Document ID: SEC-2012-1214-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2012-07-26T04:00Z

[Federal Register Volume 77, Number 144 (Thursday, July 26, 2012)]
[Notices]
[Pages 43879-43881]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-18242]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67481; File No. SR-CBOE-2012-068]

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

July 20, 2012.
    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 July 11, 2012, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the

[[Page 43880]]

``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 on the Exchange's Web site (http://www.cboe.org/legal), at the Exchange's Office of the Secretary, 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, 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Customer Large Trade Discount 
(the ``Discount''), which is intended to cap fees on large customer 
trades. Currently, regular customer transaction fees are charged up to 
the first 10,000 VIX options contracts in a customer order. The 
Exchange proposes to amend the Discount to state that for any executing 
Trading Permit Holder (``TPH'') whose affiliate \3\ is the issuer of 
one or more securities, the combined total asset value of which is $1 
billion or greater, that are based on or track the performance of VIX 
futures, regular customer transaction fees will only be charged up to 
the first 7,500 VIX options contracts per order in that month (``the 
Amendment''). On the first business day following the end of a calendar 
month, the Exchange will multiply the reported net asset value of each 
security that is based on or tracks the performance of VIX futures (as 
reported on the final calendar day of the month) by the amount of 
outstanding shares in that security to determine the total asset value 
of that security. The Exchange will then amalgamate the total asset 
values of all the securities that are based on or track the performance 
of VIX futures issued by the same issuer to determine if such issuer 
reaches the $1,000,000 [sic] threshold. The Exchange will then announce 
via information circular, on the first trading day of the calendar 
month, the TPH entities that are affiliated with issuers who met the 
threshold and therefore with which qualifying VIX options trades will 
only be charged transaction fees up to 7,500 contracts.
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    \3\ See CBOE Rule 1.1(j), which defines ``affiliate'' as ``a 
person who, directly or indirectly, controls, is controlled by, or 
is under common control with, such other person.'' CBOE Rule 1.1(k) 
defines ``control'' as ``the power to exercise a controlling 
influence over the management or policies of a person, unless such 
power is solely the result of an official position with such person. 
Any person who owns beneficially, directly or indirectly, more than 
20% of the voting power in the election of directors of a 
corporation, or more than 25% of the voting power in the election of 
directors of any other corporation which directly or through one or 
more affiliates owns beneficially more than 25% of the voting power 
in the election of directors of such corporation, shall be presumed 
to control such corporation.'' CBOE Rule 1.1(ff) defines ``person'' 
as ``an individual, partnership (general or limited), joint stock 
company, corporation, limited liability company, trust or 
unincorporated organization, or any governmental entity or agency or 
political subdivision thereof.''
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    The purpose of the Amendment is to incentivize the creation and 
issuance of securities that are based on or track the performance of 
VIX futures.
    The proposed change is to take effect on August 1, 2012.
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.\4\ Specifically, the Exchange believes the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\5\ 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. The Amendment is reasonable because 
it will allow qualifying TPHs to pay lower transaction fees for large 
customer VIX options transactions. The Amendment is equitable and not 
unfairly discriminatory because it is intended to incentivize the 
creation and issuance of securities that are based on or track the 
performance of VIX futures, which provides more trading opportunities 
for all market participants. Further, the lower 7,500-contract 
threshold for TPHs that are affiliated with issuers who hit the 
$1,000,000 [sic] threshold will encourage such TPHs to bring more 
customer VIX options orders to the Exchange, and the resulting 
increased volume and liquidity will benefit all market participants 
trading VIX options.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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

    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) \6\ of the Act and paragraph (f) of Rule 19b-4 \7\ 
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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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 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-2012-068 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.

[[Page 43881]]

All submissions should refer to File Number SR-CBOE-2012-068. 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 Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the 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-2012-068 and should be 
submitted on or before August 16, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-18242 Filed 7-25-12; 8:45 am]
BILLING CODE 8011-01-P