Federal Register / Vol. 74, No. 6 / Friday, January 9, 2009 / Notices 969 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(6). 

5The Exchange does not believe the type of 

extreme situation that is covered by the proposed 

rule would occur in the normal course of trading. 

Rather, this type of situation could potentially 

occur as a result of, for example, an error in a 

paticipant’s quotation system that causes a market 

maker to severly misprice an option. 

Shagufta_Ahmed@omb.eop.gov; and (ii) 

Charles Boucher, Director/CIO, 

Securities and Exchange Commission, 

C/O Shirley Martinson, 6432 General 

Green Way, Alexandria, VA 22312; or 

send an e-mail to: 

PRA_Mailbox@sec.gov. Comments must 

be submitted to OMB within 30 days of 

this notice. 

January 5, 2009. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–160 Filed 1–8–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59197; File No. SR–BSE– 

2008–52] 

Self-Regulatory Organizations; the 

Boston Stock Exchange, Inc.; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change To Amend 

BOX Rules Relating to Obvious Error 

Provisions To Address Catastrophic 

Errors, Erroneous Quotes or Prints in 

the Underlying Security, and Some 

Additional Modifications 

January 5, 2009. 

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 December 

24, 2008, the Boston Stock Exchange, 

Inc.) (‘‘BSE’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by BSE. The Exchange 

filed the proposed rule change as a 

‘‘non-controversial’’ proposed rule 

change pursuant to Section 19(b)(3)(A) 

of the Act 3 and Rule 19b-4(f)(6) 

thereunder,4 which renders the proposal 

effective upon filing with the 

Commission. 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 

Chapter V, Section 20 (Obvious Errors) 

of the Rules of the Boston Options 

Exchange Group, LLC ) (‘‘BOX’’) to 

address catastrophic errors ) 

(‘‘Catastrophic Errors’’) as well as 

erroneous quotes or prints in the 

underlying security and some additional 

modifications to this section. The text of 

the proposed rule change is available 

from the principal office of the 

Exchange, at the Commission’s Public 

Reference Room and also on the 

Exchange’s Internet Web site at http:// 

nasdaqtrader.com/Trader.aspx?id=

Boston_Stock_Exchange. 

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. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to amend Chapter V, Section 

20 of the BOX Rules (the ‘‘Obvious Error 

Rule’’) to address certain extreme 

circumstances. In particular, the 

Exchange proposes to add criteria for 

identifying ‘‘Catastrophic Errors’’ and 

making adjustments when Catastrophic 

Errors occur, as well as a streamlined 

procedure for reviewing actions taken in 

these extreme circumstances. This 

proposed rule change also seeks to 

incorporate provisions within the BOX 

Obvious Error Rule which will allow for 

the nullification or adjustment of trades 

that are the result of either an erroneous 

quote or print in the underlying 

security. In addition, the proposed rule 

also amends the Supplementary 

Material to remove references to a $.05 

offer and to provide that executions may 

be busted, if at least one strike below 

(for calls) or above (for puts), rather than 

the three strikes. 

The Exchange notes that, currently 

under the Obvious Error Rule, trades 

that result from an Obvious Error may 

be adjusted or busted according to 

objective standards. Under the rule, 

whether an Obvious Error has occurred 

is determined by comparing the 

execution price to the Theoretical Price 

of the option. The rule requires that 

participants notify the Market 

Operations Center ) (‘‘MOC’’) within a 

short time period following the 

execution of a trade (five minutes for 

market makers and 20 minutes for nonmarket makers) if they believe the trade 

qualifies as an Obvious Error. Trades 

that qualify for adjustment are adjusted 

under the rule to a price that matches 

the Theoretical Price plus or minus an 

adjustment value, which is $.15 if the 

theoretical value is under $3 and $.30 if 

the theoretical value is at or above $3. 

By adjusting trades above or below the 

Theoretical Price, the rule assesses a 

‘‘penalty’’ in that the adjustment price is 

not as favorable as what the party 

making the error would have received 

had it not made the error. 

