Document ID: SEC-2007-1090-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2007-08-09T04:00Z

[Federal Register: August 9, 2007 (Volume 72, Number 153)]
[Notices]               
[Page 44897-44899]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09au07-111]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56197; File No. SR-CBOE-2007-91]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Temporary Membership Status Access Fee

August 3, 2007.
    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 July 26, 2007, 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 the Exchange under 
Section 19(b)(3)(A),\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).
    \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 adopt a monthly access fee for persons granted 
temporary CBOE membership status pursuant to Interpretation and Policy 
.01 under CBOE Rule 3.19 (``Rule 3.19.01''). The text of the proposed 
rule change is provided below. Changes are indicated by italics, and 
deletions are [bracketed].
* * * * *
Chicago Board Options Exchange, [INC.] Incorporated
Fees Schedule July [2]26, 2007.
    1.-4. Unchanged.
    Footnotes: (1)-(16) Unchanged.
    5.-21. Unchanged.
    22. TEMPORARY MEMBERSHIP STATUS ACCESS FEE $4700 per month*
    *This access fee is assessed to each person granted temporary CBOE 
membership status under CBOE Rule 3.19.01. The access fee is due and 
payable for each calendar month on the first day of that calendar 
month. The first month for which the access fee will be assessed is 
September 2007. The access fee is non-refundable except as specified 
below. The access fee and any other applicable monthly fees will be 
assessed for a calendar month unless the person provides written notice 
to the Membership Department at least five business days prior to the 
start of that month that the person is relinquishing temporary 
membership status effective on a date prior to the start of that month. 
The access fee will be assessed through the integrated billing system. 
The access fee will terminate when the SEC takes final action on SR-
CBOE-2006-106. All access fees shall be payable to and held in an 
interest-bearing escrow account maintained by the Exchange until the 
SEC takes such final action. The Exchange will retain such fees if the 
SEC approves SR-CBOE-2006-106, and such fees will be returned to the 
payor, with interest, if the SEC disapproves SR-CBOE-2006-106.
    Remainder of Fee Schedule: Unchanged.
* * * * *
Chicago Board Options Exchange, Incorporated
Rules
* * * * *
    Rule 3.19. Termination from Membership
    Rule 3.19. No change.
    * * * Interpretations and Policies:
    .01 If the proposed merger between Chicago Mercantile Exchange 
Holdings, Inc. and CBOT Holdings, Inc. (``CME/CBOT Transaction''), the 
parent company of the Board of Trade of the City of Chicago, Inc. 
(``CBOT''), is consummated and if such consummation occurs before the 
Securities and Exchange Commission (``Commission'') takes final action 
on SR-CBOE-2006-106, a person who is a member of CBOE (an ``exerciser 
member'') pursuant to paragraph (b) of Article Fifth of the CBOE 
Certificate of Incorporation (``Article Fifth(b)'') as of July 1, 2007 
will be granted temporary membership status at the Exchange, until the 
Commission takes final action on SR-CBOE-2006-106, if and only if such 
person (i) Remains an exerciser member in good standing as of the close 
of business on the trading day immediately before the consummation of 
the CME/CBOT Transaction, (ii) thereafter remains in good standing and 
continues to pay all applicable fees, dues, assessments and other like 
charges that are assessed against CBOE members, and (iii) pays to the 
Exchange, for each month starting in the second month after the CME/
CBOT Transaction is consummated, a monthly access fee [based on the 
then current monthly lease fees being paid to lessors of the interest 
that CBOT denominates as a full CBOT membership, with such fee to be] 
set by the Exchange [on a monthly basis based on published lease fee 
information]. Such access fee shall be due and payable in accordance 
with the provisions of the Exchange Fee Schedule [advance of each 
calendar month that the person decides to retain the temporary 
membership status granted pursuant to this paragraph]. All such access 
fees shall be payable to and held in an interest-bearing escrow account 
maintained by the Exchange until the Commission takes final action on 
SR-CBOE-2006-106. The Exchange will retain such fees if the Commission 
approves SR-CBOE-2006-106, and such fees will be returned to the payor, 
with interest, if the Commission disapproves SR-CBOE-2006-106. The 
temporary membership status granted pursuant to this paragraph shall be 
subject to the regulatory jurisdiction of CBOE under the Act, the 
Constitution and the Rules, including CBOE's disciplinary jurisdiction 
under Chapter XVII.
* * * * *

