Document ID: SEC-2013-0475-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2013-03-13T04:00Z

[Federal Register Volume 78, Number 49 (Wednesday, March 13, 2013)]
[Notices]
[Pages 16021-16023]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05740]

[[Page 16021]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69064; File No. SR-CBOE-2013-028]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend the Fees Schedule

March 7, 2013.
    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, 2013, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
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 Volume Incentive Program 
(``VIP''). First, the Exchange proposes to add a column listing tier 
numbers for each percentage threshold \3\ in the VIP. The lowest 
percentage threshold will be tier 1, the next will be tier 2, the next 
tier 3, and the highest percentage threshold will be tier 4. Neither 
the percentage threshold amounts nor the fee amounts will change.\4\ 
The purpose of this change is to make it easier to refer to the 
different percentage thresholds.
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    \3\ The ``percentage thresholds'' refer to the column of the VIP 
table in the Exchange Fees Schedule entitled ``Percentage Thresholds 
of National Customer Volume in Multiply-Listed Options Classes 
(Monthly)''.
    \4\ The Commission notes that it understands the Exchange to 
mean that the credit amounts in the Exchange's VIP for simple orders 
will not change as a result of the new tier numbers.
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    Second, the Exchange proposes to adopt a separate credit structure 
in its VIP for complex orders. Specifically, all complex orders in 
tiers 2-4 of the VIP will accrue a per-contract credit of $0.17. As 
such, the tiers, thresholds and per-contract credits will be as 
follows:

------------------------------------------------------------------------
               Percentage thresholds of    Per contract    Per contract
               national customer volume       credit          credit
    Tier      in multiply-listed options      (simple        (complex
                  classes  (monthly)          orders)         orders)
------------------------------------------------------------------------
1...........  0%-0.75...................           $0.00           $0.00
2...........  Above 0.75%-2.00..........            0.10            0.17
3...........  Above 2.00%-2.75..........            0.11            0.17
4...........  Above 2.75................            0.14            0.17
------------------------------------------------------------------------

The purpose of this proposed change is to incentivize the sending of 
complex orders to the Exchange.
    The Exchange also proposes to amend the description of its SPX Tier 
Appointment fee. Currently, the SPX Tier Appointment fee is assessed to 
any Market-Maker Trading Permit Holder (``MMTPH'') that either (a) has 
an SPX Tier Appointment at any time during a calendar month; or (b) 
conducts any open outcry transactions in SPX or SPX Weeklys at any time 
during a calendar month.\5\ However, recently, CBOE Market-Maker firms 
have, in the process of switching around the Market-Makers to whom tier 
appointments are assigned, briefly picked up SPX Tier Appointments 
without the intention of acting as a Market-Maker in SPX. Nonetheless, 
even though such Market-Makers never engaged in SPX trading during the 
month, because they had an SPX Tier Appointment at any time during the 
calendar month, they were assessed the SPX Tier Appointment fee. Since 
the SPX Tier Appointment fee is intended to be assessed to MMTPHs who 
actually act as Market-Makers in SPX and engage in trading in SPX (as 
opposed to those who briefly pick up an SPX Tier Appointment), the 
Exchange proposes to add the stipulation that, in order for the SPX 
Tier Appointment to be assessed, an MMTPH must have an SPX Tier 
Appointment at any time during a calendar month and trade at least 100 
SPX contracts while that appointment is active (or conduct any open 
outcry transactions in SPX or SPX Weeklys at any time during a calendar 
month; that stipulation is not being amended). The 100-contract 
threshold allows for the possibility of a very small, unintentional SPX 
trade without incurring the SPX Tier Appointment fee (and is the same 
threshold used by the Exchange for the VIX Tier Appointment fee).\6\
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    \5\ See CBOE Fees Schedule, SPX Tier Appointment fee description 
in the Trading Permit and Tier Appointment Fees table.
    \6\ See CBOE Fees Schedule, VIX Tier Appointment fee description 
in the Trading Permit and Tier Appointment Fees table.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\7\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \8\ requirements that the rules of 
an exchange be 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 regulating, 
clearing, settling,

