proposed by 

the Exchange should provide sufficient 

time for an electronic crowd to compete 

for an Agency Order. The Commission 

notes that the RFR response period of 

three seconds is consistent with the 

existing minimum exposure period for 

FLEX Option crossing pursuant to the 

existing FLEX crossing procedures.43

The Commission believes that using the 

same period of time to respond to RFRs 

in SAM auctions should be appropriate 

for FLEX Traders. 

Under the proposal, at the conclusion 

of the SAM, the Agency Order would be 

executed against the second/solicited 

order unless there is sufficient size to 

execute the entire Agency Order at a 

price(s) that improves the proposed 

crossing price. In the case where there 

are one or more public customers or 

non-TPH broker-dealers at the proposed 

execution price on the opposite side of 

the Agency Order, the second/solicited 

order would be cancelled and the 

Agency Order would be executed 

against other bids (offers) if there is 

sufficient size at the bid (offer) to 

execute the Agency Order entirely. If 

there is not sufficient size to execute the 

entire Agency Order, or if the execution 

price would be inferior to the BBO, then 

the proposed cross would not be 

executed, and both the Agency Order 

and second/solicited order would be 

cancelled. In the event the Agency 

Order is executed at an improved 

price(s) or at the proposed execution 

price against RFR responses and FLEX 

Orders, priority would first go to RFR 

responses and FLEX Orders for the 

account of public customers and nonTPH broker-dealers based on time 

priority, then any RFR responses and 

FLEX Orders that are subject to a FLEX 

Appointed Market-Maker participation 

entitlement, and finally all other RFR 

responses and FLEX Orders. The 

Commission believes that the priority 

and allocation rules are reasonable and 

consistent with the Act.44

The Commission also notes that the 

Exchange has included a provision 

stating that FLEX Traders may not use 

the SAM auction to circumvent Rule 

24B.5 limiting principal transactions. 

The Exchange will also require written 

notification to customers prior to 

entering Agency Orders into the SAM 

on behalf of the customer and will 

require that determinations made by the 

Exchange regarding eligible classes, 

order size parameters, and the minimum 

price increment shall be communicated 

in a Regulatory Circular. The Exchange 

also proposes to permit the processing 

of complex orders. The Commission 

believes that the provisions help to 

clarify application of the SAM rule and 

may encourage further use of FLEX 

Options. 

One commenter asserted that the 

current FLEX auction mechanism 

should not be allowed to migrate to the 

CBOE Hybrid platform, arguing that 

participants that submit RFQs can 

receive quote responses that lock and/or 

cross markets.45 In response, CBOE 

stated that the comments have no 

relevance to the instant proposed rule 

change, which simply seeks to 

implement the two new FLEX AIM and 

SAM auctions and which does not 

propose any changes to the existing 

electronic RFQ auction mechanism.46

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,47 that the 

proposed rule change (File No. SR– 

CBOE–2011–123), be, and hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.48

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–8171 Filed 4–4–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66704; File No. SR–CBOE– 

2012–030] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change Relating to FLEX 

Transaction Fees 

March 30, 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 29, 

2012, Chicago Board Options Exchange, 

Incorporated (the ‘‘Exchange’’ or 

‘‘CBOE’’) 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 


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3See Securities Exchange Act Release No. 66052 

(December 23, 2011), 77 FR 306 (January 4, 2012) 

(SR–CBOE–2011–123) (the ‘‘CFLEX AIM Filing’’). 

The FLEX AIM or FLEX SAM auctions would be 

used to cross FLEX Option orders through an 

exposed auction process. These FLEX auctions are 

modeled after the AIM and SAM auctions available 

for trading in non-FLEX Options under Rules 6.74A 

and 6.74B, respectively. 

4See Section 1 of the Fees Schedule. 