[[Page 44898]]

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 proposal. 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
    Rule 3.19.01 granted temporary CBOE membership status to certain 
persons in the event that the proposed merger between Chicago 
Mercantile Exchange Holdings, Inc. and CBOT Holdings, Inc. (``CME/CBOT 
Transaction''), the parent company of the Board of Trade of the City of 
Chicago, Inc. (``CBOT''), were to be consummated before the Commission 
took final action on CBOE's pending rule filing SR-CBOE-2006-106.\5\
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    \5\ See Securities Exchange Act Release No. 55190 (January 29, 
2007), 72 FR 5472 (February 6, 2007) (SR-CBOE-2006-106).
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    Subsequent to the adoption of Rule 3.19.01, the CME/CBOT 
Transaction was consummated on July 12, 2007. As a result, there are 
currently persons who have temporary CBOE membership status under Rule 
3.19.01 until such time that the Commission takes final action on SR-
CBOE-2006-106.
    Specifically, under Rule 3.19.01, each person who was a member of 
the Exchange pursuant to paragraph (b) of Article Fifth of the CBOE 
Certificate of Incorporation (an ``exerciser member'') on July 1, 2007 
and who satisfies the following conditions has been granted temporary 
CBOE membership status until the Commission takes final action on SR-
CBOE-2006-106: (1) The person was an exerciser member in good standing 
as of the close of business on the trading day immediately before the 
consummation of the CME/CBOT Transaction; (2) the person remains in 
good standing and continues to pay all applicable fees, dues, 
assessments, and other like charges that are assessed to CBOE members; 
and (3) the person pays a monthly access fee to the Exchange.
    In CBOE rule filing SR-CBOE-2007-77 \6\ which adopted Rule 3.19.01, 
the Exchange stated that it was going to submit a subsequent rule 
filing pursuant to Section 19(b)(3)(A)(ii) of the Act \7\ to specify 
the access fee to be charged under Rule 3.19.01 or the methodology for 
determining it.
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    \6\ See Securities Exchange Act Release No. 56016 (July 5, 
2007), 72 FR 38106 (July 12, 2007) (SR-CBOE-2007-77).
    \7\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    The purpose of this rule filing is to specify the access fee to be 
charged under Rule 3.19.01.
    The Exchange proposes to set the access fee for those granted 
temporary CBOE membership status under Rule 3.19.01 at $4700 per month. 
The Exchange indicated in SR-CBOE-2007-77 that the access fee would be 
based on the then current monthly lease fees being paid to lessors of 
what CBOT denominates as a full CBOT membership as reflected in 
published lease fee information. Consistent with the foregoing, the 
Exchange set the access fee to closely approximate the rate published 
by CBOT on its Web site as the average lease rate as of June 28, 2007 
for the month of July 2007 to lease all of the interests that composed 
a full CBOT membership as of that date (which is $4711.40 per month).
    The Exchange has determined to have this rate remain in effect 
until such time that the Exchange submits a further rule filing 
pursuant to Section 19(b)(3)(A)(ii) of the Act \8\ to modify the access 
fee or the Commission takes final action on SR-CBOE-2006-106.\9\ 
Therefore, the Exchange is proposing to delete the current provisions 
of Rule 3.19.01 which indicate that the Exchange will set the access 
fee on a monthly basis based on the then current monthly lease fees 
being paid to lessors of what CBOT denominates as a full CBOT 
membership.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ The Exchange will remove the access fee and the text 
describing it from the CBOE Fee Schedule when the Commission takes 
final action on SR-CBOE-2006-106.
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    The Exchange believes that the proposed access fee of $4700 per 
month is appropriate because it closely approximates an average of the 
lease rates that exerciser members were paying during the month in 
which the CME/CBOT Transaction was consummated and temporary CBOE 
membership status under Rule 3.19.01 was granted. The Exchange removed 
the requirement that the access fee be re-set each month based upon 
then current CBOT lease rates because those rates could be impacted by 
the implementation of Rule 3.19.01 and may not reflect what those rates 
would have been in the absence of Rule 3.19.01. At the same time, the 
Exchange will retain the flexibility to adjust the access fee in the 
future through a rule filing submitted under Section 19(b)(3)(A)(ii) of 
the Act \10\ if the Exchange determines that it would be appropriate to 
do so taking into consideration factors and circumstances prevailing at 
that time.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    The Exchange is also proposing to amend Rule 3.19.01 to delete the 
provision that the access fee will be due and payable in advance of 
each calendar month, and instead, to more fully address in the CBOE Fee 
Schedule the manner in which the access fee will be assessed. This 
approach is consistent with CBOE's general approach regarding Exchange 
fees, which is to include the details regarding fee assessment in the 
Fee Schedule instead of in rules.
    Accordingly, the Exchange is proposing to amend the CBOE Fee 
Schedule to specify the amount of the access fee and to add an 
explanatory provision setting forth the details regarding its 
assessment.
    First, the explanatory provision states that the access fee is due 
and payable for each calendar month on the first day of that calendar 
month. Rule 3.19.01 previously provided that the access fee would be 
due and payable in advance of each calendar month. The time at which 
the access fee will be assessed has been changed to the beginning of 
the month because that is more consistent with CBOE's general billing 
practices under which monthly fees are generally assessed at the 
beginning of a month rather than in advance of a month.
    Second, the explanatory provision provides that the first month for 
which the access fee will be assessed is September 2007, and the 
Exchange proposes to make a corresponding change to Rule 3.19.01. Rule 
3.19.01 previously provided that the access fee would be assessed for 
each month starting in the month after consummation of the CME/CBOT 
Transaction (which would have been August 2007). In order to effectuate 
this change, Rule 3.19.01 is proposed to be revised to provide that the 
access fee will be assessed for each month starting in the second month 
after consummation of the CME/CBOT Transaction rather than in the first 
month following its completion. The Exchange is making this change in 
the interest of fairness so that there is an appropriate transition 
time for persons granted temporary CBOE membership status under Rule 
3.19.01.
    Third, the explanatory provision indicates that the access fee is 
non-refundable except as specified below. This is consistent with how 
other

