[Federal Register Volume 76, Number 12 (Wednesday, January 19, 2011)]
[Notices]
[Pages 3184-3188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-955]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63706; File No. SR-CBOE-2011-004]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Amend Its Fees Schedule and Circular Regarding Trading
Permit Holder Application and Other Related Fees
January 12, 2011.
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 January 3, 2011, the 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. 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 Substance
of the Proposed Rule Change
Chicago Board Options Exchange, Incorporated (``CBOE'' or
``Exchange'') proposes to amend its Fees Schedule and circular
regarding Trading Permit Holder application and other related fees
(``Trading Permit Fee Circular'').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's
Public Reference Room.
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 Rule 2.20 grants the Exchange the authority to, from time to
time, fix the fees and charges payable by Trading Permit Holders. CBOE
is proposing to amend its Fees Schedule and Trading Permit Fee Circular
to (i) Amend the monthly fee for Market-Maker Trading Permits and
establish a sliding scale for discounted Market-Maker Trading Permit
Fees (subject to certain conditions); (ii) establish a VIX Tier
Appointment; (iii) amend the monthly fee for Floor Broker Trading
Permits and add an additional fee for Floor Brokers that conduct a
certain level of activity in VIX; (iv) amend the monthly fee for
Electronic Access Permits; (v) amend the monthly fees for bandwidth
packets; (vi) increase the Inactive Nominee Status fee; (vii) increase
the Fingerprint Processing Fee; and (viii) update the Fees Schedule to
remove outdated language.
CBOE Rule 3.1 provides, among other things, that the Exchange may
issue different types of Trading Permits and determine the fees for
those Trading Permits. Specifically, under Rule 3.1(a)(iv), the
Exchange may issue different types of Trading Permits that allow
holders to trade one or more products authorized for trading on the
Exchange and to act in one or more trading functions authorized by CBOE
Rules. The Exchange currently has four types of Trading Permits: (i)
Market-Maker Trading Permit; (ii) Floor Broker Trading Permit; (iii)
Electronic Access Permit; and (iv) CBSX Trading Permit. Rule 3.1(a)(v)
provides, in relevant part, that Trading Permits will be subject to
such fees and charges as are established by the Exchange from time to
time pursuant to CBOE Rule 2.20 and the Exchange Fees Schedule.
In June 2010, and immediately following demutualization, CBOE
amended its Fees Schedule to establish Trading Permit, tier appointment
and bandwidth packet fees.\3\ The Fees Schedule established a monthly
fee of $7,500 for a Market-Maker Trading Permit. At the time the
Market-Maker Trading Permits were established, CBOE determined to
discount the fees by 20% for the remainder of 2010. Thus, between July
2010 and December 2010, CBOE assessed a fee of $6,000 per month for a
Market-Maker Trading
[[Page 3185]]
Permit. CBOE is proposing to decrease the standard $7,500 monthly fee
for a Market-Maker Trading Permit to $6,000, which is the same as the
current level of this fee.
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\3\ See Securities Exchange Act Release No. 62386 (June 25,
2010), 75 FR 38566 (July 2, 2010) (SR-CBOE-2010-073) [sic].