5For equity options, the transaction fees are as 

follows: $0.00 per contract for the account of public 

customers, $0.25 per contract for the account of 

Professionals and Voluntary Professionals, and 

$0.20 per contract for all others. For index, ETF, 

ETN and HOLDRS options, the transaction fees are 

as follows: For the account of public customers: 

$0.44 per contract in SPX if the premium is greater 

than or equal to $1; $0.35 per contract in SPX if the 

premium is less than $1; $0.40 per contract in OEX, 

XEO and volatility index options; and $0.18 per 

contract in other index, ETF, ETN and HOLDRS 

options. For the account of Professionals and 

Voluntary Professionals: $0.40 per contract in OEX, 

XEO, and volatility index options; and $0.25 per 

contract in other index, ETF, ETN and HOLDRS 

options. For the account of CBOE Market-Makers/ 

DPMs: $0.20 per contract. For Clearing Trading 

Permit Holder (‘‘TPH’’) proprietary trading: $0.25 

per contract in OEX, XEO, SPX and volatility index 

options; and $0.20 per contract in other index, ETF, 

ETN and HOLDRS options. For the account of 

broker-dealers $0.20 per contract in all products, 

except volatility index options; and $0.40 per 

contract in volatility index options. The Exchange 

notes that CBOE Market-Maker/DPM/e-DPM 

transactions fees are subject to a Liquidity Provider 

Sliding Scale and Clearing TPH transaction fees are 

subject to a Fee Cap. See Section 1 and footnotes 

10, 11, 12 and 19 of the Fees Schedule. The 

Exchange also notes that the $0.25 per contract 

transaction rates for Professionals and Voluntary 

Professionals identified above for equity options 

and index, ETF, ETN and HOLDRS options (other 

than OEX, XEO and volatility index options) will 

be effective April 1, 2012. See SR–CBOE–2012–032. 

6The AIM Contra Execution Fee is generally 

$0.05 per contract and applies to all orders 

(excluding facilitation orders, per footnote 11 of the 

Fees Schedule) in all products except OEX, XEO, 

SPX and volatility indexes executed in AIM that 

were initially entered into AIM as the contra party 

to an AIM Agency/Primary Order. The fee applies 

to such executions instead of the applicable 

standard transaction fee except if the applicable 

standard transaction fee is lower than $0.05 per 

contract, in which case the applicable standard fee 

applies. Applicable standard transaction fees apply 

to AIM executions in OEX, XEO, SPX and volatility 

index options. See footnote 18 of the Fees Schedule 

(for a description of the AIM Contra Execution Fee). 

See note 8, supra, for a description of the applicable 

standard transaction fees, including the standard 

transaction fees for OEX, XEO, SPX and volatility 

index options except for transactions for the 

account of broker-dealers (per Section 1 of the Fees 

Schedule, the applicable standard transaction fee 

for broker-dealers is $0.40 per contract in OEX, 

XEO, SPX and volatility index options). 

7See note 8, supra, for a description of the 

applicable standard transaction fees. 

8The Exchange notes that the existing CFLEX 

Surcharge Fee will also apply to CFLEX AIM 

auction executions, whether executed as a Primary/ 

Agency Order, a contra order, or a response. The 

CFLEX Surcharge Fee applies to all orders (all 

origin codes) executed electronically on the FLEX 

Hybrid Trading System. The CFLEX Surcharge Fee 

is $0.10 per contract, up to the first 2,500 contracts 

per trade. See Section 1 and footnote 17 of the Fees 

Schedule. In addition, the existing index license 

surcharge fees and product research and 

development surcharge fees will apply to CFLEX 

AIM auction executions, whether executed as a 

Primary/Agency Order, a contra order, or a 

response. The index license surcharge fees and 

product research and development surcharge fees 

apply to all non-public customer transactions (i.e., 

the surcharge fees apply to CBOE and non-TPH 

market-makers, Clearing TPHs and broker-dealers, 

voluntary professionals and professionals) and are 

as follows: index license surcharge fees of $0.10 per 

contract for OEX, XEO, SPX, DJX, and volatility 

index options (except GVZ, VXEEM, VXEWZ, and 

OVX) and $0.15 per contract for MDX, NDX, and 

RUT; and product research and development 

surcharge fees of $0.10 per contract for GVZ, 

VXEEM, VXEWZ, and OVX. See Section 1 and 

footnote 14 of the Fees Schedule. 

