Document ID: SEC-2011-1578-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2011-10-14T04:00Z

[Federal Register Volume 76, Number 199 (Friday, October 14, 2011)]
[Notices]
[Pages 63976-63977]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26531]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65517; File No. SR-CBOE-2011-097]

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

October 7, 2011.
    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 October 3, 2011, the 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 the Fees Schedule regarding the 
Marketing 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.

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 those 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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    CBOE proposes to amend its Marketing Fee Program to extend for an 
additional three months a pilot program it implemented on December 1, 
2010,\3\ and extended on April 1, 2011 \4\ and July 1, 2011 \5\ 
relating to the assessment of the marketing fee in the SPY option 
class. Specifically, CBOE previously determined not to assess the 
marketing fee on electronic transactions in SPY options, except that it 
would continue to assess the marketing fee on electronic transactions 
resulting from its Automated Improvement Mechanism (``AIM'') pursuant 
to CBOE Rule 6.74A and transactions in open outcry (the ``Waiver''). 
This pilot program is scheduled to terminate on September 30, 2011, and 
CBOE now proposes to extend it until December 31, 2011.
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    \3\ See Securities Exchange Act Release No. 63470 (December 8, 
2010), 75 FR 78284 (December 15, 2010) (SR-CBOE-2010-108).
    \4\ See Securities Exchange Act Release No. 64212 (April 6, 
2011), 76 FR 20411 (April 12, 2011) (SR-CBOE-2011-033).
    \5\ See Securities Exchange Act Release No. 64818 (July 6, 
2011), 76 FR 40978 (July 12, 2011) (SR-CBOE-2011-060).
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    As CBOE stated in its rule filing establishing this three month 
pilot program, this proposed change is intended to attract more 
customer volume to the Exchange in the SPY option class and to allow 
CBOE market-makers to better compete for order flow. CBOE noted that 
the SPY option class is unique in the manner in which it trades and is 
one of the most active option classes. CBOE also noted that DPMs and 
Preferred Market-Makers can utilize the marketing fee funds to attract 
orders from payment accepting firms that are executed in AIM and in 
open outcry. Finally, CBOE noted that it believes that the marketing 
fee funds received by payment accepting firms may be used to offset 
transaction and other costs related to the execution of an order in AIM 
and in open outcry, including in the SPY option class. CBOE believes 
that the current demographics of electronic SPY option order flow is 
more driven by the displayed best bid or offer (``BBO'') and size than 
payment for order flow considerations, and thus assessment of the 
marketing fee for those transactions is not a differentiator at this 
time.
    For the reasons noted above, CBOE believes that it would make sense 
to extend the pilot program until December 31, 2011. CBOE believes that 
it is beneficial to continue to assess the fee on the limited bases as 
proposed and will continue to enable CBOE to compete for order flow in 
the SPY option class. However, because the SPY option class is unique 
in the manner in which it trades and is one of the most active option 
classes, CBOE would like to continue to evaluate for an additional 
three months the effect of not assessing the fee on all electronic 
transactions in the SPY option class, except for transactions resulting 
from AIM and in open outcry.
    The Exchange also proposes to amend its Fees Schedule to remove the 
security EEM from a list of options on whom the marketing fee to be 
collected is $0.00. EEM is the acronym for the exchange-traded fund 
(``ETF'') iShares MSCI Emerging Markets Index Fund. The Exchange wishes 
to remove EEM from the abovementioned list. Hereafter, the marketing 
fee for EEM transactions would be $0.25 per contract, as it is with 
nearly all other ETFs. The purpose of this change is to increase volume 
on EEM options. By assessing a marketing fee on EEM transactions, the 
Exchange will be able to use the money collected to attract volume, 
pursuant to the Exchange's marketing fee plan. The Exchange believes 
that the demographics of EEM options order flow is inclined to seek 
economic considerations such as payment for order flow, so a marketing 
fee for EEM trades is necessary to attract EEM volume and liquidity.

[[Page 63977]]

2. Statutory Basis
    The proposed rule change to extend the Waiver is consistent with 
Section 6(b) of the Securities Exchange Act of 1934 (the ``Act''),\6\ 
in general, and furthers the objectives of Section 6(b)(4) of the 
Act,\7\ in particular, in that it is designed to provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
Trading Permit Holders in that it is intended to attract more customer 
volume on the Exchange in SPY options. The SPY option class is one of 
the most active and liquid classes and trades with a significant 
electronic trading volume. Because of its current trading profile, CBOE 
believes it might be better able to attract electronic liquidity by not 
assessing the marketing fee on electronic SPY transactions and 
therefore proposes to extend the current waiver. However, CBOE believes 
that continuing to collect the marketing fee on open outcry 
transactions, as well as electronic orders submitted to AIM for price 
improvement, from market makers that trade with customer orders from 
payment accepting firms would continue to attract liquidity in SPY to 
the floor and AIM mechanism, respectively. Accordingly, CBOE believes 
continuing the waiver is equitable because it reflects the trading 
profile of SPY and is designed and intended to attract additional order 
flow in SPY to the Exchange, which would benefit all market 
participants.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
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    The proposed rule change to change the marketing fee assessed on 
EEM transactions furthers the objectives of Section 6(b)(4) of the 
Act,\8\ 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 Exchange facilities. The 
amount of the fee, $0.25 per contract, is reasonable, as it is the same 
amount as is charged for transactions in other ETFs. The assessment of 
the fee is equitable and not unfairly discriminatory because it is 
designed and intended to attract additional order flow in EEM to the 
Exchange, which would increase liquidity and benefit all market 
participants, and because the same fee is assessed similar transactions 
in nearly all other ETFs.
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    \8\ 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) 
of the Act \9\ and subparagraph (f)(2) of Rule 19b-4 \10\ 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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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-2011-097 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-2011-097. 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 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 offices 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-2011-097, and should be submitted on or before 
November 4, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26531 Filed 10-13-11; 8:45 am]
BILLING CODE 8011-01-P