In formulating the Obvious Error 

Rule, the Exchange has weighed 

carefully the need to assure that one 

market participant is not permitted to 

receive a wind-fall at the expense of 

another market participant that made an 

Obvious Error, against the need to 

assure that market participants are not 

simply being given an opportunity to 

reconsider poor trading decisions. The 

Exchange states that, while it believes 

that the Obvious Error Rule strikes the 

correct balance in most situations, in 

some extreme situations, participants 

may not be aware of errors that result in 

very large losses within the time periods 

required under the rule. In this type of 

extreme situation, the Exchange believes 

participants should be given more time 

to seek relief so that there is a greater 

opportunity to mitigate very large losses 

and reduce the corresponding large 

wind-falls. However, to maintain the 

appropriate balance, the Exchange 

believes participants should only be 

given more time when the execution 

price is much further away from the 

Theoretical Price than is required for 

Obvious Errors, and that the adjustment 

‘‘penalty’’ should be much greater, so 

that relief is only provided in extreme 

circumstances.5

Accordingly, the Exchange proposes 

to amend the Obvious Error Rule to 

address ‘‘Catastrophic Errors.’’ Under 

the proposed rule, participants will 

have until 8:30 a.m. Eastern Time on the 

day following the trade to notify the 

MOC of a potential Catastrophic Error. 

For trades that take place in an expiring 

series on expiration Friday, participants 

must notify the MOC of a potential 

Catastrophic Error by 5 p.m. Eastern 

Time that same day. Once a participant 

has notified the MOC of a Catastrophic 

Error within the required time period, 

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970 Federal Register / Vol. 74, No. 6 / Friday, January 9, 2009 / Notices 

6One hundred contracts equal 10,000 shares, and 

the purchase price is $8 per share above the 

Theoretical Price. Therefore, the purchaser paid 

$80,000 over the theoretical value. 

7See Proposed Chapter V, Section 20(g)(ii) of the 

BOX Rules. 

8 10,000 shares at $.30 per share over the 

theoretical value. 

9 10,000 shares at $3.00 per share over the 

theoretical value. 

10See BOX Rules Chapter I, Section 1(43) which 

defines ‘‘Options Official’’ as an officer of BOX 

Regulation vested by the BOX Regulation Board 

with certain authority to supervise option trading 

on BOX. 

11See BOX Rules Chapter I, Section 1(50) which 

defines ‘‘Primary Market’’ as the principal market 

where the underlying security is traded. 

the Market Regulation Center ) (‘‘MRC’’) 

will review the Catastrophic Error 

claim. 

A Catastrophic Error would be 

deemed to have occurred when the 

execution price of a transaction is 

higher or lower than the Theoretical 

Price for the option by an amount equal 

to at least the amount shown in the 

second column of the chart below (the 

‘‘Minimum Amount’’), and the 

adjustment would be made plus or 

minus the amount shown in column 

three of the chart below (the 

‘‘Adjustment Value’’). At all price 

levels, the Minimum Amount and the 

Adjustment Value for Catastrophic 

Errors would be significantly higher 

than for Obvious Errors, which the 

Exchange believes, would limit the 

application of the proposed rule to 

situations where the losses are very 

large. 

Theoretical price Minimum 

amount 

Adjustment 

value 

Below $2 .......................................................................................................................................................................... $1 $1 

$2 to $5 ............................................................................................................................................................................ 2 2 

Above $5 to $10 .............................................................................................................................................................. 5 3 

Above $10 to $50 ............................................................................................................................................................ 10 5 

Above $50 to $100 .......................................................................................................................................................... 20 7 

Above $100 ...................................................................................................................................................................... 30 10 