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 as it relates to Flexible 

Exchange Options (‘‘FLEX Options’’). 

The text of the proposed rule change is 

available on the Exchange’s Web site 

(http://www.cboe.org/legal), 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, 

CBOE 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 those 

statements may be examined at the 

places specified in Item IV below. CBOE 

has prepared summaries, set forth in 

sections A, B, and C below, of the most 

significant parts 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 has submitted a 

separate proposed rule change to 

establish two new automated auctions 

for FLEX Options trading: the FLEX 

Automated Improvement Mechanism 

(the ‘‘AIM’’ auction) under proposed 

Rule 24B.5A and the FLEX Solicitation 

Auction Mechanism (the ‘‘SAM’’ 

auction) under proposed Rule 24B.5B 

(the two auctions are collectively 

referred to herein as the ‘‘CFLEX AIM’’ 

auctions).3 The primary purpose of this 

proposed rule change is to amend the 

CBOE Fees Schedule to adopt a ‘‘CFLEX 

AIM Response Fee’’ for broker-dealer 

responses to the CFLEX AIM auctions. 

Currently, under the existing Fees 

Schedule, the transaction fee for brokerdealer responses would be $0.40 per 

contract for OEX, XEO, SPX and 

volatility index options and $0.45 per 

contract for all other products (as such 

responses would be entered 

electronically).4 As proposed, the 

transaction fee for broker-dealer 

responses executed in the CFLEX AIM 

auctions will remain $0.40 per contract 

for OEX, XEO and SPX and volatility 

index options and will be reduced to 

$0.25 per contract for all other products. 

As structured, the transaction fees for 

the CFLEX AIM auctions will be as 

follows: 

• For executions of orders that are 

initially entered as Agency/Primary 

Orders, the transaction fee will be the 

per contract rate(s) already specified in 

the Fees Schedule.5 (No changes to the 

Fees Schedule are necessary to reflect 

these fee rates, except that footnote 19 

of the Fees Schedule is being amended 

to provide that the Broker-Dealer AIM 

Agency/Primary fee applies to FLEX 

AIM and FLEX SAM auctions. Footnote 

19 is also being amended to provide 

that, because there is no FLEX trading 

in Credit Default Options and Credit 

Default Basket Options, the BrokerDealer AIM Agency/Primary fee is not 

applicable to those options.) 

• For executions of orders that are 

initially entered as the contra party to 

an Agency/Primary Order, the 

transaction fee will be the AIM Contra 

Execution Fee already specified in the 

Fees Schedule.6 (Footnote 18 of the Fees 

Schedule is being amended to provide 

that the AIM Contra Execution Fee 

applies to FLEX AIM and FLEX SAM 

auctions. Footnote 18 is also being 

amended to provide that, because there 

is no FLEX trading in Credit Default 

Options and Credit Default Basket 

Options, the AIM Agency/Primary fee is 

not applicable to those options.) 

• For responses, as noted above, the 

fees schedule will be amended to 

provide for a ‘‘CFLEX AIM Response 

Fee’’ for broker-dealer responses. Again, 

the applicable standard transaction fee 

of $0.40 per contract will continue to 

apply for FLEX AIM and FLEX SAM 

auction response executions in OEX, 

XEO, SPX and volatility index options 

and $0.25 per contract will apply in all 

other products. For all other types of 

response (i.e., customer, voluntary 

professional, professional, CBOE 

Market-Maker/DPM, and Clearing 

Trading Permit Holder Proprietary) the 

applicable standard transaction fee will 

apply.7 (No changes to the Fees 

Schedule are necessary to reflect these 

non-broker-dealer fee rates.) 8

The CFLEX AIM Response Fee and 

other changes noted above will be 


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20682 Federal Register / Vol. 77, No. 66 / Thursday, April 5, 2012 / Notices 

effective immediately and applied once 

the CFLEX AIM Filing is approved and 

the auctions are activated on the 

Exchange. 