[[Page 44899]]

Exchange fees are generally assessed. For example, CBOE Rule 2.20 
provides that CBOE membership dues are assessed on a non-refundable 
basis.
    Fourth, the explanatory provision states that the access fee and 
any other applicable monthly fees will be assessed for a calendar month 
unless a person with temporary CBOE membership status provides written 
notice to the CBOE Membership Department at least five business days 
prior to the start of that month that the person is relinquishing that 
status effective on a date prior to the start of that month. The 
purpose of this requirement is to allow time for the Exchange to 
process such a change within its membership and billing systems prior 
to the beginning of the next month.
    Fifth, the explanatory provision indicates that the access fee will 
be assessed through the integrated billing system. This is consistent 
with how Exchange fees are generally assessed pursuant to CBOE Rule 
3.23.
    Finally, consistent with the provisions of Rule 3.19.01, the 
explanatory provision indicates that the access fee will terminate when 
the SEC takes final action on SR-CBOE-2006-106 (at which time the 
Exchange will also remove the access fee and the text describing it 
from the CBOE Fee Schedule); that all access fees shall be payable to 
and held in an interest-bearing escrow account maintained by the 
Exchange until the Commission takes such final action; that the 
Exchange will retain such fees if the Exchange approves SR-CBOE-2006-
106; and that such fees will be returned to the payor, with interest, 
if the Commission disapproves SR-CBOE-2006-106. In addition to stating 
in the explanatory provision that such fees will be returned to the 
payor with interest if the Commission disapproves SR-CBOE-2006-106, 
Rule 3.19.01 is also proposed to be revised to make more explicit that 
a return of these fees will be with interest. The Exchange believes 
that the return of these fees with interest in the event the Commission 
disapproves SR-CBOE-2006-106 was already provided for under Rule 
3.19.01 and is making the foregoing change to Rule 3.19.01 solely to 
eliminate any potential for ambiguity in this regard.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act,\12\ in particular, in that it 
is designed to provide for the equitable allocation of reasonable dues, 
fees, and other charges among persons using its facilities.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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 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

    Because the foregoing rule change establishes or changes a due, 
fee, or other charge imposed by the Exchange, it has become effective 
pursuant to Section 19(b)(3)(A) of the Act \13\ and subparagraph (f)(2) 
of Rule 19b-4 \14\ thereunder. At any time within 60 days of the filing 
of the 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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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-2007-91 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-2007-91. 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
am and 3 pm. 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-2007-91 and should be 
submitted on or before August 30, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-15547 Filed 8-8-07; 8:45 am]

BILLING CODE 8010-01-P