Document ID: SEC-2010-0438-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2010-03-22T04:00Z

[Federal Register: March 22, 2010 (Volume 75, Number 54)]
[Notices]               
[Page 13625-13626]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22mr10-123]                         

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SECURITIES AND EXCHANGE COMMISSION

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving a Proposed Rule Change Relating to Co-
Location Service Fees

I. Introduction

    On January 28, 2010, Chicago Board Options Exchange, Incorporated 
(``CBOE'' or the ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change relating to co-location services 
and related fees. The proposed rule change was published for comment in 
the Federal Register on February 10, 2010.\3\ The Commission received 
no comment letters on the proposal. This order approves the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 61489 (February 4, 
2010), 75 FR 6764 (``Notice'').
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II. Description

    For a monthly fee, the Exchange provides members with cabinet space 
in CBOE's building for placement of network and server hardware. The 
fee is $10 per month per ``U'' of shelf space (which is equal to 1.75 
inches).\4\ A member also receives power, cooling, security and 
assistance with installation and connection of the equipment to the 
Exchange's servers, at no additional charge. This ``co-location 
service'' provides members with close physical proximity to the 
Exchange's electronic trading system, which helps meet their need for 
high performance processing and low latency.
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    \4\ See Securities Exchange Act Release No. 57191 (January 24, 
2008), 73 FR 5611 (January 30, 2008). The fee for a Sponsored User 
is $20 per month per ``U.'' See Securities Exchange Act Release No. 
58189 (July 18, 2008), 73 FR 43274 (July 24, 2008).
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    The co-location service is available to any member that requests 
the service and pays the monthly fee.\5\ In the Notice, the Exchange 
represented that it believes that for the foreseeable future, it has 
sufficient space to accommodate all members who may request the co-
location service. In addition, the Exchange represented that, other 
than the co-location service, the Exchange does not provide any co-
locating member with any advantage over any other co-locating member or 
any non-co-locating member with respect to access to the Exchange's 
trading system. Further, the Exchange represented that its systems are 
designed to minimize, to the extent possible, any advantage for one 
member over another. The Exchange noted that the above representations 
apply equally to both inbound and outbound data.
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    \5\ A member using the co-location service may also pay certain 
CBOEdirect Connectivity Charges that are set forth in Section 16 of 
the Fee Schedule. The Exchange represents that these fees are 
charged for member connectivity to CBOEdirect regardless of whether 
or not a member is using the co-location service. These fees include 
a $40 per month ``CMi Application Server'' fee for server hardware 
used to connect to the CBOE CMi API, a $40 per month ``Network 
Access Port'' fee for use of the CMi API, and a $40 per month ``FIX 
Port'' fee for use of the FIX API. See Securities Exchange Act 
Release No. 57191, supra note 1. Each of the foregoing fees is $80 
per month for a Sponsored User. See Securities Exchange Act Release 
No. 58189, supra note 1.
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    The proposal clarifies the Exchange's Fee Schedule relating to co-
location fees in two respects. First, the Exchange proposes to move the 
co-location fees from Section 17 of the Fees Schedule (Hybrid Fees) to 
Section 8 (Facility Fees) because it believes that these fees are more 
accurately described as facility fees. Second, the Exchange proposes to 
clarify that the co-location fees are charged in increments of 4 ``U'' 
(which is equal to 7 inches) because the cabinet space is available in 
4 U increments.

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national

[[Page 13626]]

securities exchange.\6\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(4) of the Act,\7\ 
which requires that the rules of a national securities exchange provide 
for the equitable allocation of reasonable dues, fees and other charges 
among its members and issuers and other persons using its facilities, 
and with Section 6(b)(5) of the Act,\8\ which requires, among other 
things, that the rules of a national securities exchange be designed to 
promote just and equitable principles of trade, 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, and not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \6\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(4).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed co-location fees are 
equitably allocated insofar as they are applied on the same terms to 
similarly-situated market participants. In addition, the Commission 
believes that the co-location services described in the proposed rule 
change are not unfairly discriminatory because: (1) Co-location 
services are offered to all members who request them and pay the 
appropriate fees; (2) as represented by CBOE, the Exchange has 
architected its systems so as to, as much as possible, reduce or 
eliminate differences among users of its systems, whether co-located or 
not; and (3) the Exchange has stated that for the foreseeable future, 
it has sufficient space to accommodate all members who may request the 
co-location service.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-CBOE-2010-008) be, and hereby 
is, approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-6184 Filed 3-19-10; 8:45 am]
BILLING CODE 8011-01-P