Document ID: SEC-2007-1197-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2007-08-27T04:00Z

[Federal Register: August 27, 2007 (Volume 72, Number 165)]
[Notices]               
[Page 49030-49031]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27au07-89]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56289; File No. SR-CBOE-2007-95]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change as Modified by Amendment No. 1 Thereto Relating to 
the Exchange's Marketing Fee Program

August 20, 2007.
    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 1, 2007, the 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, II, and III below, which Items have been substantially 
prepared by the Exchange. On August 13, 2007, the CBOE submitted 
Amendment No. 1 to the proposed rule change.\3\ CBOE has designated 
this proposal as one establishing or changing a due, fee, or other 
charge imposed by CBOE under section 19(b)(3)(A)(ii) of the Act \4\ and 
Rule 19b-4(f)(2) thereunder,\5\ which renders the proposal effective 
upon filing with the Commission. The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange made minor clarifying 
changes to the purpose section and the proposed rule text of the 
proposed rule change.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE proposes to amend its Marketing Fee Program. The text of the 
proposed rule change is available at the Exchange, the Commission's 
Public Reference Room, and http://www.cboe.com.

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. CBOE has substantially 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 proposes to amend its marketing fee program as follows. First, 
CBOE proposes to increase the total balance of the Excess Pool of funds 
that a DPM/LMM or Preferred Market-Maker can maintain. Currently, a 
DPM/LMM can maintain up to $25,000 in an Excess Pool of funds, and a 
Preferred Market-Maker can maintain up to $80,000 in an Excess Pool of 
funds. Going forward, CBOE proposes to increase both of those amounts 
to $100,000. CBOE believes that the allowable balance in the Excess 
Pool of funds should be the same for DPMs and Preferred Market-Makers, 
and increasing the balance will assist those firms in attracting order 
flow to CBOE.
    Second, CBOE proposes to allow a DPM/LMM or Preferred Market-Maker 
to voluntarily elect to have funds refunded. For instance, if a DPM/LMM 
or Preferred Market-Maker paid out 80% or more of the funds collected 
in a given month but less than 100% of the funds collected, a DPM/LMM 
or Preferred Market-Maker could elect to refund the funds it did not 
use rather than having those funds be allocated to its Excess Pool. Or, 
a DPM/LMM or Preferred Market-Maker could elect to have some of the 
funds in its Excess Pool refunded. As is currently the case, any 
refunds would be made on a pro rata basis based upon contributions made 
by the Market-Makers, RMMs, DPMs, e-DPMs and LMMs in that month.
    Third, CBOE proposes to impose an administrative fee to offset its 
costs in administering the marketing fee program and also to provide 
funds to the association of members \6\ (``Association'') for its costs 
and expenses in supporting CBOE's marketing fee program and in seeking 
to bring order flow to CBOE. CBOE proposes to assess an administrative 
fee of .45% of the total amount of funds collected each month.
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    \6\ The Association is technically known as the DPM Association; 
however, its activities are not limited to assisting only DPM 
organizations. As noted above, through its business development 
activities it seeks to bring order flow to CBOE for the benefit of 
all CBOE liquidity providers.
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    The Exchange intends to assess and collect the administrative fee 
of .45% on

[[Page 49031]]

the total amount of funds collected each month prior to making the 
remaining funds available to DPMs/LMMs and Preferred Market-Makers to 
attract order to CBOE. For example, if the Exchange's marketing fee in 
a given month results in the total collection of $100,000, the 
administrative fee of .45% would be assessed on the $100,000 resulting 
in $4,500 being generated as part of the administrative fee. The 
remaining funds in the amount of $95,500 would be made available to 
DPMs/LMMs and Preferred Market-Makers to attract orders to CBOE.
    With respect to the portion of the fee that is intended to offset 
CBOE's overall costs related to the marketing fee program, CBOE notes 
that it previously assessed an administrative fee as part of its 
marketing fee program.\7\ CBOE intends to allocate each month 
approximately 40% of the funds collected through the administrative fee 
to CBOE to offset CBOE's overall costs in administering the program; 
the balance collected by this fee would be allocated to the 
Association.
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    \7\ See Securities Exchange Act Release No. 44469 (June 22, 
2001), 66 FR 35301 (July 3, 2001) (SR-CBOE-2001-25).
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    With respect to the portion of the fee that is intended to 
reimburse and provide funds to the Association for its costs and 
expenses in supporting CBOE's marketing fee program and in seeking to 
bring order flow to CBOE, CBOE notes that all DPMs can participate in 
the Association and support its business development activities. 
Additionally, through its support of the marketing fee program and 
business development, the Association seeks to bring order flow to CBOE 
that all members (Market-Makers, RMMs, LMMs, DPMs, and e-DPMs) may 
transact with. The funds allocated to the Association generally would 
be used to cover the Association's administrative costs and other costs 
such as travel and entertainment. Accordingly, CBOE believes that 
allocating a portion of the funds collected through this administrative 
fee to the Association is an equitable allocation of fees among CBOE 
members.
    CBOE intends to closely monitor the amount of funds raised by this 
administrative fee and may propose amendments to the fee in the future 
as appropriate, so that the fee provides sufficient funds to adequately 
offset CBOE's costs in administering the marketing fee program and 
provide funds to the Association to cover its costs and expenses.
    CBOE proposes to implement this change to the marketing fee 
beginning on August 1, 2007. CBOE is not amending its marketing fee 
program in any other respects.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act \8\ in general, and furthers the 
objectives of section 6(b)(4) of the Act \9\ 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.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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 proposed rule change has been designated as a fee 
change pursuant to section 19(b)(3)(A)(ii) of the Act \10\ and Rule 
19b-4(f)(2) \11\ thereunder, because it establishes or changes a due, 
fee, or other charge imposed by the Exchange. Accordingly, the proposal 
will take effect upon filing with the Commission. At any time within 60 
days of the filing of such 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.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
    \12\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change, the 
Commission considers the period to commence on August 13, 2007, the 
date on which the Exchange filed Amendment No. 1.
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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-2007-95 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2007-95. 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 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-2007-95 and should be submitted on 
or before September 17, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
Florence E. Harmon,
Deputy Secretary.
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    \13\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E7-16836 Filed 8-24-07; 8:45 am]

BILLING CODE 8010-01-P