The Exchange is also taking this 

opportunity to make other 

miscellaneous changes to the Fees 

Schedule. In particular, the Exchange is 

proposing to delete outdated references 

to the ‘‘S&P 500 Dividend Index’’ 

(which no longer trades on the 

Exchange). The Exchange is also 

proposing to make various nonsubstantive technical changes (moving, 

adding, removing semicolons in Section 

1 of the Fees Schedule for consistency 

in formatting; and in footnote 19, 

changing the phrase ‘‘Primary/Agency’’ 

to ‘‘Agency/Primary’’ for consistency). 

Finally, the Exchange is proposing to 

amend Footnotes 18 and 19 of the Fees 

Schedule to make clear that the AIM 

Contra Execution Fee and Broker-Dealer 

AIM Agency/Primary Fee, respectively, 

also apply to SAM auctions in nonFLEX Options. This is how the 

Exchange has intended and historically 

applied the fee (the Exchange 

commonly refers to both auctions as 

AIM auctions, e.g., the SAM auction is 

also commonly referred to as the ‘‘AIM 

AON’’ auction) and the changes to the 

Fees Schedule are intended to be more 

descriptive in that regard. These 

changes will be effective immediately. 

The Exchange believes it is reasonable 

and equitable to charge TPHs for 

responses to CFLEX AIM auctions in the 

manner proposed. With the proposed 

rule change to include a CFLEX AIM 

Response Fee for broker-dealer 

responses, TPHs submitting responses 

participating in CFLEX AIM auctions 

will be assessed similar fees, 

minimizing any gap that would exist 

between different order origin code 

types should the applicable standard 

transaction fees be applied and at the 

same time equitably distributing the 

costs of attracting orders for execution 

in the CFLEX AIM auctions. In that 

regard, at the proposed levels, TPHs 

submitting responses on behalf of 

broker-dealers will in fact see their fees 

lowered for the CFLEX AIM auctions 

(except for OEX, XEO, SPX and 

volatility index options) compared to 

the applicable standard transaction fee 

that would otherwise apply. These 

levels are equivalent to the levels that 

would be assessed for responses on 

behalf of Professionals and Voluntary 

Professionals. The Exchange notes that 

it has historically maintained 

differentials in the fees it charges TPHs 

for transactions of public customers, 

Professionals, Voluntary Professionals, 

CBOE Market-Makers/DPMs/e-DPMs, 

Clearing TPHs and broker-dealers. The 

Exchange believes it is reasonable and 

equitable to treat these groups of market 

participants differently. For example, 

the Exchange believes that offering a 

slightly lower fee for responses of CBOE 

Market-Makers than those of other 

market participants is equitable and not 

unfairly discriminatory because CBOE 

Market-Makers take on certain 

obligations to the Exchange (such as 

providing two-sided markets) that other 

market participants to [sic] not 

undertake. The Exchange also believes 

that offering a lower fee for responses of 

public customers than those originating 

from other market participants is 

equitable and not unfairly 

discriminatory because the Exchange 

believes this will attract public 

customer order flow to the Exchange 

and incentivize firms to execute public 

customer orders on the Exchange. To 

the extent that this purpose is achieved, 

all of the Exchange’s market participants 

should benefit from the improved 

market liquidity and the greater number 

of public customer orders with which to 

trade. The Exchange also believes that 

the [sic] offering a lower fee for 

responses of Clearing TPHs is equitable 

and not unfairly discriminatory because 

it provides an incentive for Clearing 

TPHs to contribute capital to facilitate 

the execution of customer orders, which 

in turn provides a deeper pool of 

liquidity on CBOE, which ultimately 

benefits all market participants who 

trade FLEX products on CBOE. 

Along the same lines, the Exchange 

believes it is reasonable and equitable to 

charge the existing AIM Agency/ 

Primary fee for broker-dealer orders 

(which is $0.20 per contract in all 

products except for volatility indexes, 

which are subject to the applicable 

standard transaction fees) because the 

Exchange believes that charging a lower 

fee for broker-dealer Agency/Primary 

orders, consistent with the existing fee 

for Agency/Primary orders traded in 

Non-FLEX AIM and SAM auctions, 

would attract additional broker-dealer 

order flow to the Exchange and create 

liquidity in those FLEX products that 

are subject to CFLEX AIM auctions, 

which the Exchange believes ultimately 

will benefit all market participants who 

trade FLEX products on CBOE. The 

Exchange already provides this lower 

execution fee for broker-dealer Agency/ 

Primary orders in Non-FLEX AIM and 

SAM auctions and is not proposing any 

changes to the fee with the proposed 

introduction of the CFLEX AIM 

auctions. 

