Document ID: SEC-2011-0374-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2011-03-18T04:00Z

[Federal Register Volume 76, Number 53 (Friday, March 18, 2011)]
[Notices]
[Pages 15025-15027]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-6301]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64070; File No. SR-CBOE-2011-022]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated: Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change, as Modified by Amendment No. 1 Thereto, Relating to PAR 
Official Fees

March 11, 2011.
    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 1, 2011, Chicago Board Options Exchange, Incorporated 
(``CBOE'' or the ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by CBOE. On March 
9, 2011, CBOE filed Amendment No. 1 to the proposed rule change.\3\ 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\ The purpose of Amendment No. 1 was to (i) remove the 
proposal to waive PAR Official Fees for February 2011 from the 
filing; and (ii) provide additional details for the statutory basis 
for waiving the fees in all classes except Volatility Index Options 
for March 2011.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Chicago Board Options Exchange, Incorporated (``CBOE'' or 
``Exchange'') proposes to amend its Fees Schedule to (i) establish 
separate PAR Official Fees for Volatility Index Options that are 
consistent with the Floor Brokerage Fees assessed in Volatility Index 
Options, and (ii) waive PAR Official Fees for all classes except 
Volatility Index Options for March 2011. 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.

[[Page 15026]]

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 is proposing to amend its Fees Schedule effective March 1, 
2011 to establish separate PAR Official Fees for Volatility Index 
Options that are consistent with the Floor Brokerage Fees assessed in 
Volatility Index Options. CBOE amended its Fees Schedule to establish 
PAR Official \4\ Fees in January 2011.\5\ These fees apply to all 
orders executed by a PAR Official in all options classes traded at 
CBOE, except for customer orders (``C'' origin code) that are not 
directly routed to the trading floor (an order that is directly routed 
to the trading floor is directed to a PAR Official for manual handling 
by use of a field on the order ticket). Such orders are charged $.02 
per contract and, like floor brokerage fees, a discounted rate of $.01 
per contract applies for crossed orders.\6\ These fees help to offset 
the Exchange's costs of providing PAR Official services (e.g., 
salaries, etc).
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    \4\ A PAR Official is an Exchange employee or independent 
contractor whom the Exchange may designate as being responsible for 
(i) operating the PAR workstation in a Designated Primary Market-
Maker trading crowd with respect to the classes of options assigned 
to him/her; (ii) when applicable, maintaining the book with respect 
to the classes of options assigned to him/her; and (iii) effecting 
proper executions of orders placed with him/her. The PAR Official 
may not be affiliated with any Trading Permit Holder that is 
approved to act as a Market-Maker. See CBOE Rule 7.12.
    \5\ See Securities Exchange Act Release No. 67301 (January 11, 
2011), 76 FR 2934 (January 18, 2011) (SR-CBOE-2010-116).
    \6\ PAR Official Fees and Floor Brokerage Fees for cross orders 
are assessed at a discounted rate because these Fees are assessed 
``per side'' and thus, these fees are equal to the amount assessed 
for one standard (non-cross) order.
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    CBOE is proposing to add language that would assess distinct PAR 
Official Fees for orders in Volatility Index Options. Specifically, 
CBOE is proposing to assess PAR Official Fees in Volatility Index 
Options in the amount of $.03 per contract for standard (non-cross) 
orders and $.015 per contract for all cross orders (per side). CBOE 
only assesses Floor Brokerage Fees \7\ for brokerage activity in its 
proprietary products, including SPX, OEX and Volatility Index Options. 
Floor Brokerage Fees in Volatility Index Options are assessed in the 
amount of $.03 per contract for standard (non-cross) orders and $.015 
per contract for all cross orders (per side). A PAR Official is 
available to execute orders in Volatility Index Options. Because both 
Floor Brokerage Fees and PAR Official Fees are assessed in Volatility 
Index Options, there is an incentive to Floor Brokers to route orders 
in Volatility Index Options to a PAR Official due to the disparity that 
exists between the amounts assessed for Floor Brokerage Fees and PAR 
Official Fees. As the PAR Official Fees are currently less than the 
Floor Brokerage Fees that are assessed in Volatility Index Options, 
CBOE is proposing to make this change to eliminate the incentive for 
Floor Brokers to rely on PAR Officials to execute their business at a 
lower cost through a PAR Official in Volatility Index Options.
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    \7\ In accordance with Footnote 5 of the CBOE Fees Schedule, 
Floor Brokerage Fees are charged to the executing broker. If a 
Market-Maker executes an order for an account in which the Market-
Maker is not a registered participant as reflected in the TPH 
Department records, the Market-Maker will be assessed a floor 
brokerage fee. To be eligible for the discounted ``crossed'' rate, 
the executing broker acronym and executing firm number must be the 
same on both the buy and sell side of an order. Floor Brokerage Fees 
are not assessed to orders effected by a PAR Official.
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    The issue described above with respect to Volatility Index Options 
does not apply to OEX and SPX because there are no PAR Officials 
available to execute orders in the OEX and SPX trading crowds. 
Furthermore, this disparity does not exist in other classes traded at 
the Exchange because there are no Floor Brokerage Fees assessed in 
classes other than OEX, SPX and Volatility Index Options.
    CBOE is continuing to evaluate the existing structure of PAR 
Official Fees and is considering additional changes in the manner in 
which it assesses PAR Official Fees. For this reason, CBOE proposes to 
waive the PAR Official Fees in all classes except for Volatility Index 
Options for March 2011. CBOE is proposing to assess the PAR Official 
Fees in Volatility Index Options in March 2011 to eliminate the 
disparity between the PAR Official Fees and Floor Brokerage Fees as 
described above.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Securities Exchange Act of 1934 (``Act''),\8\ in 
general, and furthers the objectives of Section 6(b)(4) \9\ of the Act 
in particular, in that it is designed to provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
trading permit holders and other persons using its facilities. The 
Exchange believes the proposed change is equitable, reasonable and not 
unfairly discriminatory, in that the PAR Official Fees and the Floor 
Brokerage Fees will be assessed in the same manner to all order 
originating firms for orders executed in Volatility Index Options. 
Further, CBOE believes the proposed waiver of PAR Official Fees for 
March 2011 is equitable, reasonable and not unfairly discriminatory, in 
that it will apply to all order originating firms in all classes except 
Volatility Index Options as CBOE continues to evaluate the existing 
structure of PAR Official Fees and is considering additional changes in 
the manner in which it assesses PAR Official Fees. CBOE believes it 
would be appropriate to exclude PAR Official Fees in Volatility Index 
Options from the fee waiver as a waiver of these fees would perpetuate 
the disparity between PAR Official Fees and Floor Brokerage Fees in 
Volatility Index Options that this proposal is otherwise seeking to 
eliminate.
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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 purposes of at 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) of the Act \10\ and subparagraph (f)(2) of Rule 19b-4 \11\ 
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

[[Page 15027]]

interest, for the protection of investors, or otherwise in furtherance 
of the purposes of the Act.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(2).
    \12\ For purposes of calculating the 60-day period within which 
the Commission summarily may temporarily suspend such rule change 
under Section 19(b)(3)(C) of the Act, the Commission considers the 
period to commence on March 9, 2011, the date on which the Exchange 
submitted Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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-2011-022 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.

All submissions should refer to File Number SR-CBOE-2011-022. 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 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 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-2011-022 and should be 
submitted on or before April 8, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-6301 Filed 3-17-11; 8:45 am]
BILLING CODE 8011-01-P