Document ID: SEC-2009-1193-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2009-08-24T04:00Z

[Federal Register: August 24, 2009 (Volume 74, Number 162)]
[Notices]               
[Page 42719-42721]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24au09-118]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60513; File No. SR-CBOE-2009-059]

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

August 17, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on August 12, 
2009, Chicago Board Options Exchange, Incorporated (``CBOE'' or the 
``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 CBOE. CBOE has 
designated this proposal as one establishing or changing a due, fee, or 
other charge applicable only to a member under Section 19(b)(3)(A)(ii) 
of the Act,\1\ and Rule 19b-4(f)(2) thereunder,\2\ 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \2\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Chicago Board Options Exchange, Incorporated (``CBOE'' or 
``Exchange'') proposes to amend its Fees Schedule relating to the 
Options Regulatory Fee. The text of the proposed rule change is below. 
Additions are in italics. Deletions are in [brackets].
* * * * *
Chicago Board Options Exchange, Incorporated Fees Schedule
[August] September 1, 2009
    1.-4. Unchanged.
    Footnotes:
    (1)-(17) Unchanged.
    5.-11. Unchanged.
    12. Regulatory Fees:

A) Options Regulatory Fee: $.004 per contract*

    *The Options Regulatory Fee is assessed by CBOE to each member for 
all options transactions executed or cleared by the member that are 
cleared by The Options Clearing Corporation (OCC) in the customer 
range, excluding Linkage orders, regardless of the exchange on which 
the transaction occurs. The fee is collected indirectly from members 
through their clearing firms by OCC on behalf of CBOE. There is a 
minimum one-cent charge per trade.
    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, CBOE included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed

[[Page 42720]]

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, Proposed Rule Change

(a) Purpose
    The Exchange charges an Options Regulatory Fee (``ORF'') of $.004 
per contract to each member for all options transactions executed by 
the member that are cleared by The Options Clearing Corporation 
(``OCC'') in the customer range, excluding Options Intermarket Linkage 
Plan (``Linkage'') orders. The ORF is imposed upon all such 
transactions executed by a member, even if such transactions do not 
take place on the Exchange. The ORF is collected indirectly from 
members through their clearing firms by OCC on behalf of the Exchange. 
There is a minimum one-cent charge per trade.\3\
---------------------------------------------------------------------------

    \3\ The ORF was established in October 2008 as a replacement of 
Registered Representative (``RR'') fees. See Securities Exchange Act 
Release No. 58817 (October 20, 2008), 73 FR 63744 (October 27, 2008) 
(``Original Filing''). The ORF was to be effective January 1, 2009. 
In December 2008 and January 2009, the Exchange filed proposed rule 
changes waiving the ORF for January and February, to allow 
additional time for the Exchange, OCC and firms to put in place 
appropriate procedures to implement the fee. See Securities Exchange 
Act Release No. 59182 (December 30, 2008), 74 FR 730 (January 7, 
2009), and Securities Exchange Act Release No. 59355 (February 3, 
2009), 74 FR 6677 (February 10, 2009). To avoid a regulatory revenue 
shortfall for 2009 due to the waivers of the fee, the Exchange 
increased the ORF for 2009 from $.0045 per contract to $.006 per 
contract. See Securities Exchange Act Release No. 59427 (February 
20, 2009), 74 FR 9013 (February 27, 2009). The Exchange reduced the 
ORF from $.006 per contract to $.004 per contract, effective August 
1, 2009. See Securities Exchange Act Release No. 60093 (June 10, 
2009), 74 FR 28749 (June 17, 2009).
---------------------------------------------------------------------------

    The Exchange proposes to amend the ORF to also include options 
transactions that are not executed by a CBOE member but are ultimately 
cleared by a CBOE member. Thus the Exchange would charge a member $.004 
per contract for all options transactions executed or cleared by the 
member that are cleared by OCC in the customer range, excluding Linkage 
orders, regardless of the marketplace of execution. In the case where 
one member both executes a transaction and clears the transaction, the 
ORF would be assessed to the member only once on the execution. In the 
case where one member executes a transaction and a different member 
clears the transaction, the ORF would be assessed only to the member 
who executes the transaction and would not be assessed to the member 
who clears the transaction. In the case where a non-member executes a 
transaction and a member clears the transaction, the ORF would be 
assessed to the member who clears the transaction.\4\
---------------------------------------------------------------------------

    \4\ See e-mail to Richard Holley III, Senior Special Counsel, 
from Jaime Galvan, Senior Attorney, CBOE, dated August 17, 2009 
(clarifying the operation of the proposed change to extend the ORF 
to clearing activity).
---------------------------------------------------------------------------

    The Exchange believes that its broad regulatory responsibilities 
with respect to its members'' activities, as described in the Original 
Filing, supports applying the ORF to transactions cleared but not 
executed by a member. The Exchange's regulatory responsibilities are 
the same regardless of whether a member executes a transaction or 
clears a transaction executed on its behalf. The Exchange regularly 
reviews all such activity, including performing surveillance for 
position limit violations, manipulation, insider trading, frontrunning 
and contrary exercise advice violations.
    The Exchange expects that the proposed rule change would increase 
ORF revenue by less than two percent. As stated in the Original Filing, 
the ORF is designed to generate revenue that, when combined with all of 
the Exchange's other regulatory fees, will be less than or equal to the 
Exchange's regulatory costs. If the Exchange determines regulatory 
revenues would exceed regulatory costs, the Exchange would adjust the 
ORF by submitting a fee change filing to the Commission. The Exchange 
notifies members of adjustments to the ORF via regulatory circular.
    The proposed fee change would become operative on September 1, 
2009, in order to give members time to implement the revised fee.
(b) Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Securities Exchange Act of 1934 (``Act''),\5\ in 
general, and furthers the objectives of Section 6(b)(4) \6\ of the Act 
in particular, in that it is designed to provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and other persons using its facilities. The Exchange believes 
the proposed rule change is reasonable because it relates to the 
recovery of the costs of supervising and regulating CBOE members. The 
Exchange believes the proposed rule change is equitable because the ORF 
would be charged to all members on all of their business that clears as 
customer at the OCC.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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 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 rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \7\ and subparagraph (f)(2) of Rule 19b-4 \8\ 
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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-2009-059 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-2009-059. 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

[[Page 42721]]

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 a.m. and 3 p.m. 
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-2009-059 and should be submitted on or before 
September 14, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-20195 Filed 8-21-09; 8:45 am]

BILLING CODE 8010-01-P