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CBOE is also proposing to establish the following sliding scale for
Market-Maker Trading Permits subject to the certain conditions:
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Amount per
From To month per
permit ($)
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1 permit................... 10 permits................. 6,000
Tier 1................................... 11 permits................. 20 permits................. 4,800
Tier 2................................... 21 or more permits......... ........................... 3,000
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The sliding scale will be available for all Market-Maker Trading
Permits, held by affiliated Trading Permit Holders and TPH
organizations, that are used for appointments in any options classes
other than SPX, VIX, OEX and XEO. Any Market-Maker Trading Permits used
for these four classes, whether in whole or in part, are excluded from
this sliding scale and will be priced at $6,000 per month. To qualify
for the rates set forth in Tiers 1 and 2 in the sliding scale, the
applicable Trading Permit Holder(s) and/or TPH organization(s) must
commit to a specific tier that includes a minimum number of eligible
Market-Maker Trading Permits for each calendar year. To participate in
the program, a Market-Maker Trading Permit Holder must notify the
Registration Services Department by January 25th of each year (or the
preceding business day if the 25th is not a business day) of the tier
of eligible Market-Maker Trading Permits committed to by the Market-
Maker Trading Permit Holder for that calendar year. Market-Makers are
not obligated to commit to either tier. However, the discounts will
apply only to those that do commit to Tier 1 or Tier 2 for the calendar
year (or remainder of the calendar year as described below). Trading
Permit Holders that are not eligible for and/or that do not commit to
Tier 1 or Tier 2 will continue to pay the standard rate for each
Market-Maker Trading Permit, regardless of the total number of Market-
Maker Trading Permits used.
If a Trading Permit Holder chooses to commit to either Tier 1 or
Tier 2, that Trading Permit Holder will be assessed fees for at least
the minimum number of permits in the commitment tier for the remainder
of the calendar year.\4\ Even if a Trading Permit Holder no longer
maintains the minimum number of eligible Trading Permits in the
committed tier, that Trading Permit Holder is still responsible for the
minimum payment for that commitment tier for the remainder of the
calendar year. For example, a Trading Permit Holder that commits to
eleven eligible permits per month will be subject to a minimum monthly
access fee of $64,800 (10 x $6,000 plus $4,800 = $64,800) for that
calendar year. Any additional permits will increase the fee by the
applicable amount (i.e., if the subject Trading Permit Holder also
maintains an additional Trading Permit that is associated with an
appointment in OEX, the monthly access fee will be $70,800).
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\4\ A Trading Permit Holder may pay more than the tier minimum
for monthly access fees if the Trading Permit Holder has additional
Trading Permits that are not eligible for the sliding scale.
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Trading Permit Holders may also choose to commit to a higher tier
of the sliding scale for the remainder of a calendar year, during a
commitment year, if the Trading Permit Holder obtains enough eligible
Market-Maker Trading Permits and provides written notification to the
Registration Services Department by the 25th day of the month preceding
the month in which the higher tier will be effective (or the preceding
business day if the 25th is not a business day). For example, a Trading
Permit Holder may provide written notice to commit to Tier 1 effective
July 1 for the remainder of the calendar year as long as the Trading
Permit Holder obtains enough eligible Trading Permits and provides
written notice by June 25th that the Trading Permit Holder would like
to participate in the sliding scale starting in July for the remainder
of the calendar year. Even if that Trading Permit Holder subsequently
falls below the minimum number of eligible Market-Maker Trading Permits
(in the committed calendar year), for the committed tier, the Trading
Permit Holder will remain responsible for paying at least the tier
minimum for the remainder of the calendar year.
Trading Permit Holders will be responsible to pay for the minimum
amount of eligible Market-Maker Trading Permits (based on the
commitment tier) for the calendar year on a monthly basis unless the
Trading Permit Holder entirely terminates as a Trading Permit Holder
during the year. If a Trading Permit Holder combines, merges, or is
acquired during the course of the calendar year, the surviving Trading
Permit Holder will maintain responsibility for the committed number of
eligible Market-Maker Trading Permits.
Section 6(b)(4) of the Securities Exchange Act of 1934 \5\ (the
``Act'') requires that: ``the rules of the exchange provide for the
equitable allocation of reasonable dues, fees, and other charges among
its members and issuers and other persons using its facilities.'' The
proposed sliding scale is available to all Trading Permit Holders that
maintain eligible Market-Maker Trading Permits. In essence, CBOE is
offering a discounted fee in return for a commitment for a designated
period of time. Trading Permit Holders are not precluded from providing
notice that they wish to participate in the sliding scale program
throughout a calendar year as long as such notice is provided by the
25th day of the preceding month of effectiveness. CBOE is proposing to
offer this sliding scale as a benefit to those Trading Permit Holders
that commit in advance. There is no obligation to commit to either Tier
1 or Tier 2 of the sliding scale. Since Tier 2 requires a commitment of
twenty-one or greater permits, CBOE believes that Market-Makers quoting
all multiply listed classes may consider committing in advance to Tier
2. It requires approximately thirty Trading Permits for a Trading
Permit Holder to obtain Market-Maker appointments in all multiply-
listed classes at the Exchange.
