Document ID: SEC-2011-1032-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2011-07-19T04:00Z

[Federal Register Volume 76, Number 138 (Tuesday, July 19, 2011)]
[Notices]
[Pages 42757-42759]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-18074]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64876; File No. SR-CBOE-2011-061]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend Its Fees Schedule Concerning Certain Orders of 
Certain Affiliates for Purposes of a Fee Cap and Sliding Scale

July 13, 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 June 30, 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Fees Schedule to apply the 
Multiply-Listed Options Fee Cap (the ``Fee Cap'') and the CBOE 
Proprietary Products Sliding Scale for Clearing Trading Permit Holder 
Proprietary Orders (the ``Sliding Scale'') to orders of certain non-
Trading Permit Holder affiliates of a Clearing Trading Permit Holder 
(``CTPH''). 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fees Schedule to apply the Fee 
Cap and the Sliding to orders of certain non-Trading Permit Holder 
affiliates of a CTPH.
    Under the Fee Cap, the Exchange caps CTPH Proprietary transaction 
fees in all products except options on OEX, XEO, SPX, and volatility 
indexes, in the aggregate, at $75,000 per month per CTPH, except that 
any AIM Execution Fees incurred by a CTPH do not count towards the cap. 
The Sliding Scale reduces the standard CTPH Proprietary transaction fee 
in OEX, XEO, SPX, and volatility indexes provided a CTPH reaches 
certain volume thresholds in multiply-listed options on the Exchange in 
a month.\3\
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    \3\ The Fee Cap and Sliding Scale apply to CTPH proprietary 
orders (``F'' origin code), except for orders of joint back-office 
(``JBO'') participants. See, CBOE Fees Schedule, Footnote 11.
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    The Exchange proposes to amend its Fees Schedule to apply the Fee 
Cap and the Sliding Scale to orders of certain ``Non-Trading Permit 
Holder Affiliates'' (as defined below) of a CTPH. Specifically, a CTPH 
may request that the Exchange aggregate its trading activity with 
certain trading activity (as described below) of a Non-Trading Permit 
Holder Affiliate for purposes of calculating the Fee Cap and Sliding 
Scale. For this purpose, a ``Non-Trading Permit Holder Affiliate'' 
would be defined as a 100% wholly-owned affiliate or subsidiary of a 
CTPH that is registered as a United States or foreign broker-dealer and 
that is not a CBOE Trading Permit Holder. In other words, a Non-Trading 
Permit Holder Affiliate for this purpose must be either a wholly-owned 
subsidiary of a CTPH or a wholly-owned subsidiary of the parent company 
of a CTPH.

[[Page 42758]]