The following example demonstrates 

how the proposed Catastrophic Error 

provisions would operate within the 

Obvious Error framework. Assume a 

participant notifies the MOC within 2 

minutes of a trade where 100 contracts 

of an option with a Theoretical Price of 

$9 were purchased for $17, resulting in 

an $80,000 error.6 The trade would 

qualify as an Obvious Error because the 

purchase price is more than $.50 above 

the Theoretical Price and the participant 

notified the MOC within the required 

time period. The Exchange would 

review the trade and either bust it or 

adjust it to a purchase price of $9.30,7

which reduces the cost of the error to 

$3,000.8 If, however, the participant 

failed to identify the same error and 

notify the MOC until four hours after 

the trade, it may not be reviewed under 

the current Obvious Error Rule. Under 

the proposal, this trade would qualify as 

a Catastrophic Error because the 

purchase price is more than $5 above 

the Theoretical Price. Under the 

proposal, the MRC would review the 

trade and adjust the purchase price to 

$12, which reduces the cost of the error 

to $30,000.9

The Exchange believes that the 

proposed longer time period is 

appropriate to allow participants to 

discover, and seek relief from, trading 

errors that result in extreme losses. At 

the same time, the Exchange believes 

that the proposed Minimum Amounts 

required for a trade to qualify as a 

Catastrophic Error, in combination with 

the large Adjustment Values, assures 

that only those transactions where the 

price of the execution results in very 

high losses will be eligible for 

adjustment under the new provisions. 

While the Exchange believes it is 

important to identify and resolve 

trading errors quickly, it also believes it 

is important to the integrity of the 

marketplace to have the authority to 

mitigate extreme losses resulting from 

errors. In this respect, the Exchange 

believes that the above example 

illustrates how market participants 

would continue to be encouraged to 

identify errors quickly, as losses will be 

significantly lower if the erroneous 

trades are busted or adjusted under the 

Obvious Error provisions of the rule. 

In consideration of the extreme nature 

of situations that will be addressed 

under the proposed Catastrophic Error 

provisions, the Exchange proposes a 

streamlined procedure for making 

determinations and adjustments. Under 

the current rule for Obvious Errors, the 

MRC makes determinations that can 

then be appealed to the Boston Options 

Exchange Regulation (‘‘BOXR’’) Chief 

Regulatory Officer (‘‘CRO’’). For 

Catastrophic Errors, the Exchange 

proposes to have a one-step process 

where the MRC, with the approval of 

the CRO or an Options Official,10 who 

is not a participant, designated by the 

CRO (‘‘CRO or designee’’) makes 

determinations and adjustments. If it is 

determined that a Catastrophic Error has 

occurred, the CRO or its designee will 

instruct the MRC to adjust the execution 

price of the transaction(s) according to 

proposed subparagraph (g)(iii). All 

determinations by the CRO or its 

designee shall constitute final Exchange 

action on the matter at issue. The 

Exchange encourages participants to 

request reviews only in appropriate 

situations, particularly given the 

objective criteria used to determine 

whether a Catastrophic Error occurred 

and the considerable amount of time 

participants are given under the 

proposal to assess whether a trade falls 

within that criteria. 

Additionally, the Exchange proposes 

to amend the Obvious Error Rule to 

address an occurrence of an erroneous 

quote or print in the underlying 

security. Participants on BOX base the 

value of their quotes and orders off of 

the price of underlying security. The 

two provisions which the Exchange 

proposes to add to the BOX Obvious 

Error Rule cover instances where the 

information that the participants are 

using to price options is erroneous, 

through no fault of their own. An 

erroneous quote or print in an 

underlying security, which is 

disseminated by the Primary Market 11

for that security, means that participants 

are receiving erroneous information 

which they then incorporate into 

trading decisions. In these instances, 

participants have little if any chance of 

pricing options accurately. In order to 

provide relief from transactions that 

occur as a result of these erroneous 

quotes and/or prints, the Exchange 

proposes the following provisions. 

Chapter V, Section 20(d) Erroneous 

Print in Underlying 

An electronic trade resulting from an 

erroneous print disseminated by the 

Primary Market which is later cancelled 

or corrected by that Primary Market may 

be nullified. In order to be nullified, 

however, the trade must be the result of 

an erroneous print that is higher or 

lower than the average trade in the 

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Federal Register / Vol. 74, No. 6 / Friday, January 9, 2009 / Notices 971 

12See CBOE Rules 6.25(a)(4)–(5). 

