[Federal Register Volume 71, Number 140 (Friday, July 21, 2006)]
[Notices]
[Pages 41485-41487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-11568]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54153; File No. SR-CBOE-2006-63]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to Its Marketing Fee Program
July 14, 2006.
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 June 30, 2006, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``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. The CBOE has designated this proposal as one establishing or
changing a due, fee, or other charge imposed by the CBOE under Section
19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\
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.
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\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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CBOE proposes to amend its marketing fee program. Below is the
text of the proposed rule change. Proposed new language is in italics;
deleted language is in [brackets].
Chicago Board Options Exchange, Inc.
Fees Schedule
June [2]30, 2006
1. No Change.
2. MARKETING FEE (6)(16)--$.65
3.-4. No Change.
Footnotes:
(1)-(5) No Change.
(6) The Marketing Fee will be assessed only on transactions of
Market-Makers, RMMs, e-DPMs, DPMs, and LMMs resulting from orders for
less than 1,000 contracts (i) from payment accepting firms, or (ii)
that have designated a ``Preferred Market-Maker'' under CBOE Rule 8.13
at the rate of $.65 per contract on all classes of equity options,
options on HOLDRs, options on SPDRs, options on DIA, options on NDX,
and options on RUT. The fee will not apply to: Market-Maker-to-Market-
Maker transactions including transactions resulting from orders from
non-member market-makers; transactions resulting from inbound P/A
orders or a transaction resulting from the execution of an order
against the DPM's account if an order directly related to that order is
represented and executed through the Linkage Plan using the DPM's
account; transactions resulting from accommodation liquidations
(cabinet trades); and transactions resulting from dividend strategies,
merger strategies, and short stock interest strategies as defined in
footnote 13 of this Fees Schedule. This fee shall not apply to index
options and options on ETFs (other than options on SPDRs, options on
DIA, options on NDX, and options on RUT). A Preferred Market-Maker will
only be given access to the marketing fee funds generated from a
Preferred order if the Preferred Market-Maker has an appointment in the
class in which the Preferred order is received and executed.
DPM/LMM Rebate/Carryover Process. If less than 80% of the marketing
fee funds collected in a given month are paid out by the DPM/LMM [or
Preferred Market-Maker in a given month], then the Exchange would
refund such surplus at the end of the month on a pro rata basis based
upon contributions made by the Market-Makers, RMMs, e-DPMs, DPMs and
LMMs in that month. However, if 80% or more of the [accumulated] funds
collected in a given month are paid out by the DPM/LMM [or Preferred
Market-Maker], there will not be a rebate for that month and the excess
funds will [carry over and will] be included in [the] an Excess [p]Pool
of funds to be used by the DPM/LMM [or Preferred Market-Maker the
following] in subsequent months. The total balance of the Excess Pool
of funds cannot exceed $25,000, and if in any month the balance were to
exceed $25,000, the funds in excess of $25,000 would be refunded[At the
end of each quarter, the Exchange would then refund any surplus, if
any,] on a pro rata basis based upon contributions made by the Market-
Makers, RMMs, DPMs, e-DPMs and LMMs in that month.
Preferred Market-Maker Rebate/Carryover Process. If less than 80%
of the marketing fee funds are paid out by the Preferred Market-Maker
in a given month, then the Exchange would refund such surplus at the
end of the month on a pro rata basis based upon contributions made by
the Market-Makers, RMMs, e-DPMs, DPMs and LMMs in that month. However,
if 80%
[[Page 41486]]
or more of the accumulated funds in a given month are paid out by the
Preferred Market-Maker, there will not be a rebate for that month and
the funds will carry over and will be included in the pool of funds to
be used by the Preferred Market-Maker the following month. At the end
of each quarter, the Exchange would then refund any surplus, if any, on
a pro rata basis based upon contributions made by the Market-Makers,
RMMs, DPMs, e-DPMs and LMMs in the final month of the quarter. CBOE's
marketing fee program as described above will be in effect until June
2, 2007.
Remainder of Fees Schedule--No change.
