Document ID: SEC-2012-0760-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2012-05-15T04:00Z

[Federal Register Volume 77, Number 94 (Tuesday, May 15, 2012)]
[Notices]
[Pages 28653-28655]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-11721]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66953; File No. SR-CBOE-2012-041]

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

May 9, 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 April 30, 2012, 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.
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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 the 
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 the 
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

[[Page 28654]]

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 Fees Schedule's Volume Incentive 
Program (the ``Program''), which was implemented on January 1, 2012.\3\ 
The Program credits Trading Permit Holders (``TPHs'') certain per 
contract amounts resulting from each public customer order transmitted 
by that TPH which is executed electronically on the Exchange in all 
multiply-listed option classes (excluding QCC trades and executions 
related to contracts that are routed to one or more exchanges in 
connection with the Options Order Protection and Locked/Crossed Market 
Plan referenced in Rule 6.80), provided the TPH meets certain volume 
thresholds in a month. The volume thresholds are calculated based on 
the customer contracts per day (``CPD'') entered and executed over the 
course of the month.\4\
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    \3\ See Securities Exchange Act Release No. 66054 (December 23, 
2011), 76 FR 82332 (December 30, 2011) (SR-CBOE-2011-120).
    \4\ See Exchange Fees Schedule, Section 21.
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    Under the current top tier of the Program, a TPH trading more than 
375,000 CPD gets a $0.20 per contract rebate for all CPD traded above 
375,000. While the Program is intended to attract greater customer 
volume, which benefits all market participants, the potential for an 
industry-wide volume surge could mean CBOE's average daily volume (ADV) 
also increases, commensurate with the industry, to a level unexpected 
during the design of the Program. As such, the Program's ADV thresholds 
would no longer reflect actual conditions. The lack of a CPD ceiling 
means that the Exchange could potentially be giving back a $0.20 per 
contract rebate on an extremely high, unlimited amount of contracts. 
The Program is intended to attract greater customer volume, which 
benefits all market participants, but it is not economically feasible 
to be providing an unlimited number of $0.20 rebates (the Exchange 
needs to retain much of the fees collected to maintain its 
administrative and regulatory operations). As such, the Exchange 
proposes to cap the $0.20 per contract rebate tier at 650,000 CPD. For 
all CPD traded above 650,000, the Exchange will continue offering a 
rebate, but that rebate will be reduced to $0.05 per contract. The 
addition of this new tier would ensure that the economic balances in 
the program would remain in place in the event of an unexpected volume 
surge.
    This change is to take effect May 1, 2012.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\5\ Specifically, the Exchange believes the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\6\ 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. Capping the Program's $0.20 per 
contract rebate at 650,000 CPD and providing a $0.05 per contract 
rebate for all CPD traded above 650,000 CPD is reasonable because those 
[sic] any TPH trading above 650,000 CPD will still be receiving a 
rebate for such trading activity (a rebate that they did not receive 
prior to the adoption of the Program). This change is equitable and not 
unfairly discriminatory because it only affects the contracts above 
650,001 CPD; any TPH trading above 650,000 CPD will still receive the 
$0.20 per contract rebate for contracts 375,001-650,000 CPD. Further, 
this change is equitable and not unfairly discriminatory because it is 
necessary to ensure the economic viability of the Program. Without the 
change, in the event of an unexpected volume surge, the Program itself 
may cease to be economically rational for the Exchange, and might have 
to be eliminated. Such elimination would prevent any TPH trading above 
650,000 CPD from receiving any rebates, as well as all other TPHs 
benefiting from the Program (and eliminate the spillover benefits of 
increased liquidity and tighter spreads that are experienced by all 
other market participants).
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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

    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) 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).
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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-2012-041 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-2012-041. 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

[[Page 28655]]

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 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 offices 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-2012-041, and should be 
submitted on or before June 5, 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. 2012-11721 Filed 5-14-12; 8:45 am]
BILLING CODE 8011-01-P