13See Amex Rules 936–ANTE(a)(4)–(5). 

14See NYSE Arca Rules 6.87(a)(4)–(5). 

15See e.g. CBOE Rules 6.25(a)(2); Amex Rules 

936–ANTE(a)(2). 

16 15 U.S.C. 78f(b). 

17 15 U.S.C. 78f(b)(5). 

18 15 U.S.C. 78s(b)(3)(A). 

19 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

the proposed rule change at least five business days 

prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. BSE has satisfied this requirement. 

20 17 CFR 240.19b–4(f)(6). 

21 Id. 

underlying security during a twominute period before and after the 

erroneous print by an amount at least 

five times greater than the average quote 

width for such underlying security 

during the same period. For purposes of 

this paragraph, the average trade in the 

underlying security shall be determined 

by adding the prices of each trade 

during the four minute time period 

referenced above (excluding the trade in 

question) and dividing by the number of 

trades during such time period 

(excluding the trade in question). For 

purposes of this paragraph, the average 

quote width shall be determined by 

adding the quote widths of each 

separate quote during the four minute 

time period referenced above (excluding 

the quote in question) and dividing by 

the number of quotes during such time 

period (excluding the quote in 

question). 

Chapter V, Section 20(e) Erroneous 

Quote in Underlying 

Trades resulting from an erroneous 

quote in the underlying security may be 

adjusted or nullified as set forth in 

Chapter V, Section 20(f). An erroneous 

quote occurs when the underlying 

security has a width of at least $1.00 

and has a width at least five times 

greater than the average quote width for 

such underlying security on the Primary 

Market (as defined in BOX Rules 

Chapter I, Section 1(50)) during the time 

period encompassing two minutes 

before and after the dissemination of 

such quote. For purposes of this 

paragraph, the average quote width shall 

be determined by adding the quote 

widths of each separate quote during the 

four minute time period referenced 

above (excluding the quote in question) 

and dividing by the number of quotes 

during such time period (excluding the 

quote in question) and dividing by the 

number of quotes during such time 

period (excluding the quote in 

question). 

These proposed rule changes will 

provide participants on BOX with the 

same opportunities for price adjustment 

or trade nullification that are available 

on other options exchanges. The 

Exchange notes that these provisions are 

similar in all respects to rules already 

approved for use at The Chicago Board 

Options Exchange (‘‘CBOE’’),12 The 

American Stock Exchange (‘‘Amex’’),13

and NYSE Arca.14

In addition, the proposed rule also 

amends the Supplementary Material to 

remove references to a $.05 offer. The 

Exchange also proposes to provide that 

buyers of options with a zero bid may 

request their execution be busted, if at 

least one strike below (for calls) or 

above (for puts), in the same options 

class were quoted with a zero bid at the 

time of execution rather than the three 

strikes, which is currently in the rule. 

Removing the references to a $.05 offer 

will allow errors resulting from trades in 

penny pilot issues be treated in the 

same manner as non-penny classes. 

Moreover, these proposed changes will 

provide participants on BOX with 

similar opportunities for price 

adjustment or trade nullification that are 

available on other options exchanges.15

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with the 

requirements of Section 6(b) of the 

Act,16 in general, and Section 6(b)(5) of 

the Act,17 in particular, in that it is 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. Specifically, the 

proposal will, under certain 

circumstances, provide participants 

with the opportunity for a longer period 

within which to seek relief from errors 

that result in large losses. The proposal 

is also appropriate given that it provides 

for the adjustment or nullification of 

trades which are executed at clearly 

erroneous prices due to no fault of the 

parties to the trade. Finally, removing 

the references to a $.05 offer in the 

Supplementary Material will allow 

errors resulting from trades in penny 

pilot issues be treated in the same 

manner as non-penny classes. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition 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 neither solicited 

nor received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 18 and Rule 19b– 

4(f)(6) thereunder.19

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

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. 

