Document ID: SEC-2012-0515-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2012-04-02T04:00Z

[Federal Register Volume 77, Number 63 (Monday, April 2, 2012)]
[Notices]
[Pages 19741-19743]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-7772]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66665; File No. SR-CBOE-2012-029]

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

March 27, 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 March 26, 2012, 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 the CBOE Stock Exchange (``CBSX'') 
Fees Schedule. The text of the proposed rule change is available on the 
Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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
    CBSX proposes to amend its Maker fees for transactions in 
securities priced $1 or greater to further institute a tiered fee 
structure through which Makers who transact more business on CBSX will 
pay lower transaction fees. Currently, the Maker fee for transactions 
in securities priced $1 or greater executed by a market participant 
that adds two million or more shares of liquidity that day is $0.0016 
per share,\3\ and the Maker fee for transactions in securities priced 
$1 or greater executed by a market participant that does not add two 
million or more shares of liquidity that day is $0.0018 per share. CBSX

[[Page 19742]]

proposes to amend this tiered system regarding Maker fees for 
transactions in securities priced $1 or greater in the following 
manner:
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    \3\ This rate applies to all transactions in securities priced 
$1 or greater made by the same market participant in any day in 
which such participant adds two million shares or more of liquidity. 
Market participants who share a trading acronym or MPID may 
aggregate their trading activity for purposes of this rate. 
Qualification for this rate will require that a market participant 
appropriately indicate his trading acronym and/or MPID in the 
appropriate field on the order.

Maker (adds 15 million shares or more of liquidity in one day) $0.0013 
per share
Maker (adds 10,000,000-14,999,999 shares of liquidity in one day) 
$0.0014 per share
Maker (adds 5,000,000-9,999,999 shares of liquidity in one day) $0.0015 
per share
Maker (adds 2,500,000-4,999,999 shares of liquidity in one day) $0.0016 
per share
Maker (adds 2,499,999 shares or less of liquidity in one day) $0.0018 
per share

    As with the current $0.0016 per share Maker fee for transactions in 
securities priced $1 or greater executed by a market participant that 
adds two million or more shares of liquidity that day, these rates 
apply to all transactions in securities priced $1 or greater made by 
the same market participant in any day in which such participant adds 
the established amount of shares or more of liquidity that is 
determined in the chart above for each tier. Market participants who 
share a trading acronym or MPID may aggregate their trading activity 
for purposes of these rates. Qualification for these rates will require 
that a market participant appropriately indicate his trading acronym 
and/or MPID in the appropriate field on the order. CBSX will promulgate 
an information circular to direct market participants on how to 
accurately qualify and aggregate their trading activity in order to 
receive this reduced rate.
    The structure of decreasing Maker fees for transactions in 
securities priced at $1 or greater for adding increasing amounts of 
liquidity is designed to encourage increased trading activity and 
liquidity on CBSX. The Exchange desires to incentivize market 
participants who may be able to meet higher thresholds to add more 
volume and liquidity to the CBSX marketplace. This increased volume and 
liquidity would benefit all CBSX market participants, including those 
who do not trade at the higher levels, by providing them with more 
opportunities for execution. The thresholds are applied on a daily 
basis in order to encourage market participants to add volume and 
liquidity on a consistent basis. The Exchange seeks market participants 
who will be active on CBSX on a regular basis, as the liquidity that 
such larger-volume participants provide will be attractive to all 
investors and benefit all market participants. The thresholds in the 
different tier levels were set based on an analysis of current trading 
activity and an aspirational intention to encourage trading at those 
higher levels (the higher tiers of which are not currently being 
reached by any specific market participant).
    The proposed change is intended to take effect on April 1, 2012.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\4\ in general, and furthers the objectives of Section 6(b)(4) \5\ 
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. The proposed Maker fee amounts are reasonable because they 
are lower than current CBSX fees for such transactions. The proposed 
Maker fees and tiers are equitable and not unfairly discriminatory 
because they will apply to all market participants, and all market 
participants will have the opportunity to qualify for the reduced rate 
tiers.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
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    Further, the reduced fee tiers are equitable and not unfairly 
discriminatory because they will encourage market participants to trade 
on CBSX and bring greater liquidity to CBSX, which will benefit all 
market participants. By encouraging market participants to hit certain 
threshold of executing at least increasing amounts of shares a day (at 
which point such market participants would receive the corresponding 
lower Maker fees for all shares executed by the market participant that 
day), the Exchange incentivizes market participants who may be able to 
meet that threshold to add more volume and liquidity to the CBSX 
marketplace. This increased volume and liquidity would benefit all CBSX 
market participants, including those who do not trade at the higher 
levels, by providing them with more opportunities for execution. Orders 
that provide liquidity increase the likelihood that members seeking to 
access liquidity will have their orders filled. If the lower rates did 
not exist for market participants who execute increased amounts of 
shares a day, even those market participants who do not hit those 
thresholds would not receive the benefit of this added volume and 
liquidity. Applying the thresholds on a daily basis will encourage 
these larger-volume market participants to add volume and liquidity on 
a consistent basis, and the resulting consistently-available executions 
will benefit all market participants. As such, the Exchange believes 
that it is reasonable and equitable to use pricing incentives, such as 
lower fees for creating large amounts of liquidity, to encourage market 
participants to increase their participation in the market.

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)(2) 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)(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. 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-2012-029 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 19743]]

All submissions should refer to File Number SR-CBOE-2012-029. 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 
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-2012-029 and should be 
submitted on or before April 23, 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. 2012-7772 Filed 3-30-12; 8:45 am]
BILLING CODE 8011-01-P