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\5\ 15 U.S.C. 78f(b)(4).
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CBOE Rule 8.3(e) provides that the Exchange may establish one or
more types of tier appointments. In accordance with CBOE Rule 8.3(e), a
tier appointment is an appointment to trade one or more options classes
that must be held by a Market-Maker to be eligible to act as a Market-
Maker in the options class or options classes subject to that
appointment. CBOE currently maintains a tier appointment for Market-
Maker
[[Page 3186]]
Trading Permit Holders trading in SPX. The current Fees Schedule
provides that the SPX Tier Appointment fee will be assessed to any
Market-Maker Trading Permit Holder that either (a) has an SPX Tier
Appointment at any time during a calendar month; or (b) conducts any
open outcry transactions in SPX at any time during a calendar month.
CBOE is proposing to delete this language from the section entitled
Assessment of Trading Permit and Bandwidth Packet Fees and move this
language to Section 10(A)(ii) that describes the SPX Tier Appointment.
In addition, in conjunction with a recent rule filing enabling the
trading of certain series of options on the Hybrid trading platform
even though that class generally trades on Hybrid 3.0,\6\ CBOE is
proposing to clarify the description of the SPX Tier Appointment in
Section 10(A)(2) [sic] to clarify that the SPX Tier Appointment fee
will also be assessed to a Market-Maker Trading Permit Holder that
submits open outcry transactions in SPX or electronic or open outcry
transactions in SPX Weeklys. SPX options trade on Hybrid 3.0 but CBOE
has recently listed series of SPX Weeklys that are currently trading on
Hybrid.
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\6\ See Securities Exchange Act Release No. 63186 (October 27,
2010), 75 FR 67417 (November 2, 2010) (SR-CBOE-2010-095).
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CBOE is now proposing to also establish a VIX Tier Appointment.
Effective January 3, 2010, a Market-Maker Trading Permit Holder must
obtain a VIX Tier Appointment to act as a Market-Maker in VIX. Further,
consistent with the provisions of Rule 8.3(e), each VIX Tier
Appointment may only be used with one designated Market-Maker Trading
Permit. The Exchange is proposing that the initial fee for a VIX Tier
Appointment be set at $1,000 per month.
VIX Tier Appointment fees are non-refundable and will be assessed
through the integrated billing system during the first week of the
following month. The VIX Tier Appointment fee will be assessed to any
Market-Maker Trading Permit Holder, registered with the Exchange to
conduct business on the Exchange as a Market-Maker, that either (a) has
a VIX Tier Appointment at any time during a calendar month; or (b)
conducts any transactions in VIX at any time during a calendar month.
VIX Tier Appointments will be renewed automatically for the next month
unless the Trading Permit Holder submits by the 25th day of the prior
month (or the preceding business day if the 25th is not a business day)
a written notification to cancel the VIX Tier Appointment effective at
or prior to the end of the applicable month.
The Fees Schedule previously established a monthly fee of $2,000
for an Electronic Access Permit. At the time the Electronic Access
Permits were implemented, CBOE determined to discount the fees by 20%
for the remainder of 2010. Thus, between July 2010 and December 2010,
CBOE assessed a fee of $1,600 per month for an Electronic Access
Permit. CBOE is proposing to decrease the $2,000 monthly fee for an
Electronic Access Permit to $1,600, which is the same as the current
level of this fee.