    Only proprietary orders of a Non-Trading Permit Holder Affiliate 
(``B'' origin code) effected for purposes of hedging the proprietary 
over-the-counter trading of the CTPH or its affiliates would be 
included in calculating the Fee Cap and Sliding Scale. Such orders must 
be marked with a code approved by the Exchange identifying the orders 
as eligible for the Fee Cap and Sliding Scale. The Exchange would 
aggregate a CTPH's transaction fees \4\ in multiply-listed options on 
the Exchange with the transaction fees of its Non-Trading Permit Holder 
Affiliates in multiply-listed options on the Exchange \5\ for purposes 
of determining whether the CTPH has reached the $75,000 Fee Cap. The 
Exchange would aggregate the contracts traded by a CTPH and its Non-
Trading Permit Holder Affiliates in multiply-listed options on the 
Exchange for purposes of determining whether the CTPH has reached the 
Sliding Scale volume thresholds and qualified for the reduced fees for 
CBOE Proprietary Products set forth in the Sliding Scale.\6\
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    \4\ The CTPH transaction fee is $.20 per contract in all 
products except OEX, XEO, SPX, and Volatility Index options, which 
are proprietary products and are assessed $.25 per contract. See, 
CBOE Fees Schedule, Section 1.
    \5\ Broker-Dealer transaction fees apply to orders of a Non-
Trading Permit Holder Affiliate as defined herein: $.25 per contract 
for manual executions and $.45 per contract for electronic 
executions in all products except OEX, XEO, SPX, S&P 500 Dividend 
Index and Volatility Index options, which are proprietary products 
and are assessed $.40 per contract. See, CBOE Fees Schedule, Section 
1, and Footnote 16.
    \6\ The CTPH transaction fee for OEX, XEO, SPX, and Volatility 
Index options is $.25 per contract. The Broker-Dealer transaction 
fee applicable to orders of a Non-Trading Permit Holder Affiliate in 
OEX, XEO, SPX, S&P 500 Dividend Index and Volatility Index options 
is $.40 per contract. See, CBOE Fees Schedule, Section 1 (Index 
Options), and Footnote 16. These fees would be reduced to the fees 
set forth in the Sliding Scale once a CTPH reaches the volume 
thresholds set forth in the Sliding Scale.
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    A CTPH would be required to certify the affiliate status of any a 
Non-Trading Permit Holder Affiliate whose trading activity it seeks to 
aggregate and to certify that the trades identified as eligible for the 
Fee Cap and Sliding Scale were made for the purposes of hedging 
proprietary over-the-counter trading of the CTPH or its affiliates. In 
addition, each CTPH would be required to inform the Exchange 
immediately of any event that causes an entity to cease to be an 
affiliate.
    Other exchanges have rules that permit the aggregation of the 
trading activity of affiliated entities for the purposes of calculating 
and assessing certain fees.\7\ Similarly, the International Securities 
Exchange, LLC (``ISE'') includes certain non-ISE Market-Maker 
transaction fees in calculating its Firm Proprietary transaction fee 
cap.\8\
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    \7\ See, e.g., Nasdaq Rule 7027 and Chicago Stock Exchange Fees 
Schedule, Section P.
    \8\ See ISE Schedule of Fees, footnote 2.
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    The proposed rule change will take effect on July 1, 2011.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\9\ in general, and furthers the objectives of Section 6(b)(4) \10\ 
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 Trading Permit Holders and other persons using Exchange 
facilities, and the objectives of Section 6(b)(5) \11\ of the Act in 
particular in that it is not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers. Specifically, the 
Exchange believes the proposed rule change is equitable, reasonable and 
not unfairly discriminatory because it would allow aggregation of the 
trading activity of a CTPH and its Non-Trading Permit Holder Affiliates 
for purposes of the Fee Cap and Sliding Scale only in very narrow 
circumstances, namely, where (i) the Non-Trading Permit Holder 
Affiliate is registered as a United States or foreign broker-dealer, 
(ii) the trading activity of the Non-Trading Permit Holder Affiliate 
that would be included in the calculation of the Fee Cap and Sliding 
Scale is limited to proprietary orders of the Non-Trading Permit Holder 
Affiliate effected for purposes of hedging the proprietary over-the-
counter trading of the CTPH or its affiliates, and (iii) the CTPH and 
the Non-Trading Permit Holder Affiliate have a complete identity of 
common ownership. Any CTPH may request that the Exchange aggregate its 
trading activity with the trading activity of its Non-Trading Permit 
Holder Affiliates for purposes of calculating the Fee Cap and Sliding 
Scale. Other exchanges have rules that permit the aggregation of the 
trading activity of affiliated entities for the purposes of calculating 
and assessing certain fees.\12\ Similarly, the International Securities 
Exchange includes certain non-ISE Market-Maker transaction fees in 
calculating its Firm Proprietary transaction fee cap.\13\
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ See, e.g., Nasdaq Rule 7027 and Chicago Stock Exchange Fees 
Schedule, Section P.
    \13\ See ISE Schedule of Fees, footnote 2.
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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 \14\ and subparagraph (f)(2) of Rule 19b-4 \15\ 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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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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.
    In particular, the Commission is interested in receiving comment as 
to whether the Exchange's proposal is consistent with the Act and the 
rules and regulations issued thereunder that are applicable to the 
Exchange, including Section 6 of the Act and Sections 6(b)(4) and 
6(b)(5) in particular. In addition, the Commission is interested in 
receiving comment as to whether the Exchange has carried its burden to 
demonstrate such consistency.
    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-2011-061 on the subject line.

[[Page 42759]]

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-2011-061. 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, 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 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 No. SR-CBOE-2011-061 and should be 
submitted on or before August 9, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-18074 Filed 7-18-11; 8:45 am]
BILLING CODE 8011-01-P