Document ID: SEC-2005-0156-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2005-10-26T04:00Z

[Federal Register: October 26, 2005 (Volume 70, Number 206)]
[Notices]               
[Page 61857-61859]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26oc05-137]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52643; File No. SR-CBOE-2005-71]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Relating to 
Transaction Fees Assessed on DIAMONDS Options

October 20, 2005.
    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 September 1, 2005, 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 prepared by the CBOE. 
On September 8, 2005, the CBOE submitted Amendment No. 1 to the 
proposed rule change.\3\ On October 17, 2005, the CBOE submitted 
Amendment No. 2 to the proposed rule change.\4\ The CBOE has designated 
this proposal as one establishing or changing a due, fee, or other 
charge imposed by the CBOE under section 19(b)(3)(A)(ii) of the Act,\5\ 
and Rule 19b-4(f)(2) thereunder,\6\ which renders the proposal 
effective upon filing with the Commission.\7\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange made a technical change to 
the proposed rule text.
    \4\ In Amendment No. 2, the Exchange revised the proposed rule 
text to amend the transaction fees assessed to non-member market 
makers for orders in DIA options sent to CBOE through the 
Intermarket Options Linkage (``Linkage'') and outside of Linkage. 
The Exchange states that the transaction fees assessed to non-member 
market-makers for orders in DIA options sent to CBOE through Linkage 
or outside of Linkage will be implemented on November 1, 2005.
    \5\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \6\ 17 CFR 240.19b-4(f)(2).
    \7\ The effective date of the original proposed rule change is 
September 1, 2005, the effective date of Amendment No. 1 is 
September 8, 2005, and the effective date of Amendment No. 2 is 
October 17, 2005. For purposes of calculating the 60-day period 
within which the Commission may summarily abrogate the proposed rule 
change, as amended, under Section 19(b)(3)(C) of the Act, the 
Commission considers the period to commence on October 17, 2005, the 
date on which the Exchange submitted Amendment No. 2. See 15 U.S.C. 
78s(b)(3)(C).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Fees Schedule relating to fees 
for options on the DIAMONDS [reg] (``DIA''). The text of the proposed 
rule change is available on the Exchange's Web site (http://www.cboe.com
), at the Exchange's Office of the Secretary, and at the 

Commission's Public Reference Room. The text of the proposed rule 
change is also included below. Proposed new language is italicized; 
proposed deletions are in [brackets].
Chicago Board Options Exchange, Inc.--Fees Schedule
[August 24]September 1, 2005
    1. Options Transaction Fees (1)(3)(4)(7)(16): Per Contract.
    Equity Options (13):
    I.-IX. Unchanged.
    QQQQ and SPDR OPTIONS:
    I.-VII. Unchanged.
    INDEX OPTIONS (includes Dow Jones DIAMONDS, OEF and other ETF and 
HOLDRs options):

I. CUSTOMER (2):
    S&P 100, PREMIUM > or = $1..................................    $.35
    S&P 100, PREMIUM <  $1.......................................     .20
    MNX and NDX.................................................     .15
    RUT and [REDUCED VALUE RUSSELL 2000]RMN.....................     .15
    ETF and HOLDRs options [(except DIA)].......................     .15
    OTHER INDEXES, PREMIUM > OR = $1............................     .45
    OTHER INDEXES, PREMIUM <  $1.................................     .25
II. MARKET-MAKER AND DPM--EXCLUDING DOW JONES PRODUCTS:
    OTHER THAN DIA (10).........................................     .24
    MARKET-MAKER--DOW JONES PRODUCTS (except DIA) (10)..........     .34
III. MEMBER FIRM PROPRIETARY: (11)
    FACILITATION OF CUSTOMER ORDER, MNX and NDX.................     .24
    FACILITATION OF CUSTOMER ORDER, OTHER INDEXES...............     .20
    NON-FACILITATION ORDER......................................     .24
IV. BROKER-DEALER (EXCLUDING THE PRODUCTS BELOW) INDEX CUSTOMER
 RATES:
    ETF (except DIA), HOLDRS, RUT and [REDUCED VALUE RUSSELL         .45
     2000]RMN, PREMIUM > or = $1................................

[[Page 61858]]

    ETF (except DIA), HOLDRS, RUT and [REDUCED VALUE RUSSELL         .25
     2000]RMN, PREMIUM <  $1.....................................
    DIA, MNX and NDX............................................     .25
V. NON-MEMBER MARKET MAKER:
    DIA.........................................................    $.26
    S&P 100 (including OEF), PREMIUM > or = $1..................     .37
    S&P 100 (including OEF), PREMIUM <  $1.......................     .22
    OTHER INDEXES, PREMIUM > or = $1............................     .47
    OTHER INDEXES, PREMIUM <  $1.................................     .27
VI. MNX and NDX LICENSE FEE (15)                                     .10
VII. RUT DPM and MARKET MAKER LICENSE FEE
    (Russell 2000 cash settled index) (12)......................     .10
VIII. LINKAGE ORDERS (8)(15):
    DIA.........................................................     .26
    S&P 100 (OEF), PREMIUM > or = $1............................     .35
    S&P 100 (OEF), PREMIUM <  $1.................................     .20
    OTHER INDEXES, PREMIUM > or = $1............................     .45
    OTHER INDEXES, PREMIUM <  $1.................................     .25