A proposed rule change filed 

pursuant to Rule 19b–4(f)(6) under the 

Act 20 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6) 21

permits the Commission to designate a 

shorter time if such action is consistent 

with the protection of investors and the 

public interest. BSE requests that the 

Commission waive the 30-day operative 

delay to immediately offer market 

participants on BSE the same potential 

for relief that is available at other 

options exchanges for certain obvious 

errors, catastrophic errors, or erroneous 

quotes or prints in the underlying 

security. The Exchange stated that the 

proposed changes are not novel and are 

necessary to eliminate any confusion 

among members of multiple exchanges 

regarding the handling and treatment of 

requests for review of Catastrophic 

Errors and instances of erroneous quotes 

or prints in the underlying security and 

for purposes of maintaining a fair and 

orderly market. The Commission 

believes that waiving the 30-day 

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972 Federal Register / Vol. 74, No. 6 / Friday, January 9, 2009 / Notices 

22For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

23 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b-4. 

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

4 17 CFR 240.19b-4(f)(2). 

5See Section 1 and Footnote 10 of the CBOE Fees 

Schedule. 

6Contract volume resulting from dividend, 

merger and short stock interest strategies as defined 

in Footnote 13 of the Fees Schedule does not apply 

towards reaching the sliding scale volume 

thresholds. 

operative delay 22 is consistent with the 

protection of investors and the public 

interest. Given that the Exchange’s 

proposed rule change is substantially 

similar to the rules of other exchanges 

previously approved by the 

Commission, the proposal does not 

appear to present any novel regulatory 

issues. Therefore, the Commission 

designates the proposal as operative 

upon filing. 

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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–BSE–2008–52 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–BSE–2008–52. This file 

number should be included on the 

subject line if e-mail 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 inspection and copying 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 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 publicly available. All 

submissions should refer to File 

Number SR–BSE–2008–52 and should 

be submitted on or before January 30, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.23

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–158 Filed 1–8–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59193; File No. SR–CBOE– 

2008–128] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Exchange 

Fees for Fiscal Year 2009 

January 2, 2009. 

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 December 

24, 2008, the Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’ or 

‘‘Exchange’’) 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 Exchange. CBOE has 

designated this proposal as one 

establishing or changing a due, fee, or 

other charge applicable only to a 

member under Section 19(b)(3)(A)(ii) of 

the Act 3 and Rule 19b–4(f)(2) 

thereunder,4 which renders the proposal 

effective upon filing with the 

Commission. 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 

Chicago Board Options Exchange, 

Incorporated (‘‘CBOE’’ or ‘‘Exchange’’) 

proposes to amend its Fees Schedule to 

make various changes for Fiscal Year 

2009. 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. 

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 these 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 

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 the CBOE Fees 

Schedule to make various fee changes. 

The proposed changes are the product 

of the Exchange’s annual budget review. 

The fee changes were approved by the 

Exchange’s Board of Directors pursuant 

to CBOE Rule 2.22 and will take effect 

on January 1, 2009. 

The Exchange proposes to amend the 

following fees: 

A. Liquidity Provider Sliding Scale 

The Exchange’s Liquidity Provider 

Sliding Scale program reduces a 

Liquidity Provider’s per contract 

transaction fee based on the number of 

contracts the Liquidity Provider trades 

in a month.5 The sliding scale applies to 

all Liquidity Providers (CBOE MarketMaker, Designated Primary MarketMaker (‘‘DPM’’), Electronic DPM (‘‘eDPM’’) and Lead Market-Maker 

(‘‘LMM’’)) for transactions in all 

products.6

Under the current program, a 

Liquidity Provider’s standard $.20 per 

contract transaction fee is reduced if the 

Liquidity Provider reaches the volume 

thresholds set forth in the sliding scale 

in a month. As a Liquidity Provider’s 

monthly volume increases, its per 

contract transaction fee decreases. The 

first 75,000 contracts traded in a month 

(first tier) are assessed at $.20 per 

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