Document ID: SEC-2013-1715-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2013-10-02T04:00Z

[Federal Register Volume 78, Number 191 (Wednesday, October 2, 2013)]
[Notices]
[Pages 60978-60981]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24013]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70522; File No. SR-CBOE-2013-090]

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

September 26, 2013.
    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 September 17, 2013, Chicago Board Options Exchange, 
Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities 
and Exchange Commission

[[Page 60979]]

(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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Fees Schedule. The text of the 
proposed rule change is available at the Exchange's Office of the 
Secretary, on the Exchange's Web site at http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx, at the Commission's Public Reference 
Room, and on the Commission's Web site at http://www.sec.gov.

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fees Schedule. First, the 
Exchange is proposing to make changes to Footnote 26 of the Fees 
Schedule. Pursuant to that section, the Exchange charges a Trading 
Permit Holder (``TPH'') a monthly fee for a Trading Permit or Tier 
Appointment, the amount of which fee is based on the type of Trading 
Permit or Tier Appointment. Pursuant to the Fees Schedule, the Exchange 
assesses these access fees in arrears during the first week of the 
following month. For example, a TPH will be billed in February for use 
of a Trading Permit in January. The Fees Schedule further provides that 
if a Trading Permit is issued during a calendar month after the first 
trading day of the month, the access fee for the Trading Permit for 
that calendar month is prorated based on the remaining trading days in 
the calendar month. A Trading Permit will be renewed automatically for 
the next month unless the TPH submits written notification to the 
Registration Services Department by the 25th day of the prior month (or 
the preceding business day if the 25th is not a business day) to cancel 
the Trading Permit effective at or prior to the end of the applicable 
month.
    Under the Fees Schedule, if a TPH cancels a Trading Permit 
effective prior to the end of the applicable month, the TPH will still 
be assessed the full access fee for that month (the same amount it 
would pay if the TPH had cancelled the Trading Permit effective at the 
end of the month). However, if the TPH later requests that the Exchange 
issue the same type of Trading Permit for the remainder of that same 
month, pursuant to the Fees Schedule, the Exchange will assess a 
prorated access fee based on the remaining trading days in that month. 
Thus, the TPH would be double-paying the access fee for that remaining 
portion of the month.
    The purpose of the proposed rule change is to prevent a TPH from 
double-paying a portion of the monthly access fee in this situation. 
The proposed rule change amends Footnote 26 of the Fees Schedule to 
provide that if cancellation of a Trading Permit is effective prior to 
the end of the applicable month, and the cancelling TPH later requests 
issuance of the same type of Trading Permit for the remainder of that 
same month, the Exchange may issue the same type of Trading Permit 
(assuming one is available) but will not impose the additional prorated 
access fee for the remainder of the month.\3\ The proposed rule change 
results in a TPH that cancels a Trading Permit prior to the end of the 
month but then has the same type of Trading Permit issued during that 
same month paying the same monthly access fee amount as it would if it 
had cancelled its Trading Permit effective at the end of a month. This 
change is similar to a change made by C2 Options Exchange, Incorporated 
(``C2'').\4\
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    \3\ The proposed rule change does not change the amounts of the 
access fees imposed on TPHs for the use of Trading Permits.
    \4\ See Securities Exchange Act Release No. 68751 (January 29, 
2013), 78 FR 7837 (February 4, 2013) (SR-C2-2013-005).
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    The Exchange proposes to make one other change to Footnote 26. 
Currently, Footnote 26 states that ``Trading Permits will be renewed 
automatically for the next month unless the Trading Permit Holder 
submits written notification to the Registration Services Department by 
the 25th day of the prior month (or the preceding business day if the 
25th is not a business day) to cancel the Trading Permit effective at 
or prior to the end of the applicable month.'' The Exchange proposes to 
amend this statement to give TPHs until 4 p.m. on the second-to-last 
business day of the prior month to cancel a Trading Permit. This will 
give TPHs more time to cancel Trading Permits before such permits 
renew.\5\
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    \5\ The proposed new language would read ``Trading Permits will 
be renewed automatically for the next month unless the Trading 
Permit Holder submits written notification to the Registration 
Services Department by 4 p.m. [sic] on the second-to-last business 
day of the prior month to cancel the Trading Permit effective at or 
prior to the end of the applicable month.''
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    The Exchange also proposes to amend Footnote 28 (which is currently 
``reserved'') to state that monthly fees are assessed and applied in 
their entirety and are not prorated. This explicit statement will apply 
specifically to monthly Facility Fees and CBOE Command Connectivity 
Charges (but is not intended to imply that other monthly charges are 
not applied in their entireties). This is not a proposed change, as 
this is the manner in which those fees are currently assessed; the 
Exchange merely desires to make this fact explicit. This means that, 
regardless of whether a market participant incurs the fee at the 
beginning or the end of the month, or the amount of the month for which 
the market participant incurs the fee, the entirety of the monthly fee 
will be assessed. For example, the OEX Standard Booth Rental Fee is 
$550 per month. Regardless of whether a market participant rents an OEX 
Standard Booth on the third of the month or the thirtieth of the month, 
that market participant will be assessed the full $550 fee. This is how 
the Exchange's billing system is set up, and absent a statement that 
such fees are prorated, the manner that such fees have been and are to 
be assessed. The Exchange expends resources to provide and administer 
these facilities and connectivity, and in many circumstances, the same 
amounts of Exchange resources are necessary regardless of the portion 
of the month that the services, facilities and connectivity are used 
(or at the very least, a disproportionate amount of resources are 
necessary). Further, Exchange billing systems are arranged to bill for 
these services on a monthly basis, and determining these costs on a 
prorated basis would prove difficult and require further resources.
    The Exchange also proposes to amend its paper fees (which apply to 
the paper that the Exchange provides for TPHs on the trading floor for 
use in printing trade tickets). The Fees Schedule currently lists a fee 
of $50 per box for 5-part and 2-part paper. However, the Exchange no