In August 2010, CBOE amended its Fees Schedule and Trading Permit
Fee Circular to establish a fee scale for the purchase of Order Entry
Bandwidth Packets under which the cost of an Order Entry Bandwidth
Packet would decline at certain break points as additional Order Entry
Bandwidth Packets are purchased.\7\ Specifically, the first through
fifth Order Entry Bandwidth Packets obtained by a Trading Permit Holder
cost $2,000 per packet per month, the sixth through eighth Order Entry
Bandwidth Packets obtained by that Trading Permit Holder would cost
$1,000 per packet per month, the ninth through thirteenth Order Entry
Bandwidth Packets obtained by that Trading Permit Holder would cost
$500 per packet per month, and the fourteenth and each additional Order
Entry Bandwidth Packet obtained by that Trading Permit Holder would
cost $250 per packet per month. CBOE also discounted these fees by 20%
for the remainder of 2010. CBOE is now proposing to decrease the
monthly fee scale for Order Entry Bandwidth Packets such that the first
through fifth Order Entry Bandwidth Packets obtained by a Trading
Permit Holder would cost $1,600 per packet per month, the sixth through
eighth Order Entry Bandwidth Packets obtained by that Trading Permit
Holder would cost $800 per packet per month, the ninth through
thirteenth Order Entry Bandwidth Packets obtained by that Trading
Permit Holder would cost $400 per packet per month, and the fourteenth
and each additional Order Entry Bandwidth Packet obtained by that
Trading Permit Holder would cost $200 per packet per month (which is
the same as the current level of these fees).
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\7\ See Securities Exchange Act Release No. 62704 (August 12,
2010), 75 FR 51132 (August 18, 2010) (SR-CBOE-2010-073).
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CBOE also amended its Fees Schedule in August 2010 to allow Trading
Permit Holders to obtain and assign to a particular Sponsored User of
the Trading Permit Holder one or more Order Entry Bandwidth Packets.\8\
In that event, the fees for the assigned bandwidth packet(s) would be
assessed to the Trading Permit Holder and the bandwidth packet(s) could
be utilized solely by the Sponsored User (and not by the Trading Permit
Holder or any other Sponsored User).
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\8\ Id.
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Fees for Order Entry Bandwidth Packets assigned to a particular
Sponsored User are also subject to a fee scale, similar to the fee
scale in place for the Order Entry Bandwidth Packet assigned to a
particular Trading Permit Holder. Specifically, the full fee scale for
Order Entry Bandwidth Packets assigned by a Trading Permit Holder to a
Sponsored User provides that the first through sixth Order Entry
Bandwidth Packets assigned to the Sponsored User would cost $2,000 per
packet per month, the seventh through ninth Order Entry Bandwidth
Packets assigned to that Sponsored User would cost $1,000 per packet
per month, the tenth through fourteenth Order Entry Bandwidth Packets
assigned to that Sponsored User would cost $500 per packet per month,
and the fifteenth and each additional Order Entry Bandwidth Packet
assigned to that Sponsored User would cost $250 per packet per month.
CBOE also discounted these fees by 20% for the remainder of 2010. CBOE
is now proposing to decrease the monthly fee scale for Order Entry
Bandwidth Packets assigned by a Trading Permit Holder to a particular
Sponsored User such that the first through sixth Order Entry Bandwidth
Packets assigned to the Sponsored User would cost $1,600 per packet per
month, the seventh through ninth Order Entry Bandwidth Packets assigned
to that Sponsored User would cost $800 per packet per month, the tenth
through fourteenth Order Entry Bandwidth Packets assigned to that
Sponsored User would cost $400 per packet per month, and the fifteenth
and each additional Order Entry Bandwidth Packet assigned to that
Sponsored User would cost $200 per packet per month (which is the same
as the current level of these fees).
