Document ID: SEC-2005-0325-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2005-12-05T05:00Z

[Federal Register: December 5, 2005 (Volume 70, Number 232)]
[Notices]               
[Page 72480-72483]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05de05-97]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52851; File No. SR-CBOE-2005-84]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change and Amendment No. 1 Thereto Relating to 
Transaction Fees for Options on the Dow Jones Industrial Average

November 29, 2005.
    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 October 11, 2005, 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. 
On November 22, 2005, the CBOE submitted Amendment No. 1 to the 
proposed rule change.\3\ The CBOE

[[Page 72481]]

has designated this proposal as one establishing or changing a due, 
fee, or other charge imposed by the CBOE under Section 19(b)(3)(A)(ii) 
of the Act,\4\ and Rule 19b-4(f)(2) thereunder,\5\ which renders the 
proposal effective upon filing with the Commission.\6\ The Commission 
is publishing this notice to solicit comments on the proposed rule 
change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange revised the proposed rule 
text to amend the fees assessed to non-member market-makers for 
transactions in options on the Dow Jones Industrial Average (``DJX 
options'') and in ``Jumbo'' options on the Dow Jones Industrial 
Average (``DXL options''). The Exchange states that this change in 
fees assessed to non-member market-makers for transactions in DJX 
options and DXL options will be implemented on December 1, 2005.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 17 CFR 240.19b-4(f)(2).
    \6\ The effective date of the original proposed rule change is 
October 11, 2005, and the effective date of Amendment No. 1 is 
November 22, 2005. For purposes of calculating the 60-day period 
within which the Commission may summarily abrogate the proposed rule 
change, as amended, under Section 19(b)(3)(C) of the Act, the 
Commission considers the period to commence on November 22, 2005, 
the date on which the Exchange submitted Amendment No. 1. See 15 
U.S.C. 78s(b)(3)(C).
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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 its Fees Schedule to: (i) Amend 
certain fees for DJX options, and (ii) establish fees for DXL options. 
The text of the proposed rule change is available on the Exchange's Web 
site (http://www.cboe.com), at the Exchange's Office of the Secretary, 

and at the Commission's Public Reference Room. The text of the proposed 
rule change is also included below. Proposed new language is 
italicized; proposed deletions are in [brackets].
CHICAGO BOARD OPTIONS EXCHANGE, INC.
FEES SCHEDULE
[OCTOBER 1, 2005] NOVEMBER 2, 2005
    1. OPTIONS TRANSACTION FEES (1)(3)(4)(7)(16): PER CONTRACT
    EQUITY OPTIONS (13):
    I.-IX. Unchanged.
    QQQQ and SPDR OPTIONS:
    I.-VII. Unchanged.
    INDEX OPTIONS (includes Dow Jones DIAMONDS, OEF and other ETF and 
HOLDRs options) (17):