The Exchange further believes it is 

reasonable and equitable to charge the 

existing AIM Contra Execution fee 

(which is $0.05 per contract except for 

(i) executions for the account of public 

customers, which are not subject to any 

transaction fee; and (ii) executions in 

OEX, XEO, SPX and volatility index 

options, which are subject to the 

applicable standard transaction fees) 

because the Exchange believes charging 

a lower fee to the contra-party in CFLEX 

AIM auctions, consistent with the 

existing fee for contra-party executions 

in Non-FLEX AIM and SAM auctions, 

would attract additional order flow to 

the Exchange and create liquidity in 

those FLEX products that are subject to 

CFLEX AIM auctions, which the 

Exchange believes ultimately will 

benefit all market participants who 

trade FLEX products on CBOE. The 

Exchange already provides this lower 

execution fee for contra-parties to NonFLEX AIM and SAM auctions and is not 

proposing any changes to the fee with 

the proposed introduction of the CFLEX 

AIM auctions. 

The Exchange further believes the 

proposed fee structure is not unfairly 

discriminatory because the fee structure 

is consistent with the fee structure that 

exists today, but simply minimizes any 

gap that would exist between different 

order origin code types should the 

applicable standard transaction fees be 

applied to broker-dealer responders to 

CFLEX AIM auctions. Additionally, the 

Exchange believes that the fees are fair, 

equitable and not unfairly 

discriminatory because they are 

consistent with price differentiation that 

exists today at other option exchanges. 

The Exchange believes it remains an 

attractive venue for market participants 

to trade FLEX Options as its fees remain 

competitive with those charged by other 

exchanges for FLEX Options and for 

similar electronic auctions (although we 

note that CBOE is the only options 

exchange to offer an electronic 

mechanism for trading FLEX Options). 

The Exchange operates in a highly 

competitive market in which market 

participants can readily direct order 

flow to another exchange or the overthe-counter market if they deem fee 

levels at a particular exchange to be 

excessive. With this proposed rule 

change, the Exchange believes it 

remains an attractive venue for market 

participants to trade FLEX Options. 

Finally, in amending the Fees 

Schedule to delete outdated references 

to the S&P 500 Dividend Index, make 

non-substantive technical changes, and 

make clear the applicability of the AIM 

Contra Execution Fee and Broker-Dealer 

AIM Agency/Primary Fee to SAM 

auctions in non-FLEX Options, the 

proposed rule change is more 

descriptive for users and should help to 

avoid any potential confusion about the 


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9 15 U.S.C. 78f(b)(5). 

10 15 U.S.C. 78f(b). 

11 15 U.S.C. 78f(b)(4). 12 15 U.S.C. 78f(b)(5). 

applicability of the fees. The Exchange 

believes these changes, which are 

designed to make the Fees Schedule 

more descriptive and avoid confusion, 

further the objectives of Section 6(b)(5) 9

of the Act in particular, in that they 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, protect investors and the public 

interest. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the 

Act,10 in general, and furthers the 

objectives of Section 6(b)(4) of the Act,11

in particular, in that it is designed to 

provide for the equitable allocation of 

reasonable dues, fees, and other charges 

among TPHs. 

