[Federal Register Volume 76, Number 77 (Thursday, April 21, 2011)]
[Notices]
[Pages 22427-22429]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-9648]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64304; File No. SR-CBOE-2011-028]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Establish Transaction Fees for CBOE Gold ETF
Volatility Index Options
April 15, 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 April 8, 2011, 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 Substance
of the Proposed Rule Change
CBOE proposes to amend its Fees Schedule to establish fees for
transactions in CBOE Gold ETF Volatility Index (``GVZ'') options. 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, the self-regulatory organization
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 those 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 the most
significant parts 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 received approval to list and trade options on the
CBOE Gold ETF Volatility Index (``GVZ''), which is an up-to-the-minute
market estimate of the expected volatility of the SPDR Gold Trust
(``GLD'') calculated by using real-time bid/ask quotes of CBOE listed
GLD options.\3\ GVZ uses nearby and second nearby options with at least
8 days left to expiration and then weights them to yield a constant,
30-day measure of the expected (implied) volatility. The Exchange will
begin listing GVZ options on April 12, 2011.
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\3\ See Securities Exchange Act Release No. 62139 (May 19,
2010), 75 FR 29597 (May 26, 2010) (approving SR-CBOE-2010-018).
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The purpose of this rule change is to clarify that the existing
transaction fees for ``Volatility Indexes'' shall apply for
transactions in GVZ options, except that the existing Surcharge Fee
(currently $.10 per contract for Volatility Index options) will not
apply to GVZ options.\4\ In addition, the Exchange's marketing fee \5\
shall not apply to GVZ options.
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\4\ This fee is assessed to help the Exchange recoup license
fees the Exchange pays to the different index licensors in order to
list options on the respective indexes.
\5\ See Footnote 6 of the Fees Schedule. In 2007, the Exchange
amended its Fees Schedule to broaden the application of existing
transaction fees for VIX options to options on all volatility
indexes calculated by CBOE. At that time, the Exchange replaced all
references to ``VIX'' in its Fees Schedule with ``VOLATILITY
INDEXES.'' The reference to ``VIX'' in Footnote 6 was inadvertently
omitted in that filing. See Securities Exchange Act Release No.
56660 (October 15, 2007), 72 FR 59315 (October 19, 2007).
Accordingly, the Exchange is proposing to make a technical change to
Footnote 6 to change the reference from ``VIX'' to ``VOLATILITY
INDEXES.''
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For reference, the existing Volatility Index transactions fees that
will apply to GVZ options are as follows:
$0.40 per contract for customer transactions;
[[Page 22428]]
$0.40 per contract for voluntary professional
transactions;
$0.40 per contract for professional transactions
$0.20 per contract for CBOE Market-Maker/DPM transactions;
\6\
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\6\ This is the standard rate that is subject to the Liquidity
Provider Sliding Scale as set forth in Footnote 10 to the Fees
Schedule.
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$0.25 per contract for Clearing Trading Permit Holder
proprietary transactions; \7\
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\7\ This is the standard rate that is subject to the CBOE
Proprietary Products Sliding Scale for Clearing Trading Permit
Holder Proprietary Orders as set forth in Footnote 11 to the Fees
Schedule.
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$0.40 per contract for broker-dealer transactions;
$0.10 per contract CFLEX Surcharge Fee;
$0.03 per contract floor brokerage fee; \8\
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\8\ See Section 3 (Floor Brokerage and Par Official Fees) to the
Fee Schedule and Footnotes 1, 5 and 15 of the Fees Schedule.
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$0.015 per contract floor brokerage fee for crossed
orders; \9\
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\9\ Id.
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$0.03 per contract par official fee; \10\ and
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\10\ Id.
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$0.015 per contract for par official fee for crossed
orders.\11\
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\11\ Id.