I. CUSTOMER (2):
     S&P 100, PREMIUM > or = $1......  $.35
     S&P 100, PREMIUM < $1...........  $.20
     DJX, MNX, [and] NDX, RUT and RMN  $.15
     [RUT and RMN....................  $.15]
     ETF and HOLDRs options..........  $.15
     OTHER INDEXES, PREMIUM > OR = $1  $.45
     OTHER INDEXES, PREMIUM < $1.....  $.25
II. MARKET-MAKER AND DPM (10): [--EXCLUDING
 DOW JONES PRODUCTS OTHER THAN DIA (10)$.24]
    [MARKET-MAKER--DOW JONES PRODUCTS (except  $.34]
     DIA) (10).
     DOW JONES PRODUCTS (except DIA    $.34
     and DJX).
     OTHER INDEXES...................  $.24
III. MEMBER FIRM PROPRIETARY: (11)
     FACILITATION OF CUSTOMER ORDER,   $.24
     MNX and NDX.
     FACILITATION OF CUSTOMER ORDER,   $.20
     OTHER INDEXES.
     NON-FACILITATION ORDER..........  $.24
IV. BROKER-DEALER (EXCLUDING THE PRODUCTS
 BELOW) INDEX CUSTOMER RATES.
     DJX, ETF (except DIA), HOLDRS,    $.45
     RUT and RMN, PREMIUM > or = $1.
     DJX, ETF (except DIA), HOLDRS,    $.25
     RUT and RMN, PREMIUM <  $1.
     DIA, MNX and NDX................  $.25
V. NON-MEMBER MARKET MAKER:
     DIA and DJX.....................  $.26
     DXL.............................  $.36
     S&P 100 (including OEF), PREMIUM  $.37
     > or = $1.
     S&P 100 (including OEF), PREMIUM  $.22
     <  $1.
     OTHER INDEXES, PREMIUM > or = $1  $.47
     OTHER INDEXES, PREMIUM < $1.....  $.27
VI.- IX. Unchanged.
2. MARKETING FEE (6)(16).....................  $.22
3. FLOOR BROKERAGE FEE (1)(5)(16)(17):
     EQUITY & QQQQ CUSTOMER ORDER....  $.00
     ALL OTHER EQUITY, QQQQ AND INDEX  $.04
     OPTIONS (8).
     CROSSED ORDERS..................  $.02
4. RAES ACCESS FEE (RETAIL AUTOMATIC
 EXECUTION SYSTEM) (1)(4)(16):
     INDEX CUSTOMER TRANSACTIONS.....  $.25
         DOW JONES, ASSESSED ON THE
         FIRST 25 CONTRACTS ONLY
     NON-CUSTOMER TRANSACTIONS         $.30
     (ORIGIN CODE OTHER THAN ``C'')(8)(9).
FOOTNOTES: Unchanged.
5.-6. Unchanged.
7. INDEXES CUSTOMER ORDER BOOK OFFICIAL (OBO)
 EXECUTION FEES(16)(17):

                                                 Rate Per Contract (1)

    Accommodation Liquidation Or Cabinet       $.10
     Order.
    All Other Orders.........................   .25

    (1) OEX--No charge for ``market'' and ``limit orders'' placed with 
the OBO prior to the opening and executed during opening rotation.
    Other Indexes--Same as above for index ``market orders'' (``limit 
orders'' not included).

[[Page 72482]]

    Remainder of Fees Schedule--Unchanged.

