[Federal Register Volume 76, Number 53 (Friday, March 18, 2011)]
[Notices]
[Pages 15025-15027]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-6301]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64070; File No. SR-CBOE-2011-022]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated: Notice of Filing and Immediate Effectiveness of Proposed
Rule Change, as Modified by Amendment No. 1 Thereto, Relating to PAR
Official Fees
March 11, 2011.
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 March 1, 2011, 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 and II below, which Items have been prepared by CBOE. On March
9, 2011, CBOE filed Amendment No. 1 to the proposed rule change.\3\ 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\ The purpose of Amendment No. 1 was to (i) remove the
proposal to waive PAR Official Fees for February 2011 from the
filing; and (ii) provide additional details for the statutory basis
for waiving the fees in all classes except Volatility Index Options
for March 2011.
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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 to (i) establish
separate PAR Official Fees for Volatility Index Options that are
consistent with the Floor Brokerage Fees assessed in Volatility Index
Options, and (ii) waive PAR Official Fees for all classes except
Volatility Index Options for March 2011. The text of the proposed rule
change is available on the Exchange's Web site (http://www.cboe.org/legal), at the Exchange's Office of the Secretary and at the
Commission.
[[Page 15026]]
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 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 is proposing to amend its Fees Schedule effective March 1,
2011 to establish separate PAR Official Fees for Volatility Index
Options that are consistent with the Floor Brokerage Fees assessed in
Volatility Index Options. CBOE amended its Fees Schedule to establish
PAR Official \4\ Fees in January 2011.\5\ These fees apply to all
orders executed by a PAR Official in all options classes traded at
CBOE, except for customer orders (``C'' origin code) that are not
directly routed to the trading floor (an order that is directly routed
to the trading floor is directed to a PAR Official for manual handling
by use of a field on the order ticket). Such orders are charged $.02
per contract and, like floor brokerage fees, a discounted rate of $.01
per contract applies for crossed orders.\6\ These fees help to offset
the Exchange's costs of providing PAR Official services (e.g.,
salaries, etc).
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\4\ A PAR Official is an Exchange employee or independent
contractor whom the Exchange may designate as being responsible for
(i) operating the PAR workstation in a Designated Primary Market-
Maker trading crowd with respect to the classes of options assigned
to him/her; (ii) when applicable, maintaining the book with respect
to the classes of options assigned to him/her; and (iii) effecting
proper executions of orders placed with him/her. The PAR Official
may not be affiliated with any Trading Permit Holder that is
approved to act as a Market-Maker. See CBOE Rule 7.12.
\5\ See Securities Exchange Act Release No. 67301 (January 11,
2011), 76 FR 2934 (January 18, 2011) (SR-CBOE-2010-116).
\6\ PAR Official Fees and Floor Brokerage Fees for cross orders
are assessed at a discounted rate because these Fees are assessed
``per side'' and thus, these fees are equal to the amount assessed
for one standard (non-cross) order.
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CBOE is proposing to add language that would assess distinct PAR
Official Fees for orders in Volatility Index Options. Specifically,
CBOE is proposing to assess PAR Official Fees in Volatility Index
Options in the amount of $.03 per contract for standard (non-cross)
orders and $.015 per contract for all cross orders (per side). CBOE
only assesses Floor Brokerage Fees \7\ for brokerage activity in its
proprietary products, including SPX, OEX and Volatility Index Options.
Floor Brokerage Fees in Volatility Index Options are assessed in the
amount of $.03 per contract for standard (non-cross) orders and $.015
per contract for all cross orders (per side). A PAR Official is
available to execute orders in Volatility Index Options. Because both
Floor Brokerage Fees and PAR Official Fees are assessed in Volatility
Index Options, there is an incentive to Floor Brokers to route orders
in Volatility Index Options to a PAR Official due to the disparity that
exists between the amounts assessed for Floor Brokerage Fees and PAR
Official Fees. As the PAR Official Fees are currently less than the
Floor Brokerage Fees that are assessed in Volatility Index Options,
CBOE is proposing to make this change to eliminate the incentive for
Floor Brokers to rely on PAR Officials to execute their business at a
lower cost through a PAR Official in Volatility Index Options.
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\7\ In accordance with Footnote 5 of the CBOE Fees Schedule,
Floor Brokerage Fees are charged to the executing broker. If a
Market-Maker executes an order for an account in which the Market-
Maker is not a registered participant as reflected in the TPH
Department records, the Market-Maker will be assessed a floor
brokerage fee. To be eligible for the discounted ``crossed'' rate,
the executing broker acronym and executing firm number must be the
same on both the buy and sell side of an order. Floor Brokerage Fees
are not assessed to orders effected by a PAR Official.
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The issue described above with respect to Volatility Index Options
does not apply to OEX and SPX because there are no PAR Officials
available to execute orders in the OEX and SPX trading crowds.
Furthermore, this disparity does not exist in other classes traded at
the Exchange because there are no Floor Brokerage Fees assessed in
classes other than OEX, SPX and Volatility Index Options.
CBOE is continuing to evaluate the existing structure of PAR
Official Fees and is considering additional changes in the manner in
which it assesses PAR Official Fees. For this reason, CBOE proposes to
waive the PAR Official Fees in all classes except for Volatility Index
Options for March 2011. CBOE is proposing to assess the PAR Official
Fees in Volatility Index Options in March 2011 to eliminate the
disparity between the PAR Official Fees and Floor Brokerage Fees as
described above.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Securities Exchange Act of 1934 (``Act''),\8\ in
general, and furthers the objectives of Section 6(b)(4) \9\ 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
trading permit holders and other persons using its facilities. The
Exchange believes the proposed change is equitable, reasonable and not
unfairly discriminatory, in that the PAR Official Fees and the Floor
Brokerage Fees will be assessed in the same manner to all order
originating firms for orders executed in Volatility Index Options.
Further, CBOE believes the proposed waiver of PAR Official Fees for
March 2011 is equitable, reasonable and not unfairly discriminatory, in
that it will apply to all order originating firms in all classes except
Volatility Index Options as CBOE continues to evaluate the existing
structure of PAR Official Fees and is considering additional changes in
the manner in which it assesses PAR Official Fees. CBOE believes it
would be appropriate to exclude PAR Official Fees in Volatility Index
Options from the fee waiver as a waiver of these fees would perpetuate
the disparity between PAR Official Fees and Floor Brokerage Fees in
Volatility Index Options that this proposal is otherwise seeking to
eliminate.
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\8\ 15 U.S.C. 78f(b).
\9\ 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 purposes of at 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 \10\ and subparagraph (f)(2) of Rule 19b-4 \11\
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
[[Page 15027]]
interest, for the protection of investors, or otherwise in furtherance
of the purposes of the Act.\12\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(2).
\12\ For purposes of calculating the 60-day period within which
the Commission summarily may temporarily suspend such rule change
under Section 19(b)(3)(C) of the Act, the Commission considers the
period to commence on March 9, 2011, the date on which the Exchange
submitted Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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 [email protected]. Please include
File Number SR-CBOE-2011-022 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-2011-022. 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 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-2011-022 and should be
submitted on or before April 8, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-6301 Filed 3-17-11; 8:45 am]
BILLING CODE 8011-01-P