[[Page 16022]]

processing information with respect to, and facilitation 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. Adding a column listing tier 
numbers for each percentage threshold is intended to make it easier to 
refer to the different percentage thresholds. This should prevent any 
potential confusion, thereby removing impediments to and perfecting the 
mechanism of a free and open market and a national market system.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange also believes the proposed rule change is consistent 
with Section 6(b)(4) of the Act,\9\ which requires that Exchange rules 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its Trading Permit Holders and other persons using 
its facilities. The proposed adoption of a separate set of VIP credits 
for complex orders is reasonable because it provides for a higher VIP 
credit for such orders than previously existed. Providing a higher 
credit for complex orders than for simple orders, and providing a 
credit for tiers 2-4 (and not tier 1), is equitable and not unfairly 
discriminatory because this is intended to incentivize the sending of 
more complex orders to the Exchange. This should provide greater 
liquidity and trading opportunities, both for market participants who 
send simple orders to the Exchange (as simple orders can trade with the 
legs of complex orders) and for those who only reach tier 1 of the VIP 
(indeed, this increased volume may allow for such market participants 
to reach the higher tiers in the VIP). As such, the greater liquidity 
and trading opportunities should benefit not just public customers 
(whose orders are the only ones that qualify for the VIP) but all 
market participants.
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    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that establishing the stipulation that a TPH 
that does not conduct any open outcry transactions in SPX or SPX 
Weeklys at any time during a calendar month but does have an SPX Tier 
Appointment at any time during the calendar month will only be assessed 
the SPX Tier Appointment fee if such TPX also trades at least 100 SPX 
contracts while that appointment is active is reasonable because it 
will prevent MMTPHs who do not trade SPX or intend to trade SPX from 
being assessed the SPX Tier Appointment fee. This proposed change is 
equitable and not unfairly discriminatory for the same reason; the SPX 
Tier Appointment fee is intended to be assessed to MMTPHs who act as 
Market-Makers in SPX, not those who accidentally pick up an SPX Tier 
Appointment, and the proposed change will prevent such MMTPHs from 
being assessed the SPX Tier Appointment fee.

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. The Exchange does not believe 
that the adoption of higher VIP credits for complex orders will impose 
an unnecessary burden on intramarket competition because such credits 
will apply to the same market participants as the VIP previously 
applied (public customers). Moreover, these higher credits for complex 
orders are intended to incentivize the sending of more complex orders 
to the Exchange. This should provide greater liquidity and trading 
opportunities, both for market participants who send simple orders to 
the Exchange (as simple orders can trade with the legs of complex 
orders) and for those who only reach tier 1 of the VIP (indeed, this 
increased volume may allow for such market participants to reach the 
higher tiers in the VIP). As such, the greater liquidity and trading 
opportunities should benefit not just public customers, but all market 
participants.
    The Exchange does not believe that the proposed change to adopt 
different, higher VIP credits for complex orders will impose an 
unnecessary burden on intermarket competition. Indeed, the proposed 
change should place the Exchange on a better competitive footing to 
attract complex orders, which benefits market participants at other 
exchanges by providing them with another, more attractive exchange to 
which to send complex orders. To the extent that the proposed change is 
attractive to such market participants on other exchanges, they may 
always elect to become CBOE market participants and execute orders 
(complex and simple) on CBOE. The Exchange does not believe that the 
proposed change to the SPX Tier Appointment fee description will impose 
an unnecessary burden on intramarket competition because it will only 
apply to MMTPHs, as they are the only market participants to whom the 
SPX Tier Appointment fee applies. The Exchange does not believe that 
the proposed change to the SPX Tier Appointment fee description will 
impose an unnecessary burden on intermarket competition because SPX is 
only traded on CBOE, and the proposed change only applies to CBOE 
MMTPHs.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \10\ and paragraph (f) of Rule 19b-4 \11\ 
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. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f).
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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 rule-comments@sec.gov. Please include 
File Number SR-CBOE-2013-028 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-2013-028. 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

[[Page 16023]]

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 10:00 a.m. and 
3:00 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 available publicly. All 
submissions should refer to File Number SR-CBOE-2013-028, and should be 
submitted on or before April 3, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05740 Filed 3-12-13; 8:45 am]
BILLING CODE 8011-01-P