[[Page 60980]]

longer offers 5-part and 2-part paper. Instead, the Exchange provides 
two types of printers to TPHs on the trading floor, and sells paper to 
TPHs based on the type of printer the TPH uses. For TPHs that use a 
Hewlett-Packard (``HP'') Laser Printer, the Exchange provides packets 
of 500 sheets, for which the Exchange proposes to assess a fee of $5 
per packet. For TPHs that use the more powerful Zebra printer, the 
Exchange provides rolls of ink as well as rolls of paper, and proposes 
to assess a fee of $19.50 for each roll of either. The proposed fees 
would be intended to cover the costs of the paper (and ink), as well as 
the costs of provision of such paper (and ink).
    The Exchange also proposes to add fees for the installation, 
relocation, and removal of CBOE Trading Floor Terminals to the Fees 
Schedule. Specifically, the Exchange proposes to list a fee of $175 for 
the installation, $225 for the relocation, and $125 for the removal of 
such terminals. These fee amounts are currently being assessed for such 
services, as they are the fees that are assessed by electricians for 
their work and then passed through to the relevant TPHs by the 
Exchange.\6\ Because these are set fee amounts, the Exchange proposes 
to list them on the Fees Schedule for clarity.
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    \6\ This is pursuant to the ``DPM requests for post 
modifications/equipment'' fee listed in the ``Miscellaneous'' 
section of the Fees Schedule.
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    Finally, the Exchange proposes to amend a typographical error on 
its Fees Schedule. The ``Trading Permit and Tier Appointment Fees'' 
table of the Fees Schedule lists a column for ``Origin Code'' to 
delineate to which origin codes (which correspond to different types of 
market participants) the different permits and tier appointments apply. 
Next to the ``Electronic Access Permit'' and ``CBSX Trading Permit'', 
the letter ``M'' (corresponding to Market-Makers) is listed in the 
``Origin Code'' column. However, these types of permits are not limited 
to Market-Makers, and the Exchange believes that the letter ``M'' was 
unintentionally added to these rows because it was also added 
(correctly) to a number of rows above it. As such, the Exchange 
proposes to delete the ``M'' from these rows.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\7\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \8\ requirements that the rules of 
an exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitation [sic] transactions in securities, 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. Additionally, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \9\ requirement that the rules 
of an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. The Exchange also believes the 
proposed rule change is consistent with Section 6(b)(4) of the Act,\10\ 
which provides that Exchange rules may provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
Trading Permit Holders and other persons using its facilities.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
    \10\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed change to amend Footnote 26 
to prevent the double-paying of a Trading Permit fee is equitable and 
not unfairly discriminatory as it applies to all TPHs that cancel a 
Trading Permit effective prior to the end of a month and request 
issuance of the same type of Trading Permit during that same month. The 
Exchange believes the proposed rule change protects investors and the 
public interest, as it prevents a TPH from paying the monthly access 
fee twice during the same month for a Trading Permit in the event that 
the TPH cancels the Trading Permit effective prior to the end of the 
month but later requests issuance of the same type of Trading Permit 
during that month. The Exchange believes that the proposed rule change 
is fair and reasonable, because it results in a TPH that cancels a 
Trading Permit prior to the end of the month but then has the same type 
of Trading Permit issued that month paying the same amount in access 
fees for that month as a TPH that cancels a Trading Permit effective at 
the end of a month. A Trading Permit Holder is able to trade the same 
amount in either situation; therefore, the Exchange believes it is 
reasonable that the TPH pay the same amount in either situation.
    The Exchange believes that the proposal to amend Footnote 26 to 
give TPHs until 4 p.m. on the second-to-last business day of the prior 
month to cancel a Trading Permit is reasonable because it will give 
TPHs more time to determine whether to cancel a Trading Permit. The 
Exchange believes that the proposed change is equitable and not 
unfairly discriminatory because it will apply to all TPHs.
    The Exchange believes that the proposal to amend Footnote 28 state 
that monthly Facility Fees and CBOE Command Connectivity Charges are 
assessed and applied in their entireties and are not prorated removes 
impediments to and perfects the mechanism of a free and open market and 
a national market system, and, in general, protects investors and the 
public interest because it makes clear this current policy, thereby 
avoiding possible confusion. The Exchange believes that assessing these 
fees in their entireties is reasonable, equitable and not unfairly 
discriminatory because the Exchange expends resources to provide and 
administer these facilities and connectivity, and in many 
circumstances, the same amounts of Exchange resources are necessary 
regardless of the portion of the month that the services, facilities 
and connectivity are used (or at the very least, a disproportionate 
amount of resources are necessary). Further, Exchange billing systems 
are arranged to bill for these services on a monthly basis, and 
determining these costs on a prorated basis would prove difficult and 
require further resources. Also, this policy applies to all TPHs 
equally.
    The Exchange believes that its proposed amendment to state that 
paper fees are assessed for $5 per packet of 500 sheets for HP Laser 
Printer paper and $19.50 per roll of either Zebra printer paper or ink 
(and the deletion of the $50 fee per box of 5-part or 2-part paper) is 
reasonable because this change would better align the Exchange's paper 
provision practice, and because the proposed fees would be intended to 
cover the costs of the paper (and ink), as well as the costs of 
provision of such paper (and ink). The Exchange believes that this 
change is equitable and not unfairly discriminatory because the fees 
will apply to all TPHs equally.
    The Exchange believes that the proposed listing of the fees for the 
installation, relocation, and removal of CBOE Trading Floor Terminals 
will remove impediments to and perfect the mechanism of a free and open 
market and a national market system by letting TPHs who may need those 
services know explicitly on the Fees Schedule