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The Exchange is also proposing to establish a new Surcharge Fee on
transactions in GVZ options to help the Exchange offset some of the
costs and expenses associated with new product research and development
and ongoing maintenance. CBOE is a recognized industry leader in
product innovation and believes that the introduction of new products
is beneficial for the marketplace and provides investors with new and
important risk management tools. Product innovation necessarily results
in costs and expenses to the Exchange and involves risk. For example,
the Exchange conducts surveys of market participants to scope new
products, invests in development and marketing of new products and
engages in ongoing maintenance of new products. Similarly, it takes
time to build liquidity in new products. As a result, the Exchange
believes that the proposed $0.10 per contract Surcharge Fee to help
offset some of the costs and expenses expended for product research and
development and ongoing maintenance is appropriate and will enable the
Exchange to continue its longstanding leadership role in options
product innovation.
The Exchange is proposing to codify the new ``Product Research &
Development'' Surcharge Fee in Section 1 (Index Options) to the Fees
Schedule by setting it forth in new subparagraph (B) under the existing
``Surcharge Fee'' category (and renaming the category ``Surcharge
Fees''). The new Product Research & Development Surcharge Fee will
apply to all non-public customer transactions (i.e., CBOE and non-
Trading Permit Holder market-maker, Clearing Trading Permit Holder and
broker-dealer), including voluntary professionals and
professionals.\12\ The Exchange notes that the existing ``Surcharge
Fee'' is assessed on transactions in certain index options, including
Volatility Indexes, and the Exchange is expressly excluding GVZ options
from this fee. In order to differentiate between the existing Surcharge
Fee and the proposed Product Research & Development Surcharge Fee, the
Exchange is proposing to establish a new subparagraph (A) which will be
named ``Index License.'' Those products that are currently assessed the
existing Surcharge Fee will be itemized under ``Index License'' and GVZ
will be itemized under ``Product Research & Development.''
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\12\ See existing footnote 14 to Fees Schedule, which shall
apply to the proposed new Product Research & Development Surcharge
Fee.
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The Exchange is also proposing to make the first reference to
``VOLATILITY INDEXES'' in the Fees Schedule an active hyperlink that
will take readers to a CBOE Web site that identifies all of the
Volatility Indexes that underlie options traded on the Exchange.
Specifically, the first reference to ``VOLATILITY INDEXES'' in Section
1 (Index Options, I. Customer at the third bullet point) will be
displayed in blue text and has been embedded with the following
hyperlink: http://www.cboe.com/products/Cash-SettledIndexOptions.aspx#Volatility.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Act,\13\ in general, and furthers the objectives of
Section 6(b)(4) \14\ of the Act in particular, in that it is designed
to provide for the equitable allocation of reasonable dues, fees, and
other charges among CBOE Trading Permit Holders and other persons using
its facilities. The Exchange believes the fee changes proposed by this
filing are equitable because they will apply uniformly to all market
participants that trade GVZ options. In addition, the proposed fees are
reasonable and comparable to fees that the Exchange currently assesses
for other volatility index products. Furthermore, the proposed new
Product Research and Development Surcharge Fee will enable to Exchange
to offset some (although not all) of the costs and expenses associated
with offering new products. For example, the Exchange conducts surveys
of market participants to scope new products, invests in development
and marketing of new products and engages in ongoing maintenance of new
products. Similarly, it takes time to build liquidity in new products.
Finally, the proposed fees further the Exchange's goal of introducing
new products to the marketplace that are competitively priced.
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\13\ 15 U.S.C. 78f(b).
\14\ 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 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 proposed rule change is designated by the Exchange as
establishing or changing a due, fee, or other charge, thereby
qualifying for effectiveness on filing pursuant to Section 19(b)(3)(A)
of the Act \15\ and subparagraph (f)(2) of Rule 19b-4 \16\ 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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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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
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Number SR-CBOE-2011-028 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-2011-028. 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 publicly available. All
submissions should refer to File Number SR-CBOE-2011-028 and should be
submitted on or before May 12, 2011.
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\17\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-9648 Filed 4-20-11; 8:45 am]
BILLING CODE 8011-01-P