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, as 
amended, and discussed any comments it received on the proposed rule 
change, as amended. 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
    The Exchange proposes to amend its Fees Schedule to reduce and 
eliminate certain fees for DJX options and to establish fees for DXL 
options.
    a. DJX Options Fees. The Exchange proposes to reduce customer and 
non-member market-maker fees for transactions in DJX options and 
eliminate the market-maker license fee surcharge applicable to 
transactions in DJX options.
    Currently, customer transaction fees for transactions in DJX 
options are $.45 if the premium is greater than or equal to $1 and $.25 
if the premium is less than $1. The Exchange proposes to reduce fees 
for public customer transactions in DJX options to $.15 per contract. 
Moreover, the transaction fees for non-member market-maker transactions 
in DJX options are currently $.47 per contract if the premium is 
greater than or equal to $1 and $.27 per contract if the premium is 
less than $1. The Exchange proposes to reduce the non-member market 
maker transaction fee for transactions in DJX options to $.26 per 
contract, regardless of the premium.\7\
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    \7\ See Amendment No. 1, supra note 3. According to CBOE, the 
proposed change to the fees assessed to non-member market-makers for 
transactions in DJX options will be implemented on December 1, 2005.
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    In addition, the Exchange currently charges market-makers that 
trade Dow Jones products, except options on DIAMONDS (``DIA''), a 
license fee of $.10 per contract in addition to the regular transaction 
fee of $.24 per contract, to assist the Exchange in offsetting some of 
the royalty fees the Exchange must pay to Dow Jones for its license to 
trade Dow Jones products.\8\ The Exchange proposes to eliminate the 
$.10 license fee with respect to market-maker transactions in DJX 
options.\9\
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    \8\ See Securities Exchange Act Release No. 48223 (July 24, 
2003), 68 FR 44978, 44979 (July 31, 2003).
    \9\ The Commission notes that the Exchange currently charges 
market-makers that trade Dow Jones products, except DIA options, a 
total fee of $.34 per contract, which reflects a $.10 licensing fee 
surcharge. Under the proposed rule change, the fee for market-makers 
that trade DJX options will be $.24 per contract.
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    The Exchange is reducing these fees in connection with DJX options 
moving to CBOE's Hybrid Trading System.\10\ The proposed fees changes 
are intended to make DJX options competitively priced with respect to 
DIA options.
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    \10\ Conversation between Jaime Galvan, Assistant Secretary, 
CBOE and Sara Gillis, Attorney, Division of Market Regulation, 
Commission on November 23, 2005.
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    b. DXL Options. The Exchange launched trading in DXL options on 
October 11, 2005.\11\ DXL options are options that are based on one-
tenth the value of the Dow Jones Industrial Average (``DJIA'').\12\ DXL 
options will trade in open outcry. The Exchange proposes to amend its 
Fees Schedule to establish fees for DXL options.
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    \11\ Id.
    \12\ DXL options are referred to as ``Jumbo-DJX'' options 
because they are ten times larger than DJX options (DJX options are 
based on 1/100th the value of the DJIA).
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    Specifically, the Exchange proposes to assess public customers a 
transaction fee for DXL options of $.45 if the premium is greater than 
or equal to $1 and $.25 if the premium is less than $1. Market-maker 
transaction fees for DXL options will be $.34, which consists of the 
standard $.24 transaction fee and the $.10 license fee surcharge 
assessed on certain Dow Jones index options as described above. Non-
member market-maker transaction fees for DXL options will be $.36, 
regardless of the premium.\13\
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    \13\ See Amendment No. 1, supra note 3. CBOE had originally 
proposed to charge non-member market-makers a transaction fee for 
transactions in DXL options of $.47 per contract if the premium was 
greater than or equal to $1 and $.27 per contract if the premium was 
less then $1. In Amendment No. 1, CBOE proposed to change the non-
member market-maker transaction fees for DXL options to $.36 per 
contract, regardless of the premium. According to CBOE, the proposed 
change to the fees assessed to non-member market-makers for 
transactions in DXL options will be implemented on December 1, 2005.
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    Member firm proprietary transaction fees for DXL options will be 
$.20 for facilitation of customer orders and $.24 for non-facilitation 
orders. Broker-dealer transaction fees for DXL options will be $.45 if 
the premium is greater than or equal to $1 and $.25 if the premium is 
less than $1.
    The floor brokerage fee for DXL options will be $.04, and for 
crossed orders, the floor brokerage fee will be $.02. The RAES Access 
Fee will be $.25 for customer transactions (only the first 25 contracts 
will be assessed) and $.30 for non-customer transactions. Order Book 
Official (``OBO'') execution fees will be $.10 per contract for cabinet 
and accommodation/liquidation trades and $.25 per contract for all 
other orders.
2. Statutory Basis
    The CBOE believes that the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act,\14\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act,\15\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The CBOE does not believe that the proposed rule change, as 
amended, 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 proposed rule change, as amended, has been designated 
as a fee change pursuant to Section 19(b)(3)(A)(ii) of the Act \16\ and 
Rule 19b-4(f)(2) \17\ thereunder, because it establishes or changes a 
due, fee or other charge imposed by the Exchange. Accordingly, the 
proposal will take effect upon filing with the Commission.\18\ At any 
time within 60 days of the filing of the proposed rule change, as 
amended, 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.\19\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \17\ 17 CFR 240.19b-4(f)(2).
    \18\ See supra note 6.
    \19\ Id.

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[[Page 72483]]

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2005-84 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-CBOE-2005-84. 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, as 
amended, that are filed with the Commission, and all written 
communications relating to the proposed rule change, as amended, 
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. Copies of such filing also will be available for 
inspection and copying at the principal office of the 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 Number SR-CBOE-2005-84 and should be 
submitted on or before December 27, 2005.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
Jonathan G. Katz,
Secretary.
 [FR Doc. E5-6831 Filed 12-2-05; 8:45 am]

BILLING CODE 8010-01-P