[[Page 60981]]

what the fees for such services will be (thereby eliminating any 
possible confusion). The Exchange believes that these fee amounts are 
reasonable because they reflect the amounts necessary to perform such 
services (and indeed, are the amounts assessed by electricians for such 
services). The Exchange believes that these fees are equitable and not 
unfairly discriminatory because they will apply to all TPHs equally.
    The Exchange believes that the proposal to delete the erroneous 
listing of the letter ``M'' from the ``Origin Code'' column of [sic] 
next to the ``Electronic Access Permit'' and ``CBSX Trading Permit'' 
rows of the Trading Permit and Tier Appointment Fees table of the Fees 
Schedule will eliminate possible investor confusion, thereby removing 
impediments to and perfecting the mechanism of a free and open market 
and a national market system.

B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule changes will impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
that the proposed rule changes will impose any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because the proposed changes apply to all TPHs 
equally, regardless of the type of market participant. The Exchange 
does does [sic] not believe that the proposed rule changes will impose 
any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because these 
changes all apply to billing and fees that affect CBOE only (and not 
other exchanges). Further, to the extent that the proposed changes make 
CBOE more attractive to market participants on other exchanges, such 
market participants may elect to become CBOE market participants.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on 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 \11\ and paragraph (f) of Rule 19b-4 \12\ 
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. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f).
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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 email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2013-090 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-2013-090. This file 
number should be included on the subject line if email 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 Section, 100 F Street 
NE., Washington, DC 20549-1090 on official business days between the 
hours of 10:00 a.m. and 3:00 p.m. Copies of the 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 Number SR-
CBOE-2013-090 and should be submitted on or before October 23, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24013 Filed 10-1-13; 8:45 am]
BILLING CODE 8011-01-P