Document ID: SEC-2011-0857-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2011-06-20T04:00Z

[Federal Register Volume 76, Number 118 (Monday, June 20, 2011)]
[Notices]
[Pages 35926-35928]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-15281]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64674; File No. SR-CBOE-2011-054]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated: Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to the Sales Value Fee

June 15, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on June 3, 2011, Chicago Board Options 
Exchange, Incorporated (``CBOE'' or the ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'' or ``SEC'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by CBOE. 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 Substance 
of the Proposed Rule Change

    Chicago Board Options Exchange, Incorporated (``CBOE'' or 
``Exchange'') proposes to make clarifying changes to its Fees Schedule 
concerning the application and collection of the Sales Value Fee. 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.

[[Page 35927]]

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, Proposed Rule Change

1. Purpose
    The Exchange is proposing amendments to its Fees Schedule to make 
clear the circumstances that trigger application of the Sales Value 
Fee, and to make other clarifying changes. Section 6 of the CBOE Fees 
Schedule permits the Exchange to collect a fee from its Trading Permit 
Holders for sales of securities on CBOE and the CBOE Stock Exchange, 
LLC (``CBSX'') \3\ with respect to which the Exchange is obligated to 
pay a fee to the SEC pursuant to Section 31 of the Act \4\ and Rule 31, 
thereunder.\5\ Each national securities exchange and association is 
required to calculate the aggregate dollar amount of ``covered sales'' 
occurring on the exchange or through a member of the national 
securities association and to pay fees based on those covered sales to 
the Commission (``Section 31 fees''). A covered sale is a ``sale of a 
security, other than an exempt sale or a sale of a security future, 
occurring on a national securities exchange or by or through any member 
of a national securities association otherwise than on a national 
securities exchange.'' \6\ Pursuant to Section 6 of the Fees Schedule, 
the Exchange assesses a Trading Permit Holder the Sales Value Fee for 
an executed sell order entered on CBOE or CBSX that results in a 
covered sale. The Sales Value Fee defrays the cost of the Section 31 
fee triggered by the covered sale. In this regard, the Sales Value Fee 
assessed a Trading Permit Holder is equal to the Section 31 fee 
assessed by the Commission for the covered sale. Further, the Exchange 
adjusts the Sales Value Fee in lock step with changes to the Section 31 
fee made by the Commission. Assessing a sales fee is common practice 
among the national securities exchanges and associations.\7\
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    \3\ CBSX operates as a facility of CBOE.
    \4\ 15 U.S.C. 78ee.
    \5\ 17 CFR 240.31.
    \6\ 17 CFR 240.31(a)(6).
    \7\ See, e.g., ISE Rule 212, NASDAQ Rule 7002, NASDAQ OMX PHLX 
Rule 607 and NYSE Rule 440H.
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    As noted above, the Sales Value Fee defrays the cost of the Section 
31 fee. The Sales Value Fee is triggered by the fulfillment of a 
Trading Permit Holder's sell order in options securities entered on 
CBOE or equity securities entered on CBSX that results in a covered 
sale. If the Trading Permit Holder's sell order is fulfilled on CBOE or 
CBSX, the Exchange incurs a Section 31 fee obligation. Sell orders in 
options securities entered on CBOE or equity securities entered on CBSX 
that are routed to another market for execution, however, do not result 
in a covered sale on CBOE or CBSX. Execution of such routed orders is 
facilitated by CBOE's and CBSX's routing brokers,\8\ which act as the 
selling Trading Permit Holder for a routed order on the away market on 
behalf of the CBOE or CBSX Trading Permit Holder that entered the sell 
order. Such routed sell orders result in a covered sale on the away 
market, which incurs a Section 31 fee obligation. Like the Exchange, 
the away market assesses a sales fee on the Trading Permit Holder that 
entered the sell order, in this case the CBOE or CBSX routing broker, 
as applicable, to defray the cost of the Section 31 fee obligation. The 
Exchange may reimburse its routing broker for all Section 31-related 
fees (e.g., away market sales fees) incurred by the routing broker in 
connection with the routing services it provides.
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    \8\ CBOE and CBSX route orders to other exchanges in conjunction 
with one or more routing brokers pursuant to CBOE Rule 6.14B and 
CBSX Rule 52.10, respectively.
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    In turn, the Exchange assesses its Trading Permit Holder, the 
original selling party, a Sales Value Fee pursuant to Section 6 of the 
Fees Schedule to defray the cost of the Section 31 fee passed on by the 
away exchange pursuant to its sales fee. As such, the Exchange's Sales 
Value Fee offsets the sales fee its routing broker is assessed by the 
away market (which the routing broker then passes to CBOE), the result 
of which is to place the parties involved in the transaction in the 
same position as if the covered sale had occurred on CBOE or CBSX.
    In light of the varying means by which a Sales Value Fee is 
incurred by Trading Permit Holders, as described above, the Exchange 
believes that a more detailed description of the circumstances that 
trigger the Sales Value Fee is warranted. Accordingly, the new Fees 
Schedule language proposed by the Exchange expressly discusses covered 
sales in both option and non-option securities. In addition, the 
proposed new Fees Schedule language includes a description of sell 
orders entered on CBOE or CBSX that result in a covered sale on another 
exchange, expressly discussing the fee incurred by the Exchange and the 
application of the Sales Value Fee in such circumstances.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Securities Exchange Act of 1934 (``Act''),\9\ in 
general, and furthers the objectives of Section 6(b)(4) \10\ of the Act 
in particular, in that it is designed to provide for the equitable 
allocation of reasonable dues, fees, and other charges among Trading 
Permit Holders and other persons using its facilities and it does not 
unfairly discriminate between customers, issuers, brokers or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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    The proposed clarifying language does not change the application 
and assessment of the Sales Value Fee under the Fees Schedule, but 
rather provides greater detail on the transactions that trigger the fee 
and the process by which the fee is collected. The Exchange applies 
Section 6 of its Fees Schedule uniformly to all Trading Permit Holders' 
sell orders entered on CBOE and CBSX resulting in covered sales. The 
Exchange also believes the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\11\ in general and with Section 
6(b)(5) of the Act,\12\ in particular, which requires that the rules of 
an exchange be designed to prevent fraudulent and manipulative acts and 
practices, promote just and equitable principles of trade, foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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. The 
Exchange believes that the proposed rule change is consistent with 
these requirements because the proposed amended Fees Schedule text 
provides Trading Permit Holders with more detail regarding the 
circumstances under which the Exchange assesses a Sales Value Fee, and 
the process by

[[Page 35928]]

which the fee is collected. As such, the proposed changes will help 
avoid Trading Permit Holder confusion and foster better understanding 
of the application of the fee. Accordingly, the Exchange believes the 
proposed rule change will promote just and equitable principles of 
trade, remove impediments to and perfect the mechanism of a free and 
open market and a national market system, and protect investors and the 
public interest.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(5).
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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 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 foregoing rule change has become effective 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.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(2).
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2011-054 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-2011-054. 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of CBOE. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly.
    All submissions should refer to File No. SR-CBOE-2011-054 and 
should be submitted on or before July 11, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-15281 Filed 6-17-11; 8:45 am]
BILLING CODE 8011-01-P