Document ID: SEC-2010-1348-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2010-09-07T04:00Z

[Federal Register: September 7, 2010 (Volume 75, Number 172)]
[Notices]               
[Page 54408-54410]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07se10-78]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62793; File No. SR-CBOE-2010-076]

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

August 30, 2010.
    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 August 17, 2010, 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 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.
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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

    The Exchange proposes to amend its Fees Schedule relating to 
routing charges. The text of the proposed rule change is available on 
the Exchange's Web site (http://www.cboe.org/legal), at

[[Page 54409]]

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, 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 is proposing to modify its fee schedule related to 
routing large orders to other exchanges for execution in connection 
with the Options Order Protection and Locked/Crossed Market Plan 
referenced in CBOE Rule 6.80. Currently, when the Exchange receives a 
marketable order for the account of a non-broker dealer when CBOE is 
not at the national best bid or offer (``NBBO''), CBOE transmits a 
message to market participants in accordance with Rule 6.14A to see in 
an attempt to achieve an execution at the NBBO price or better for the 
order (i.e., step-up) so that CBOE can avoid routing order flow to a 
competing exchange. If step-up is not achieved, CBOE will route a 
``linkage'' order to the NBBO market(s) up to the size of the displayed 
interest at the NBBO or the size of the order (whichever is 
smaller).\3\ If the linkage order is executed (which is typically the 
case), CBOE absorbs all transaction costs associated with the execution 
at the away market. CBOE also routes the order for free. When CBOE 
receives a similar marketable order for the account of a broker dealer, 
however, CBOE charges $0.50 per contract for the routing and away 
execution costs, in addition to the customary CBOE execution charges. 
This is because the service is geared more toward retail customer 
orders.
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    \3\ We note that, pursuant to Rule 6.14A(a)(i), if one or more 
orders are resting at the Exchange's BBO and there is insufficient 
Market-Maker interest at the BBO price to satisfy the entire 
marketable order, the Exchange will immediately route away without 
processing for step-up.
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    CBOE is now seeking to refine the cost structure of the program as 
it relates to large non-broker dealer customer orders. Specifically, 
when CBOE receives a qualifying customer order that has an original 
size of 1,000 or more contracts that is routed, in whole or in part, to 
one or more exchanges, CBOE will charge $ 0.35 per contract executed on 
another exchange, in addition to the customary CBOE execution charges 
(when applicable). The changes will take effect on August 23, 2010.
    These larger non-broker dealer customer orders are more akin to 
broker dealer orders and CBOE believes it is appropriate and consistent 
to pass through some of these costs. We note that the step-up service 
should still be a very attractive offering for these larger non-broker 
dealer orders since, when step-up is achieved, they will continue to 
receive considerable cost savings. As is the case today, order senders 
can request that orders be cancelled if step-up is not achieved without 
routing to an away market, thereby avoiding this new charge. The 
program will remain unchanged for orders that fall under the 1,000 
contract threshold.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\4\ in general, and 
furthers the objectives of Section 6(b)(4) \5\ of the Act in 
particular, in that it is designed to provide for the equitable 
allocation of reasonable dues, fees, and other charges among CBOE 
trading permit holders. Because non-broker dealer customer orders with 
an original size of 1,000 contracts or more are more akin to broker 
dealer orders, CBOE believes it is appropriate to pass through some 
costs associated with this routing service.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
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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 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)(ii) \6\ of the Act and subparagraph (f)(2) of Rule 19b-4 
\7\ thereunder.
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    \6\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \7\ 17 C.F.R. 240.19b-4(f)(2).
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    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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2010-076 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-2010-076. 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

[[Page 54410]]

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 will also 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 No. SR-CBOE-2010-076 and should be submitted on or before 
September 28, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-22207 Filed 9-3-10; 8:45 am]
BILLING CODE 8010-01-P