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 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
The CBOE proposes to amend its marketing fee to modify the manner
in which marketing fee funds collected during a calendar quarter are
refunded. The CBOE states that its marketing fee currently provides
that if less than 80% of the marketing fee funds are paid out by the
DPM/LMM or Preferred Market-Maker in a given month, then the Exchange
would refund such surplus at the end of the month on a pro rata basis
based upon contributions made by the Market-Makers, RMMs, e-DPMs, DPMs,
and LMMs. However, if 80% or more of the accumulated funds in a given
month are paid out by the DPM/LMM or Preferred Market-Maker, there will
not be a rebate for that month and the funds will carry over and will
be included in the pool of funds to be used by the DPM/LMM or Preferred
Market-Maker the following month. At the end of each quarter, the
Exchange would then refund any surplus, if any, on a pro rata basis
based upon contributions made by the Market-Makers, RMMs, DPMs, e-DPMs,
and LMMs.
The CBOE states that the purpose of this rule change is to modify
the rebate process as it relates to DPMs. As amended, if less than 80%
of the marketing fee funds collected in a given month are paid out by
the DPM/LMM, then the Exchange would refund such surplus at the end of
the month on a pro rata basis based upon contributions made by the
Market-Makers, RMMs, e-DPMs, DPMs, and LMMs in that month. However, if
80% or more of the funds collected in a given month are paid out by the
DPM/LMM, there would not be a rebate for that month and the excess
funds would be included in an excess pool (``Excess Pool'') of funds to
be used by the DPM/LMM in subsequent months. The CBOE states that the
total balance of the Excess Pool of funds could not exceed $25,000, and
if in any month the balance were to exceed $25,000, the funds in excess
of $25,000 would be refunded on a pro rata basis based upon
contributions made by the Market-Makers, RMMs, DPMs, e-DPMs, and LMMs
in that month. As before, in the event a DPM/LMM is also marked as a
Preferred Market-Maker on a particular order, the funds collected from
the order will be allocated to the DPM in its capacity as a DPM and not
as a Preferred Market-Maker.
The Exchange states that the rebate and carryover process for
Preferred Market-Makers will continue to operate on a quarterly basis.
However, CBOE proposes to make one clarification to the rebate process
for Preferred Market-Makers in the text of the Fees Schedule to make it
consistent with the current process and procedure for rebating excess
funds. As noted above, if less than 80% of the marketing fee funds are
paid out by the Preferred Market-Maker in a given month, then the
Exchange would refund such surplus at the end of the month on a pro
rata basis based upon contributions made by the Market-Makers, RMMs, e-
DPMs, DPMs, and LMMs. CBOE states that it refunds the money based on
the contributions made by these market participants in that specific
month.
If there are surplus funds at the end of the quarter, CBOE
represents that it refunds the money on a pro rata basis based upon
contributions made by the Market-Makers, RMMs, e-DPMs, DPMs, and LMMs
in the final month of the quarter. CBOE believes that refunding surplus
funds to market participants on a pro rata basis based upon
contributions made in the final month of the quarter, as opposed to
based upon contributions made during the preceding three months, would
be an equitable allocation of dues and fees due to the manner in which
the marketing fee funds collected are paid out and how CBOE accounts
for the funds on a month-to-month basis. For example, if at least 80%,
but less than 100%, of the funds collected in the 1st month of a
quarter is paid out, the balance that carries over to the 2nd month is
paid out first in that 2nd month. Similarly, if at least 80%, but less
than 100%, of the funds collected in the 2nd month is paid out, the
balance that carries over to the 3rd month is paid out first in that
3rd month. As a result, any surplus of funds at the end of the quarter
(the 3rd month) was contributed by the Market-Makers, RMMs, e-DPMs,
DPMs, and LMMs who were assessed the fee in that month.
CBOE states that it is not amending its marketing fee program in
any other respects.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\5\ in general, and furthers the
objectives of Section 6(b)(4) of the Act,\6\ in particular, in that it
is designed to provide for the equitable allocation of reasonable dues,
fees, and other charges among CBOE members.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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
The Exchange neither solicited nor received comments on the
proposal.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change has been designated as a fee
change pursuant to Section 19(b)(3)(A)(ii) of the Act \7\ and Rule 19b-
4(f)(2) \8\ thereunder, because it establishes or changes a due, fee,
or other charge imposed by the Exchange. Accordingly, the proposal will
take effect upon filing with the Commission. 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
[[Page 41487]]
interest, for the protection of investors, or otherwise in furtherance
of the purposes of the Act.
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\7\ 15 U.S.C. 78s(b)(3)(A)(ii).
\8\ 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-2006-63 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2006-63. 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 such
filing also will be available for inspection and copying at the
principal office of the 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-2006-63 and should be submitted on or before August
11, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-11568 Filed 7-20-06; 8:45 am]
BILLING CODE 8010-01-P