Document ID: SEC-2008-1037-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2008-07-24T04:00Z

[Federal Register: July 24, 2008 (Volume 73, Number 143)]
[Notices]               
[Page 43274-43275]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24jy08-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58189; File No. SR-CBOE-2008-75]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Sponsored User Fees

July 18, 2008.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ notice is hereby given that on July 15, 2008, the Chicago 
Board Options Exchange, Incorporated filed with the Securities and 
Exchange Commission (``Commission'') 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).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Chicago Board Options Exchange, Incorporated (``CBOE'' or 
``Exchange'') proposes to establish fees applicable to Sponsored Users. 
The text of the proposed rule change is available on the Exchange's Web 
site (http://www.cboe.org/legal), at the Exchange's principal office, 
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, 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, the Proposed Rule Change

1. Purpose
    CBOE Rule 6.20A, Sponsored Users, governs electronic access for the 
entry and execution of orders by Sponsored Users \2\ with authorized 
access to Exchange Systems \3\ and the applicable requirements that 
Sponsored Users and Sponsoring Members \4\ are required to satisfy in 
order to engage in a Sponsoring Member/Sponsored User relationship. The 
Exchange proposes to establish fees specifically applicable to 
Sponsored Users. The fees are (1) a Sponsored User Inactivity Fee, (2) 
a Sponsored User Registration Fee, (3) CBOEdirect connectivity fees, 
and (4) a co-location fee. The proposed fees would be billed to 
Sponsoring Members through their clearing firms.
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    \2\ A ``Sponsored User'' is defined in Rule 6.20(A)(a) as a 
person or entity that has entered into a sponsorship arrangement 
with a Sponsoring Member for purposes of receiving electronic access 
to the Exchange System(s).
    \3\ ``Exchange Systems'' is defined in Rule 6.20A.01 as the FLEX 
Hybrid Trading System (``FLEX''), CBOE Stock Exchange (``CBSX'') and 
CBOE.
    \4\ ``Sponsoring Member'' is defined in Rule 6.20A(b) as a 
member organization that agrees to sponsor the Sponsored User's 
access to the Exchange System(s).
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    Sponsored User Inactivity Fee. The Exchange recently expanded the 
Sponsored User program, which had previously only applied to CBOE's 
FLEX and CBSX facilities, to permit electronic access for the entry and 
execution of orders by Sponsored Users to all other products traded on 
CBOE.\5\ However, the number of Sponsored Users with electronic access 
to all other products traded on CBOE has been limited to a total of 15 
persons or entities (referred to as the 15 ``Sponsored User 
Slots'').\6\ The Exchange proposes to charge an inactivity fee of 
$5,000 per month that would be charged only if a CBOE Sponsored User 
(one of the 15 Sponsored User Slots) is not software certified by the 
Exchange and has not established a production network connection and 
passed a login test within 90 days of CBOE's acceptance of its 
Sponsored User registration status. The fee would continue to apply 
until the Sponsored User has completed all of the foregoing 
requirements or the Sponsored User's registration status is withdrawn.
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    \5\ See Securities Exchange Act Release No. 58051 (June 27, 
2008), 73 FR 38260 (July 3, 2008).
    \6\ See Rule 6.20A.01.
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    Without the fee, a Sponsored User could obtain one of the Sponsored 
User Slots and choose not to connect to the Exchange. The Exchange 
believes the proposed fee should provide an appropriate incentive to 
Sponsored Users to connect to the Exchange and trade. A Sponsored User 
very easily may avoid assessment of the fee simply by becoming software 
certified and establishing a network connection to the Exchange as 
described above.
    Sponsored User Registration Fee. The Exchange proposes to charge a 
one-time fee of $2,500 for each registration of a Sponsored User.
    CBOEdirect connectivity fees. The Exchange currently charges 
members the following monthly fees related to connectivity to 
CBOEdirect: a $40 per month ``CMI Application Server'' fee for 
providing member firms with server hardware that enable the firms to 
connect to CBOE's two Application Protocol Interfaces: CMI (CBOE Market 
Interface) and Financial Information Exchange (``FIX''), and a $40 per 
month ``network access port'' fee and a $40 per month ``FIX port'' fee 
for network hardware the Exchange provides to members for access to the 
Exchange's network. The Exchange proposes to charge Sponsored Users an 
$80 per month CMI Application Server fee, $80 per month network access 
port fee and $80 per month FIX port fee.
    Co-location fee. The Exchange provides cabinet space in the CBOE 
data center for co-locating member firm network and quoting engine 
hardware, to help members meet their need for high performance 
processing and low latency. The Exchange currently charges members a 
co-location fee of $10 per ``U'' of shelf space (which is equal to 1.75 
inches). The Exchange proposes to charge Sponsored Users a co-location 
fee of $20 per ``U'' of shelf space.

[[Page 43275]]

    The Exchange believes it is equitable and reasonable to charge 
higher connectivity and co-location fees to Sponsored Users than it 
charges to members because members are subject to dues and other fees 
through their membership to help offset the Exchange's systems 
expenses.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
section 6(b) of the Securities Exchange Act of 1934 (``Act'') \7\, in 
general, and furthers the objectives of section 6(b)(4) \8\ 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 
members and other persons using its facilities. The Exchange believes 
the Sponsored User Inactivity Fee should provide an appropriate 
incentive to Sponsored Users to connect to the Exchange and trade. The 
Exchange believes the proposed connectivity and co-location fees 
equitably allocate to Sponsored Users their fair share of Exchange 
systems expenses.
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    \7\ 15 U.S.C. 78f(b).
    \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 that is 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 foregoing rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \9\ and subparagraph (f)(2) of Rule 19b-4 
thereunder.\10\ At any time within 60 days of the filing of the 
proposed rule change, the Commission may summarily abrogate 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-2008-75 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2008-75. 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 inspection and 
copying 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 Number SR-CBOE-2008-75, and 
should be submitted on or before August 14, 2008.

    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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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-16930 Filed 7-23-08; 8:45 am]

BILLING CODE 8010-01-P