Document ID: SEC-2008-1044-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2008-07-28T04:00Z

[Federal Register: July 28, 2008 (Volume 73, Number 145)]
[Notices]               
[Page 43805-43807]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28jy08-118]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58200; File No. SR-CBOE-2008-77]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to the Interim Trading Permit Access Fee

July 21, 2008.
    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 July 18, 2008, 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. 
CBOE has designated this proposal as one establishing or changing a 
due, fee, or other charge imposed by the Exchange under section 
19(b)(3)(A),\3\ and Rule 19b-4(f)(2) thereunder,\4\ which renders the 
proposal effective upon filing with the Commission. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 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 adopt a monthly access fee for Interim Trading 
Permit holders. 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, CBOE 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 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 Rule 3.27(f)(ii) provides that Interim Trading Permit holders 
shall pay to the Exchange a monthly access fee set by the Exchange and 
that the access fee shall be implemented through the submission of a 
proposed rule change to the Commission under section 19(b)(3)(A) of the 
Act.\5\ The purpose of this rule filing is to propose that the access 
fee for Interim Trading Permit holders be set at $12,387 per month.
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    \5\ 15 U.S.C. 78s(b)(3)(A).
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    The amount of the proposed access fee is equal to the current 
indicative lease rate. Under Rule 3.27(b), the ``indicative lease 
rate'' is the highest clearing firm floating monthly rate \6\ of the 
CBOE Clearing Members that assist in facilitating at least 10% of the 
CBOE transferable membership leases. The Exchange determined the 
current indicative lease rate by polling each of these Clearing Members 
and obtaining the clearing firm floating monthly rate designated by 
each of these Clearing Members for the month of July 2008.
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    \6\ Rule 3.27(b) defines the term ``clearing firm floating 
monthly rate'' as the floating monthly rate that a Clearing Member 
designates, in connection with transferable membership leases that 
the Clearing Member assisted in facilitating, for leases that 
utilize that monthly rate.
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    The Exchange believes that the proposed access fee constitutes an 
equitable allocation of reasonable dues,

[[Page 43806]]

fees, and other charges among persons using its facilities because it 
is equivalent to the current lease rate paid by a large percentage of 
lessees of CBOE transferable memberships and is equivalent to the 
current access fee assessed by the Exchange to persons granted 
temporary CBOE membership status (``Temporary Members'') pursuant to 
Interpretation and Policy .02 under CBOE Rule 3.19.\7\ Additionally, by 
setting the proposed access fee at the indicative lease rate, the 
Exchange is utilizing a benchmark that is used for other purposes under 
various provisions of Rule 3.27. For example, the Exchange may issue 
Interim Trading Permits under Rule 3.27(b) only if, among other things, 
the Exchange determines that there are insufficient transferable 
memberships available for lease at that time at a rate reasonably 
related to the indicative lease rate. In addition, Rule 3.27(d) 
provides that, under specified circumstances, the Exchange will make a 
payment to lessors of CBOE transferable memberships that notify the 
Exchange that their memberships remain unleased while Interim Trading 
Permits are outstanding, and the amount of that payment is the 
indicative lease rate (assuming the number of Interim Trading Permits 
exceeds the number of these open leases). Setting the proposed access 
fee equal to the indicative lease rate therefore is consistent with 
these other provisions.\8\
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    \7\ See Securities Exchange Act Release No. 58073 (July 1, 
2008), 73 FR 39357 (July 9, 2008) (SR-CBOE-2008-71), which set the 
current access fee for Temporary Members at $12,387 per month.
    \8\ Because Interim Trading Permit holders possess a feature 
that does not exist in the typical lease arrangement for a CBOE 
transferable membership, the Exchange also believes that it would be 
equitable to assess Interim Trading Permit holders an access fee 
that is higher than the indicative lease rate if the Exchange chose 
to do so in the future through the submission of a subsequent 
proposed rule change pursuant to section 19(b)(3)(A)(ii) of the Act, 
15 U.S.C. 78s(b)(3)(A)(ii). Under Rule 3.27(c), an Interim Trading 
Permit can be terminated only (1) if the holder terminates the 
Interim Trading Permit, (2) as a result of regulatory action against 
the holder, (3) in the event of a demutualization, or (4) through a 
rule change approved by the Commission. On the other hand, the 
typical lease arrangement for a transferable membership can be 
terminated by the lessor upon a month's notice to the lessee. As a 
result, Interim Trading Permit holders enjoy more certainty than 
lessees with respect to their trading access to the Exchange and the 
Exchange could determine to assess them a higher access fee to 
reflect that certainty.
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    The Exchange may, and likely will, further adjust the proposed 
access fee in the future through the submission of a further rule 
filing pursuant to section 19(b)(3)(A)(ii) of the Act \9\ if the 
Exchange determines that it would be appropriate to do so, such as to 
take into consideration changes in the indicative lease rate.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    Rule 3.27(f)(ii) provides that the access fee for Interim Trading 
Permit holders shall be due and payable in accordance with the 
provisions of the Exchange Fee Schedule and shall be the same for all 
Interim Trading Permit holders.
    The Exchange proposes to include in the Exchange Fee Schedule the 
following procedural provisions related to the assessment of the 
proposed access fee. The proposed access fee will be assessed to each 
Interim Trading Permit holder for each Interim Trading Permit issued to 
the holder. Consistent with Rule 3.27(c), the proposed access fee and 
any other applicable monthly fees will be assessed for each calendar 
month unless an Interim Trading Permit holder provides written notice 
to the CBOE Membership Department on or before the fifteenth day of the 
preceding calendar month that the holder is terminating the Interim 
Trading Permit effective no later than the last day of that preceding 
calendar month.\10\ The proposed access fee will be due and payable for 
each calendar month on the first day of that calendar month. If an 
Interim Trading Permit is issued during a calendar month after the 
first day of the month, the proposed access fee for that calendar month 
will be prorated and will be assessed as of the date of the issuance of 
the Interim Trading Permit. The proposed access fee will be non-
refundable and will be assessed through the integrated billing system.
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    \10\ For example, an Interim Trading Permit holder that did not 
wish to be assessed the proposed access fee and any other applicable 
monthly fees for the month of September 2008 would need to provide 
notice to the Membership Department on or before August 15, 2008 
that the holder was terminating the Interim Trading Permit effective 
no later than August 31, 2008.
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2. Statutory Basis
    For the reasons described above, the Exchange believes that the 
proposed rule change is consistent with Section 6(b) of the Act,\11\ in 
general, and furthers the objectives of Section 6(b)(4) of the Act,\12\ 
in particular, in that it is designed to provide for the equitable 
allocation of reasonable dues, fees, and other charges among persons 
using its facilities.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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

    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

    Because the foregoing rule change establishes or changes a due, 
fee, or other charge imposed by the Exchange, it has become effective 
pursuant to section 19(b)(3)(A) of the Act \13\ and subparagraph (f)(2) 
of Rule 19b-4 \14\ thereunder. At any time within 60 days of the filing 
of the 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.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2008-77 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2008-77. 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

[[Page 43807]]

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 No. SR-CBOE-2008-77 and should be 
submitted on or before August 18, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-17142 Filed 7-25-08; 8:45 am]

BILLING CODE 8010-01-P