The Exchange believes it is reasonable 

and equitable to charge TPHs for 

responses to CFLEX AIM auctions in the 

manner proposed. With the proposed 

rule change to include a CFLEX AIM 

Response Fee for broker-dealer 

responses, TPHs submitting responses 

participating in CFLEX AIM auctions 

will be assessed similar fees, 

minimizing any gap that would exist 

between different order origin code 

types should the applicable standard 

transaction fees be applied and at the 

same time equitably distributing the 

costs of attracting orders for execution 

in the CFLEX AIM auctions. In that 

regard, at the proposed levels, TPHs 

submitting responses on behalf of 

broker-dealers will in fact see their fees 

lowered for the CFLEX AIM auctions 

(except for OEX, XEO, SPX and 

volatility index options) compared to 

the applicable standard transaction fee 

that would otherwise apply. These 

levels are equivalent to the levels that 

would be assessed for responses on 

behalf of Professionals and Voluntary 

Professionals. The Exchange notes that 

it has historically maintained 

differentials in the fees it charges TPHs 

for transactions of public customers, 

Professionals, Voluntary Professionals, 

CBOE Market-Makers/DPMs/e-DPMs, 

Clearing TPHs and broker-dealers. The 

Exchange believes it is reasonable and 

equitable to treat these groups of market 

participants differently. For example, 

the Exchange believes that offering a 

slightly lower fee for responses of CBOE 

Market-Makers than those of other 

market participants is equitable and not 

unfairly discriminatory because CBOE 

Market-Makers take on certain 

obligations to the Exchange (such as 

providing two-sided markets) that other 

market participants to not undertake. 

The Exchange also believes that offering 

a lower fee for responses of public 

customers than those originating from 

other market participants is equitable 

and not unfairly discriminatory because 

the Exchange believes this will attract 

public customer order flow to the 

Exchange and incentivize firms to 

execute public customer orders on the 

Exchange. To the extent that this 

purpose is achieved, all of the 

Exchange’s market participants should 

benefit from the improved market 

liquidity and the greater number of 

public customer orders with which to 

trade. The Exchange also believes that 

the offering a lower fee for responses of 

Clearing TPHs is equitable and not 

unfairly discriminatory because it 

provides an incentive for Clearing TPHs 

to contribute capital to facilitate the 

execution of customer orders, which in 

turn provides a deeper pool of liquidity 

on CBOE, which ultimately benefits all 

market participants who trade FLEX 

products on CBOE. 

Along the same lines, the Exchange 

believes it is reasonable and equitable to 

charge the existing AIM Agency/ 

Primary fee for broker-dealer orders 

(which is $0.20 per contract in all 

products except for volatility indexes, 

which are subject to the applicable 

standard transaction fees) because the 

Exchange believes that charging a lower 

fee for broker-dealer Agency/Primary 

orders, consistent with the existing fee 

for Agency/Primary orders traded in 

Non-FLEX AIM and SAM auctions, 

would attract additional broker-dealer 

order flow to the Exchange and create 

liquidity in those FLEX products that 

are subject to CFLEX AIM auctions, 

which the Exchange believes ultimately 

will benefit all market participants who 

trade FLEX products on CBOE. The 

Exchange already provides this lower 

execution fee for broker-dealer Agency/ 

Primary orders in Non-FLEX AIM and 

SAM auctions and is not proposing any 

changes to the fee with the proposed 

introduction of the CFLEX AIM 

auctions. 

The Exchange further believes it is 

reasonable and equitable to charge the 

existing AIM Contra Execution fee 

(which is $0.05 per contract except for 

(i) executions for the account of public 

customers, which are not subject to any 

transaction fee; and (ii) executions in 

OEX, XEO, SPX and volatility index 

options, which are subject to the 

applicable standard transaction fees) 

because the Exchange believes charging 

a lower fee to the contra-party in CFLEX 

AIM auctions, consistent with the 

existing fee for contra-party executions 

in Non-FLEX AIM and SAM auctions, 

would attract additional order flow to 

the Exchange and create liquidity in 

those FLEX products that are subject to 

CFLEX AIM auctions, which the 

Exchange believes ultimately will 

benefit all market participants who 

trade FLEX products on CBOE. The 

Exchange already provides this lower 

execution fee for contra-parties to NonFLEX AIM and SAM auctions and is not 

proposing any changes to the fee with 

the proposed introduction of the CFLEX 

AIM auctions. The Exchange further 

believes the proposed fee structure is 

not unfairly discriminatory because the 

fee structure is consistent with the fee 

structure that exists today, but simply 

minimizes any gap that would exist 

between different order origin code 

types should the applicable standard 

transaction fees be applied to 

responders to CFLEX AIM auctions. 

