Document ID: SEC-2006-1233-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2006-09-22T04:00Z

[Federal Register: September 22, 2006 (Volume 71, Number 184)]
[Notices]               
[Page 55532-55533]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22se06-159]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54465; File No. SR-CBOE-2006-76]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Its Marketing Fee Program

September 18, 2006.
    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 September 1, 2006, 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 
Exchange. CBOE has designated this proposal as one establishing or 
changing a due, fee, or other charge imposed by CBOE under Section 
19(b)(3)(A)(ii) of the Act \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)(ii).
    \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 marketing fee program. Below is the text 
of the proposed rule change. Proposed new language is in italics; 
deleted language is in [brackets].

Chicago Board Options Exchange, Inc.

Fees Schedule

[August 29]September 1, 2006
    1. No Change.
    2. Marketing Fee (6)(16): $.65
    3.-4. No Change.
FOOTNOTES:
    (1)-(5) No Change.
    (6) The Marketing Fee will be assessed only on transactions of 
Market-Makers, RMMs, e-DPMs, DPMs, and LMMs resulting from [orders for 
less than 1,000 contracts] (i) orders for less than 1,000 contracts 
from payment accepting firms, or (ii) customer orders for less than 
1,000 contracts that have designated a ``Preferred Market-Maker'' under 
CBOE Rule 8.13 at the rate of $.65 per contract on all classes of 
equity options, options on HOLDRs, options on SPDRs, options on DIA, 
options on NDX, and options on RUT. The fee will not apply to: Market-
Maker-to-Market-Maker transactions including transactions resulting 
from orders from non-member market-makers; transactions resulting from 
inbound P/A orders or a transaction resulting from the execution of an 
order against the DPM's account if an order directly related to that 
order is represented and executed through the Linkage Plan using the 
DPM's account; transactions resulting from accommodation liquidations 
(cabinet trades); and transactions resulting from dividend strategies, 
merger strategies, and short stock interest strategies as defined in 
footnote 13 of this Fees Schedule. This fee shall not apply to index 
options and options on ETFs (other than options on SPDRs, options on 
DIA, options on NDX, and options on RUT). A Preferred Market-Maker will 
only be given access to the marketing fee funds generated from a 
Preferred order if the Preferred Market-Maker has an appointment in the 
class in which the Preferred order is received and executed.
    Rebate/Carryover Process. If less than 80% of the marketing fee 
funds collected in a given month is paid out by the DPM/LMM or 
Preferred Market-Maker in a given month, then the Exchange would refund 
such surplus at the end of the month on a pro rata basis based upon 
contributions made by the Market-Makers, RMMs, e-DPMs, DPMs and LMMs in 
that month. However, if 80% or more of the funds collected in a given 
month is paid out by the DPM/LMM or Preferred Market-Maker, there will 
not be a rebate for that month and the excess funds will be included in 
an Excess Pool of funds to be used by the DPM/LMM or Preferred Market-
Maker in subsequent months. The total balance of the Excess Pool of 
funds for a DPM/LMM cannot exceed $25,000, and the total balance of the 
Excess Pool of funds for a Preferred Market-Maker cannot exceed 
$80,000. If in any month the DPM/LMM Excess Pool balance were to exceed 
$25,000, or the Preferred Market-Maker Excess Pool balance were to 
exceed $80,000, the funds in excess of $25,000 or $80,000, 
respectively, would be refunded on a pro rata basis based upon 
contributions made by the Market-Makers, RMMs, DPMs, e-DPMs and LMMs in 
that month.
    CBOE's marketing fee program as described above will be in effect 
until June 2, 2007.
    Remainder of Fees Schedule--No change.

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. 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 proposes to amend its marketing fee program as it relates to 
orders designating a ``Preferred Market-Maker'' under CBOE Rule 8.13. 
Going forward, CBOE proposes to assess the fee only on transactions of 
Market-Makers, RMMs, e-DPMs, DPMs, and LMMs (collectively ``Market-
Makers'') resulting from customer orders \5\ for less than 1,000 
contracts that have designated a ``Preferred Market-Maker'' under CBOE 
Rule 8.13. The Exchange states that previously, transactions of Market-
Makers resulting from all orders of 1,000 contracts or less that have 
designated a ``Preferred Market-Maker'' under CBOE Rule 8.13 were 
assessed the marketing fee. CBOE would continue to assess the fee on 
transactions of Market-Makers resulting from orders for less than 1,000 
contracts from payment accepting firms.
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    \5\ CBOE represents that, as used in its Fees Schedule, the term 
``customer'' refers to a public customer. Telephone conference 
between David Liu, Special Counsel, Division of Market Regulation, 
Commission, and Patrick Sexton, Associate General Counsel, Exchange, 
on September 12, 2006.
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    CBOE states that it is not amending its marketing fee program in 
any other respects.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with

[[Page 55533]]

Section 6(b) of the Act,\6\ in general, and furthers the objectives of 
Section 6(b)(4) of the Act,\7\ in particular, in that it is designed to 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among CBOE members.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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

    The Exchange neither solicited nor received comments on the 
proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing proposed rule change has been designated as a fee 
change pursuant to Section 19(b)(3)(A)(ii) of the Act \8\ and Rule 19b-
4(f)(2) \9\ 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. 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 furtherance of the purposes of 
the Act.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 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-2006-76 on the subject line.

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-2006-76. 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. 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 Number 
SR-CBOE-2006-76 and should be submitted on or before October 13, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 06-8037 Filed 9-21-06; 8:45 am]

BILLING CODE 8010-01-P