Document ID: SEC-2011-1138-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2011-08-08T04:00Z

[Federal Register Volume 76, Number 152 (Monday, August 8, 2011)]
[Notices]
[Pages 48190-48192]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-19979]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65007; File No. SR-CBOE-2011-071]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend the Fee Schedule Concerning Facilitation 
Orders in Multiply-Listed FLEX Options

August 2, 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 August 1, 2011, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange hereby proposes to waive the Clearing Trading Permit 
Holder Proprietary Transaction Fee for Clearing Trading Permit Holders 
executing facilitation orders in multiply-listed FLEX Options classes. 
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.

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 self-regulatory organization 
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 those 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 parts of such statements.

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

1. Purpose
    Over-the-counter (``OTC'') trading and Flexible Exchange Options 
(``FLEX'') trading are similar in that both are highly customized, and 
largely involve customer-to-firm trades. Due to regulatory changes and 
other market forces, the Exchange believes that market participants 
interested in executing these types of customized, customer-to-firm 
trades will begin to transition from executing such trades in the OTC 
markets to executing them as FLEX trades. Currently, a number of other 
exchanges which also host FLEX trading, including the NASDAQ OMX PHLX 
LLC (``PHLX''), do not charge transaction fees on firm facilitation 
orders in multiply-listed FLEX Options classes \3\ (the nature of a 
facilitation order is such that it provides a market for a trade, and 
only Clearing Trading Permit Holders (or firms, on other exchanges) can 
enter such orders). Because CBOE anticipates an increase in FLEX 
trading, and because CBOE would like to be able to compete with other 
exchanges for FLEX trades on an even

[[Page 48191]]

footing, the Exchange hereby proposes to waive the Clearing Trading 
Permit Holder Proprietary Transaction Fee for Clearing Trading Permit 
Holders executing facilitation orders in multiply-listed FLEX Options 
classes (the ``Fee Waiver'').
---------------------------------------------------------------------------

    \3\ See PHLX Fee Schedule, page 9.
---------------------------------------------------------------------------

    A number of Clearing Trading Permit Holders will not be affected by 
this rule change because such Clearing Trading Permit Holders trade 
multiply-listed options in such volume on the Exchange (in capacities 
other than as a Clearing Trading Permit Holder executing facilitation 
orders in multiply-listed FLEX Options classes) that their overall 
trading activity already meets the Exchange's $75,000 per month 
Multiply-Listed Option Fee Cap \4\ (the ``Fee Cap'') and the Fee Waiver 
will not bring such Clearing Trading Permit Holders below the Fee Cap. 
However, there are some firms that are very active in OTC trading, but 
not very active (relatively speaking) in the trading of listed options, 
and therefore do not reach the Fee Cap. CBOE proposes the Fee Waiver in 
order to attract such firms to send order flow to the Exchange.
---------------------------------------------------------------------------

    \4\ See the Exchange Fee Schedule, Section 1 (on page 2).
---------------------------------------------------------------------------

    The Exchange proposes limiting the Fee Waiver to Clearing Trading 
Permit Holders facilitation orders because other exchanges also limit 
not charging such fees to facilitation orders,\5\ and the Exchange 
intends the proposed Fee Waiver to allow CBOE to compete with such 
exchanges for such orders. The Exchange proposes limiting the Fee 
Waiver to multiply-listed FLEX Options classes, as opposed to also 
including singly-listed (proprietary) FLEX Options classes, because the 
Exchange devoted a lot of resources to develop such proprietary singly-
listed FLEX Options classes, and therefore must continue to collect 
fees for trading in such classes in order to justify and recoup such 
development costs.
---------------------------------------------------------------------------

    \5\ See PHLX Fee Schedule, page 9.
---------------------------------------------------------------------------

    The proposed rule change will take effect on August 1, 2011.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\6\ in general, and furthers the objectives of Section 6(b)(4) \7\ 
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 Exchange believes the proposed Fee Waiver is reasonable 
because it merely waives an already-existing fee and certainly 
replacing a current fee with no fee is a ``reasonable'' change for 
those parties who had previously been paying the fee. The Exchange also 
believes the proposed Fee Waiver is reasonable because it would make 
the amount comparable to the fee charged on other exchanges for similar 
facilitation orders in multiply-listed FLEX Options.\8\
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
    \8\ See PHLX Fee Schedule, page 9.
---------------------------------------------------------------------------

    The Exchange believes waiving the Clearing Trading Permit Holder 
Proprietary Transaction Fee for Clearing Trading Permit Holders 
executing facilitation orders in multiply-listed FLEX Options classes 
is equitable and not unfairly discriminatory because the Exchange 
believes the Fee Waiver will attract new FLEX order flow to the 
Exchange and incentivize Clearing Trading Permit Holders firms to 
execute more orders on the Exchange. To the extent that this purpose is 
achieved, all of the Exchange's market participants should benefit from 
the improved market liquidity. Further, other exchanges also do not 
charge transaction fees for such trades.\9\ The Exchange believes 
limiting the proposed Fee Waiver to multiply-listed FLEX Options is 
equitable and not unfairly discriminatory because the Exchange has 
devoted a lot of resources to develop proprietary singly-listed FLEX 
Options classes, and therefore must continue to collect fees for 
trading in such classes in order to justify and recoup such development 
costs.
---------------------------------------------------------------------------

    \9\ See PHLX Fee Schedule, page 9.
---------------------------------------------------------------------------

    The Exchange operates in a highly competitive market in which 
sophisticated and knowledgeable market participants readily can, and 
do, send order flow to competing exchanges based on fee levels. The 
Exchange believes that the fees it assesses must be competitive with 
fees assessed on other options exchanges. The Exchange believes that 
this competitive marketplace impacts the fees present on the Exchange 
today and influences the proposals set forth above.

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 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 proposed rule change is designated by the Exchange as 
establishing or changing a due, fee, or other charge, thereby 
qualifying for effectiveness on filing 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 interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-2011-071 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-2011-071. 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

[[Page 48192]]

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 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-2011-071 and should be submitted on or 
before August 29, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

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

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-19979 Filed 8-5-11; 8:45 am]
BILLING CODE 8011-01-P