Additionally, the Exchange believes that 

the fees are fair, equitable and not 

unfairly discriminatory because they are 

consistent with price differentiation that 

exists today at other option exchanges. 

The Exchange believes it remains an 

attractive venue for market participants 

to trade FLEX Options as its fees remain 

competitive with those charged by other 

exchanges for FLEX Options and for 

similar electronic auctions (although we 

note that CBOE is the only options 

exchange to offer an electronic 

mechanism for trading FLEX Options). 

The Exchange operates in a highly 

competitive market in which market 

participants can readily direct order 

flow to another exchange or the overthe-counter market if they deem fee 

levels at a particular exchange to be 

excessive. With this proposed rule 

change, the Exchange believes it 

remains an attractive venue for market 

participants to trade FLEX Options. 

Finally, in amending the Fees 

Schedule to delete outdated references 

to the S&P 500 Dividend Index, make 

non-substantive technical changes, and 

make clear the applicability of the AIM 

Contra Execution Fee and Broker-Dealer 

AIM Agency/Primary Fee to SAM 

auctions in non-FLEX Options, the 

proposed rule change is more 

descriptive for users and should help to 

avoid any potential confusion about the 

applicability of the fees. The Exchange 

believes these changes, which are 

designed to make the Fees Schedule 

more descriptive and avoid confusion, 

further the objectives of Section 

6(b)(5) 12 of the Act in particular, in that 

they remove impediments to and perfect 

the mechanism of a free and open 

market and a national market system, 


Tkelley on DSK3SPTVN1PROD with NOTICES
20684 Federal Register / Vol. 77, No. 66 / Thursday, April 5, 2012 / Notices 

13 15 U.S.C. 78s(b)(3)(A). 

14 17 CFR 240.19b–4(f)(2). 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Exchange adopted the Weeklys Program on 

July 15, 2010. See Securities Exchange Act Release 

No. 62505 (July 15, 2010), 75 FR 42792 (July 22, 

2010) (SR–BX–2010–047). 

and, in general, protect investors and 

the public interest. 

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 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The proposed rule change is 

designated by the Exchange as 

establishing or changing a due, fee, or 

other charge, thereby qualifying for 

effectiveness on filing pursuant to 

Section 19(b)(3)(A) of the Act 13 and 

subparagraph (f)(2) of Rule 19b–4 14

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–2012–030 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–2012–030. 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–CBOE– 

2012–030 and should be submitted on 

or before April 26, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–8172 Filed 4–4–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66705; File No. SR–BX– 

2012–024] 

Self-Regulatory Organizations; 

NASDAQ OMX BX, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend the 

BOX Trading Rules Regarding the 

Short Term Option Series Program 

March 30, 2012. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that, on March 

29, 2012, NASDAQ OMX BX, Inc. (the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

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 the 

Trading Rules of the Boston Options 

Exchange Group, LLC (‘‘BOX’’) 

regarding the Short Term Option Series 

Program. The text of the proposed rule 

change is available from the principal 

office of the Exchange, on the 

Exchange’s Internet Web site at http:// 

nasdaqomxbx.cchwallstreet.com/ 

NASDAQOMXBX/Filings/, 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 purpose of this proposed rule 

change is to amend Supplementary 

Material .07 to Chapter IV, Section 6 

(Series of Options Open for Trading) 

and Supplementary Material .02 to 

Chapter XIV, Section 10 (Terms of Index 

Options Contracts) to expand the Short 

Term Option Series Program (‘‘Weeklys 

Program’’).3 Specifically, the Exchange 

proposes to amend the BOX Rules to 

allow BOX to open short term option 

series that are opened by other 

securities exchanges in option classes 

selected by other exchanges under their 

respective short term option rules. 

Currently, BOX may select up to 30 

currently listed option classes on which 

short term option series may be opened 


Tkelley on DSK3SPTVN1PROD with NOTICES