Document ID: SEC-2007-1699-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2007-12-13T05:00Z

[Federal Register: December 13, 2007 (Volume 72, Number 239)]
[Notices]               
[Page 70912-70914]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13de07-108]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56927; File No. SR-CBOE-2007-145]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to the Exchange's Hybrid Electronic Quoting Fee

December 7, 2007.
    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 November 30, 2007, 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 substantially 
prepared by the Exchange. 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 persons.
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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 amend its Hybrid Electronic Quoting Fee. The text 
of the proposed rule change is available at the Exchange, the 
Commission's Public Reference Room, and http://www.cboe.org/legal. 

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 proposal. 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.

[[Page 70913]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to amend CBOE's Hybrid 
Electronic Quoting Fee, which is applicable to all Market-Makers, RMMs, 
DPMs and e-DPMs (collectively ``liquidity providers'') in order to 
promote and encourage more efficient quoting.
    Under the current fee, CBOE assesses all liquidity providers who 
are submitting electronic quotations to the Exchange in Hybrid and 
Hybrid 2.0 option classes a monthly fee of $450 per membership 
utilized.\5\ CBOE also assesses or credits fees on liquidity providers 
that vary depending on: (i) the quality of the liquidity providers' 
quotation (a quotation is a bid and an offer); and (ii) the value of 
the underlying security and CBOE's bid in the option series.\6\ The fee 
varies slightly in ``high premium series'' \7\ with respect to Market-
Makers and RMMs on the one hand, and DPMs and e-DPMs on the other hand 
due to the difference in their quoting obligations.
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    \5\ See Securities Exchange Act Release No. 56602 (October 3, 
2007), 72 FR 57620 (October 10, 2007) (SR-CBOE-2007-116).
    \6\ The value of the underlying security is the closing price of 
the underlying security on the preceding trading day. The bid is the 
closing bid in the option series at CBOE on the preceding trading 
day.
    \7\ For purposes of this fee, ``high premium series'' are those 
series in which the underlying security is less than or equal to 
$100 and CBOE's bid is greater than $10, or those series in which 
the underlying security is greater than $100 and CBOE's bid is 
greater than 15% of the underlying security.
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    CBOE believes that the quote mitigation strategies it has 
implemented, including the Hybrid Electronic Quoting Fee, have been 
effective in mitigating quotations. Some liquidity providers have 
modified their quoting processes in response to the Hybrid Electronic 
Quoting Fee. Accordingly, CBOE believes that it would be appropriate to 
reduce slightly certain of the fees and, thus, reduce the total amount 
of revenue that CBOE collects from the Hybrid Electronic Quoting Fee. 
At the same time, CBOE believes that it would be beneficial to increase 
the amounts that are credited for competitive quotations that improve 
or match the NBBO, as an incentive to liquidity providers to submit 
competitive quotations. Specifically, CBOE proposes to amend certain of 
the fees that are imposed as part of the Hybrid Electronic Quoting Fee 
as follows:
     Increase the amount that a liquidity provider will be 
credited if its quotation improves the NBBO on at least one side of the 
market from $.02 to $.10 per 1,000 quotes.
     Increase the amount that a liquidity provider will be 
credited if its quotation matches the NBBO on both sides of the market 
from $.01 to $.03 per 1,000 quotes.
     Decrease the amount that a liquidity provider will be 
assessed if its quotation matches the NBBO on only one side of the 
market from $.02 to $0.00.
     In high premium series, decrease the amount that a Market-
Maker or RMM will be assessed if its quotation matches the CBOE BBO 
(which is not the NBBO) on at least one side of the market from $.05 to 
$.04 per 1,000 quotes.
     Decrease the amount that a liquidity provider will be 
assessed if its quotation is a duplicate quote, or if it does not 
satisfy any of the above conditions, from $.05 to $.04 per 1,000 
quotes.
    The Exchange believes that the Hybrid Electronic Quoting Fee, as 
amended, is fair and reasonable and will continue to promote and 
encourage more competitive and efficient quoting and help to reduce 
quote traffic. The fee encourages and rewards liquidity providers that 
quote competitively, and imposes costs on liquidity providers that do 
not. CBOE intends to monitor the fee and may amend the fee in the 
future.
    As before, the Hybrid Electronic Quoting Fee will be assessed by 
liquidity provider acronym. In the event a liquidity provider is 
utilizing more than one membership and submits electronic quotations 
for all of the memberships under the same acronym, the Hybrid 
Electronic Quoting Fee will be assessed per membership utilized by the 
liquidity provider. Because a liquidity provider's total credits cannot 
exceed the total debits assessed according to the schedule of credits 
and debits set forth in the two tables in Item 17 of the CBOE Fees 
Schedule, if the total credits were to exceed the total debits, the 
Hybrid Electronic Quoting Fee assessed to that liquidity provider would 
be $450.
    If a liquidity provider is assessed the Hybrid Electronic Quoting 
Fee, the liquidity provider does not pay a member dues fee. The 
Exchange intends to implement this revised Hybrid Electronic Quoting 
Fee effective Monday, December 3, 2007.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\8\ in general, and furthers the objectives of Section 6(b)(4) of 
the Act,\9\ in particular, in that it is designed to provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
CBOE members and other persons using its facilities.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \10\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\11\ since it establishes or changes a due, fee or other 
charge imposed by the Exchange. At any time within 60 days of the 
filing of such 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 the furtherance of the 
purposes of the Act.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 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-2007-145 on the subject line.

[[Page 70914]]

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2007-145. 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 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 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 No. SR-CBOE-2007-145 and should be 
submitted on or before January 3, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-24122 Filed 12-12-07; 8:45 am]

BILLING CODE 8011-01-P