Document ID: SEC-2012-1288-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2012-08-07T04:00Z

[Federal Register Volume 77, Number 152 (Tuesday, August 7, 2012)]
[Notices]
[Pages 47148-47150]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-19286]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67557; File No. SR-CBOE-2012-075]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend the Fees Schedule

August 1, 2012.
    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 July 27, 2012, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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. The text of the 
proposed rule change is available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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, the Exchange 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. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Marketing Fee. Currently, the 
Marketing

[[Page 47149]]

Fee assessed on all Penny Pilot Exchange-Traded Fund (``ETF'') options 
is $0.25 per contract, with the exception of DIA, for which the listed 
Marketing Fee is $0.10 per contract.\3\ The Exchange hereby proposes to 
eliminate the exception for DIA, thereby amending the Marketing Fee for 
DIA to be $0.25 per contract. This change will place DIA on the same 
footing regarding the Marketing Fee as other ETFs.
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    \3\ See CBOE Fees Schedule, Section 2. Exceptions also apply 
regarding certain types of trades in SPY and QQQ, as discussed 
elsewhere in this proposal.
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    The Exchange also proposes to change references to options on the 
PowerShares QQQ Trust. The ticker symbol for PowerShares QQQ Trust was 
changed from QQQQ to QQQ in 2011, but such changes were not reflected 
on the CBOE Fees Schedule. In order to accurately reflect the ticker 
symbol for the PowerShares QQQ Trust, the Exchange hereby proposes to 
change references on the Fees Schedule to from QQQQ to QQQ.
    Currently, the marketing fee is not assessed on electronic 
transactions in SPY and QQQ, except for electronic transactions 
resulting from the Exchange's Automated Improvement Mechanism 
(``AIM''). Because complex order transactions in SPY and QQQ made via 
the Exchange's Complex Order Auction (``COA'') and Complex Order Book 
(``COB'') are electronic and do not result from AIM, such transactions 
do not incur the Marketing Fee. The Exchange now proposes to assess the 
Marketing Fee on such transactions (with the exception of complex 
orders that trade via COB against individual leg markets). By 
collecting the Marketing Fee on these transactions, the Exchange can 
then use such funds to attract greater order flow.
    When a complex order is entered on CBOE, it first generates a COA 
and, if not filled there, is placed into the COB. In either case, a 
market participant is aware that it is a complex order and, in electing 
to trade against it, will know that such transaction will incur the 
Marketing Fee and take that fact into account in making such an 
election. However, CBOE's complex order processing also has the 
capability to fill a complex order from the posted leg markets. In such 
an event, the liquidity provider cannot know in advance if a simple or 
complex order is going to transact against those leg markets and 
therefore incur the Marketing Fee, and is thus not able to adjust his 
quoted price accordingly. As such, the Exchange proposes to except 
electronic complex orders in SPY and QQQ that trade against individual 
leg markets from being assessed the Marketing Fee.
    Currently, transactions in XSP are assessed a Marketing Fee of 
$0.10 per contract. The Exchange intends to revise the offering for XSP 
in coming months, including the market model and fee schedule. In 
advance of this change, the Exchange proposes to eliminate the XSP 
Marketing Fee.
    The proposed changes are to take effect on August 1, 2012.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Act and the rules and regulations thereunder applicable to the Exchange 
and, in particular, the requirements of Section 6(b) of the Act.\4\ 
Specifically, the Exchange believes the proposed rule change is 
consistent with Section 6(b)(4) of the Act \5\, which provides that 
Exchange rules may provide for the equitable allocation of reasonable 
dues, fees, and other charges among its Trading Permit Holders and 
other persons using its facilities. Eliminating the $0.10 per contract 
Marketing Fee for XSP is reasonable because XSP transactions will now 
be assessed lower fees than previously. This change is equitable and 
not unfairly discriminatory because XSP transactions will now be 
assessed no Marketing Fee, similar to other singly-listed CBOE 
products, such as DJX, OEX, SPX, VIX, XEO and Volatility Indexes.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
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    Eliminating the separate Marketing Fee for DIA and assessing the 
$0.25 per contract Marketing Fee for DIA is reasonable because that 
amount is the same amount as is being assessed for other ETFs. This is 
equitable and not unfairly discriminatory because the $0.25 per 
contract Marketing Fee will be assessed to all market participants on 
whom the Marketing Fee is assessed, and because DIA transactions will 
now be assessed the same Marketing Fee as transactions in other ETFs.
    Assessing the Marketing Fee on complex order SPY and QQQ 
transactions executed via COA and COB is reasonable because the amount 
of the fee would be equivalent to the amount of the Marketing Fee 
assessed on SPY and QQQ transactions executed via other means, as well 
as the amount assessed on complex order transactions in other ETFs that 
are executed via COA and COB. Assessing the Marketing Fee on complex 
order SPY and QQQQ transactions executed via COA and COB is equitable 
and not unfairly discriminatory because the Marketing Fee is assessed 
on complex transactions in other ETFs that are executed via COA and 
COB, as well as on SPY and QQQ transactions executed via other means.
    Excluding complex orders in SPY and QQQ that trade via COB against 
individual leg markets from being assessed the Marketing Fee is 
equitable and not unfairly discriminatory because such exclusion 
prevents a situation in which a market participant trading the single 
legs on COB elects to make a trade without knowing that he will be 
assessed the Marketing Fee for executing such trade. Excluding complex 
orders in SPY and QQQ that trade via COB against individual leg markets 
from being assessed the Marketing Fee while still assessing the 
Marketing Fee for complex orders in other products that trade via COB 
against individual leg markets is equitable and not unfairly 
discriminatory because, since in the other products the Marketing Fee 
is assessed on simple, single leg electronic orders, a market 
participant executing a trade in such products will know that the 
Marketing Fee will be assessed and be able to take that knowledge into 
account in determining whether or not to execute the trade.
    The Exchange believes the proposed change of references from QQQQ 
to QQQ is consistent with the Section 6(b)(5) \6\ requirements that the 
rules of an exchange be designed to promote just and equitable 
principles of trade, to prevent fraudulent and manipulative acts, to 
remove impediments to and to perfect the mechanism for a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest. QQQ is now the correct ticker symbol 
for the PowerShares QQQ Trust. As such, the accurate reflection of the 
correct ticker symbol of QQQ eliminates potential investor confusion, 
thereby removing impediments to and to perfecting the mechanism for a 
free and open market and a national market system, and, in general, 
protecting investors and the public interest.
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    \6\ 15 U.S.C. 78f(b)(5).
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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.

[[Page 47150]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on 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) \7\ of the Act and paragraph (f)(2) of Rule 19b-4 \8\ 
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.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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 email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2012-075 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-2012-075. This file 
number should be included on the subject line if email 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-2012-075 and should be 
submitted on or before August 28, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-19286 Filed 8-6-12; 8:45 am]
BILLING CODE 8011-01-P