[Federal Register Volume 70, Number 214 (Monday, November 7, 2005)]
[Notices]
[Pages 67506-67508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-6138]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52698; File No. SR-CBOE-2005-78]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to a Fee Waiver for Certain Transactions in SPX 
LEAPS[supreg] Options

October 28, 2005.
    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 September 26, 2005, 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, II, and III below, which Items have been prepared by the 
Exchange. CBOE has designated the proposed rule change as one 
establishing or changing a due, fee, or other charge imposed by CBOE 
pursuant to Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposal

[[Page 67507]]

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

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

    CBOE proposes to amend its Fees Schedule to waive fees through 
December 15, 2005 for certain transactions in S&P 500 index options 
LEAPS[supreg].\5\ The text of the proposed rule change is available on 
the Exchange's Web site (http://www.cboe.com), at the Exchange's Office 
of the Secretary, and at the Commission's Public Reference Room.
---------------------------------------------------------------------------

    \5\ Index LEAPS are long-term index option series that can 
expire up to 60 months from the date of issuance. See CBOE Rule 
24.9(b).
---------------------------------------------------------------------------

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 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 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
    The Exchange proposes to amend its Fees Schedule to waive fees for 
certain transactions in S&P 500 index (``SPX'') options LEAPS through 
December 15, 2005, which is the last day of trading in the December 
2005 SPX options series. Specifically, the Exchange will waive all 
trading related fees (transaction, floor brokerage, and OBO fees) for 
transactions in which a market participant closes a position in 
reduced-value SPX LEAPS (``RV SPX LEAPS'') and simultaneously opens a 
corresponding position in full-value SPX LEAPS (``FV SPX LEAPS'').\6\
---------------------------------------------------------------------------

    \6\ Pursuant to CBOE Rule 24.9(b), the Exchange may list LEAPS 
based on the full and the reduced value of the underlying index.
---------------------------------------------------------------------------

    The fee waiver would apply only to trades that close positions in 
RV SPX LEAPS and simultaneously open corresponding positions in FV SPX 
LEAPS. The fee waiver would apply on a 10-for-1 basis only.\7\ For 
example, if a market participant closes 100 contracts of the December 
2006 120 strike RV SPX LEAPS and opens a 10 contract position in the 
December 2006 1200 strike FV SPX LEAPS, all trading related fees would 
be waived for all contracts in both transactions. However, if a market 
participant closes 100 contracts of the December 2006 120 strike RV SPX 
LEAPS and opens a 100 contract position in the December 2006 1200 
strike FV SPX LEAPS, fees would be waived for all of the RV SPX LEAPS 
contracts but only for 10 contracts of the FV SPX LEAPS transaction. 
All standard fees would apply to the remaining 90 contracts of the FV 
SPX LEAPS transaction.
---------------------------------------------------------------------------

    \7\ The RV SPX LEAPS are \1/10\th the size of the FV SPX LEAPS.
---------------------------------------------------------------------------

    The purpose of the proposed fee waiver is to encourage rollover of 
open interest in currently listed RV SPX LEAPS series into FV SPX LEAPS 
series, in order to facilitate the listing of series in options on the 
Mini-SPX (``XSP'').\8\ Currently, the Exchange lists December 2006 and 
December 2007 series in both the RV SPX LEAPS and the FV SPX LEAPS. 
After December 2005 expiration, the Exchange will list the XSP December 
2006 series and after December 2006 expiration, the Exchange will list 
the XSP December 2007 series. Since XSP options, like RV SPX LEAPS, are 
also based on \1/10\th the value of the S&P 500 Index, the Exchange 
intends to move any open interest in December 2006 and 2007 RV SPX 
LEAPS into December 2006 and 2007 XSP series, respectively, once those 
XSP series have been listed, in order to avoid having open at the same 
time two ``reduced-value SPX'' products.\9\ The purpose of the proposed 
fee waiver is to encourage as much open interest as possible to move 
from the RV SPX LEAPS into the FV SPX LEAPS before the Exchange moves 
any remaining open interest in RV SPX LEAPS into the XSP.
---------------------------------------------------------------------------

    \8\ The Exchange has announced that it intends to list XSP 
options in late October 2005.
    \9\ The Commission notes that the rollover of RV SPX LEAPS into 
XSP options is not the subject of this proposed rule change.
---------------------------------------------------------------------------

    Market participants who effect transactions that qualify for the 
fee waiver will receive a rebate of trade related fees (transaction, 
floor brokerage, and OBO fees) incurred by the transactions.\10\ The 
rebate will be processed as a credit on billing statements produced at 
each month-end.
---------------------------------------------------------------------------

    \10\ The Exchange has represented that the waiver will be 
accomplished through a rebate to market participants, rather than a 
traditional waiver, for processing and administrative reasons, but 
that the effect of the rebate will be the same as if the fees were 
initially waived. Telephone conversation between Jaime Galvan, 
Assistant Secretary, CBOE and Deborah Flynn, Assistant Director, and 
Sara Gillis, Attorney, Division of Market Regulation, Commission, on 
October 12, 2005.

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act,\12\ in particular, in that it 
is designed to provide for the equitable allocation of reasonable dues, 
fees, and other charges among CBOE members and other persons using its 
facilities.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 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 upon filing pursuant 
to Section 19(b)(3)(A)(ii) of the Act \13\ and Rule 19b-4(f)(2) 
thereunder,\14\ because it establishes or changes a due, fee, or other 
charge imposed by the Exchange. At any time within 60 days of the 
filing of such 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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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:

[[Page 67508]]

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-2005-78 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-CBOE-2005-78. 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 inspection 
and copying in the Commission's Public Reference Room. 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-2005-78 
and should be submitted on or before November 28, 2005. 
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
Jonathan G. Katz,
Secretary.
 [FR Doc. E5-6138 Filed 11-4-05; 8:45 am]
BILLING CODE 8010-01-P