CBOE is also proposing to make two technical changes to Section 10
of the CBOE Fees Schedule. First, CBOE is proposing to modify the
numbering of the section setting forth the Trading Permit and tier
appointment fees and the accompanying descriptions to reflect the
addition of the VIX Tier Appointment. In addition, CBOE is proposing to
remove references throughout Section 10 of the Fees Schedule to Trading
Permit, tier
[[Page 3187]]
appointment and bandwidth packet fees regarding the assessment of these
fees in 2010 as this language is outdated and no longer necessary.
CBOE is also proposing to make two changes to Section 11 of the
CBOE Fees Schedule. First, CBOE is proposing to increase the Inactive
Nominee Status fee from $750 to $900. This fee is payable quarterly by
a TPH organization for each inactive nominee status that the TPH
organization wishes to maintain. (e.g., a TPH organization firm
desiring the ability to have three parking spaces within which to
designate inactive nominees would pay this fee at the beginning of each
quarter for each of the three parking spaces). In addition, CBOE is
proposing to increase the Fingerprint Processing Fee from $50 to $60.
This fee is assessed for employees of Trading Permit Holders and any
other individual requesting the Exchange to process a fingerprint,
electronically or otherwise, excluding fingerprint requirements for
Individual Applicants, individuals applying for Renewal/Change of
Status, and Associated Persons. CBOE is proposing to increase these
fees to account for an increase in resources required to process
inactive nominee information, fingerprints, and related requests. The
Inactive Nominee Status Fee and the Fingerprint Processing Fee have not
been increased in three years.\9\
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\9\ See Securities Exchange Act Release No. 57191 (January 24,
2008), 73 FR 5611 (January 30, 2008) (SR-CBOE-2007-150).
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In addition to the proposed changes to the Fees Schedule described
above, CBOE is proposing to revise its regulatory circular that sets
forth the existing Trading Permit Holder application and other related
fees. The Exchange proposes to revise this circular to incorporate the
changes to Sections 10 and 11 of the CBOE Fees Schedule that are
described above, as well as to clarify the description of the
Fingerprint Processing Fee to provide that only those associated
persons that are subject to the Associated Person Application [sic] Fee
are not subject to the Fingerprint Processing Fee. The proposed changes
to the circular are included as Exhibit 2 to the Form 19b-4.
2. Statutory Basis
The proposed rule change will treat similarly situated Trading
Permit Holders in the same manner. Specifically, CBOE shall assess the
same base Trading Permit, tier appointment and bandwidth packet fees to
all Trading Permit Holders based on the type of tier appointment
requested and type and number of Trading Permit(s) and bandwidth
packet(s) requested. All Trading Permit Holders may elect to receive a
discounted price if the Trading Permit Holder commits in advance to a
minimum number of eligible Market-Maker Trading Permits for a calendar
year. Trading Permit Holders that do not wish to commit in advance to a
minimum number of eligible Trading Permits for a calendar year will be
subject to the standard rate for each Market-Maker Trading Permit.
Further, CBOE shall assess the Fingerprint Processing Fee and Inactive
Nominee Status Fee in the same manner to all Trading Permit Holders.
For the reasons stated in the purpose section, CBOE is also proposing
to add a VIX Tier Appointment and assess a $1,000 monthly fee to any
Floor Broker Trading Permit Holder (a) that executes more than 20,000
VIX contracts during the month and (b) whose aggregate VIX executed
contracts during the month comprise more than 30% of the Floor Broker
Trading Permit Holder's exchange-wide total executed contracts.
Accordingly, the Exchange believes that the proposed rule change is
consistent with Section 6(b) of the Act,\10\ in general, and furthers
the objectives of Section 6(b)(4) of the Act \11\ 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 for the reasons described above.
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\10\ 15 U.S.C. 78f(b).
\11\ 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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \12\ and subparagraph (f)(2) of Rule 19b-4 \13\
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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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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 [email protected]. Please include
File Number SR-CBOE-2011-004 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-2011-004. 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 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-2011-004 and should be
submitted on or before February 9, 2011.
[[Page 3188]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-955 Filed 1-18-11; 8:45 am]
BILLING CODE 8011-01-P