    2. MARKET-MAKER, RMM, e-DPM & DPM MARKETING FEE (in option classes 
in which a DPM has been appointed) (6)(16): Unchanged.
    3. FLOOR BROKERAGE FEE (1)(5)(16): Unchanged.
    4. RAES ACCESS FEE (RETAIL AUTOMATIC EXECUTION SYSTEM) (1)(4)(16): 
Unchanged.
* * * * *

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 CBOE included statements 
concerning the purpose of, and basis for, the proposed rule change, as 
amended, and discussed any comments it received on the proposed rule 
change, as amended. The text of these statements may be examined at the 
places specified in Item IV below. The 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
    The Exchange proposes to amend its Fees Schedule to amend certain 
fees for DIA options. Specifically, the Exchange proposes to reduce 
customer and broker-dealer fees for transactions in DIA options, amend 
non-member market-maker fees for orders in DIA options sent to CBOE 
through Linkage and outside of Linkage,\8\ and eliminate the market-
maker license fee surcharge applicable to transactions in DIA options.
---------------------------------------------------------------------------

    \8\ See Amendment No. 2, supra note 4.
---------------------------------------------------------------------------

    In particular, the transaction fees for public customer 
transactions in DIA options are currently $.45 per contract if the 
premium is equal to or greater than $1, and $.25 per contract if the 
premium is less than $1. The Exchange proposes to reduce the 
transaction fees for public customer transactions in DIA options to 
$.15 per contract, regardless of the premium. Moreover, the transaction 
fees for broker-dealer transactions in DIA options are currently $.45 
per contract if the premium is equal to or greater than $1, and $.25 
per contract if the premium is less than $1. The Exchange proposes to 
reduce the transaction fees for broker-dealer transactions in DIA 
options to $.25 per contract, regardless of the premium. Further, the 
transaction fees for non-member market-maker transactions in DIA 
options are currently $.47 per contract if the premium is greater than 
or equal to $1, and $.27 per contract if the premium is less than $1. 
The transaction fees assessed to non-member market-makers for orders in 
DIA options sent to CBOE through Linkage are currently $.45 per 
contract if the premium is greater than or equal to $1, and $.25 per 
contract if the premium is less than $1. The Exchange proposes to 
change both the non-member market maker transaction fee and the Linkage 
transaction fee for transactions in DIA options to $.26 per contract, 
regardless of the premium.\9\
---------------------------------------------------------------------------

    \9\ See Amendment No. 2, supra note 4. According to CBOE, the 
proposed changes to the transaction fees assessed to non-member 
market-makers for orders in DIA options sent to CBOE through Linkage 
or outside of Linkage will be implemented on November 1, 2005.
---------------------------------------------------------------------------

    In addition, the Exchange currently charges market-makers that 
trade Dow Jones products, including DIA options, a license fee of $.10 
per contract in addition to the regular transaction fee of $.24 per 
contract, to assist the Exchange in offsetting some of the royalty fees 
the Exchange must pay to Dow Jones for its license to trade Dow Jones 
products.\10\ The Exchange proposes to eliminate the $.10 license fee 
solely with respect to market-maker transactions in DIA options.\11\
---------------------------------------------------------------------------

    \10\ See Securities Exchange Act Release No. 48223 (July 24, 
2003), 68 FR 44978, 44979 (July 31, 2003).
    \11\ The Commission notes that the Exchange currently charges 
market-makers that trade Dow Jones products, including DIA options, 
a total fee of $.34 per contract, which reflects a $.10 licensing 
fee surcharge. Under the proposed rule change, the fee for market-
makers that trade DIA options will be $.24 per contract.
---------------------------------------------------------------------------

    The proposed rule change, as amended, is intended to establish fees 
for CBOE's DIA options that will be competitive with fees charged by 
other exchanges for transactions in DIA options.
    The Exchange also proposes to make a minor technical amendment to 
its Fees Schedule to change references relating to ``Reduced Value 
Russell 2000'' options to its ticker symbol, ``RMN.''
2. Statutory Basis
    The CBOE believes that the proposed rule change, as amended, is 
consistent with section 6(b) of the Act,\12\ in general, and furthers 
the objectives of section 6(b)(4) of the Act,\13\ in particular, in 
that it is designed to provide for the equitable allocation of 
reasonable dues, fees, and other charges among CBOE members.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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

    The CBOE does not believe that the proposed rule change, as 
amended, will impose any burden on competition.

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, as amended, has been designated 
as a fee change pursuant to section 19(b)(3)(A)(ii) of the Act \14\ and 
Rule 19b-4(f)(2) \15\ 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.\16\ At any 
time within 60 days of the filing of the proposed rule change, as 
amended, 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.\17\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 17 CFR 240.19b-4(f)(2).
    \16\ See supra note 7.
    \17\ Id.

---------------------------------------------------------------------------

[[Page 61859]]

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2005-71 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.

All submissions should refer to File Number SR-CBOE-2005-71. 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, as 
amended, that are filed with the Commission, and all written 
communications relating to the proposed rule change, as amended, 
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. Copies of such filing also will be available for 
inspection and copying at the principal office of the 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-2005-71 and should be 
submitted on or before November 16, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jonathan G. Katz,
Secretary.
 [FR Doc. E5-5945 Filed 10-25-05; 8:45 am]

BILLING CODE 8010-01-P