[Federal Register Volume 72, Number 195 (Wednesday, October 10, 2007)]
[Notices]
[Pages 57620-57621]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-19910]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56602; File No. SR-CBOE-2007-116]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to the Exchange's Hybrid Electronic Quoting Fee

October 3, 2007.
    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 October 1, 2007, 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 substantially 
prepared by the Exchange. CBOE has designated this proposal as one 
establishing or changing a due, fee, or other charge imposed by the 
Exchange under Section 19(b)(3)(A),\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).
    \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

    CBOE proposes to amend its Hybrid Electronic Quoting Fee. The text 
of the proposed rule change is available at the Exchange, the 
Commission's Public Reference Room, and http://www.cboe.org/legal.

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 proposal. 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
    The purpose of this proposed rule change is to amend CBOE's Hybrid 
Electronic Quoting Fee, which is applicable to all Market-Makers, RMMs, 
DPMs and e-DPMs (collectively ``liquidity providers'') in order to 
promote and encourage more efficient quoting.\5\ The fee has been 
effective since February 1, 2007.
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    \5\ Because the Hybrid Quoting Fee is only applicable in Hybrid 
and Hybrid 2.0 option classes, it does not apply to LMMs, which 
currently only function in Hybrid 3.0 option classes. Therefore, the 
Exchange is proposing to delete the reference to LMMs in the Hybrid 
Electronic Quoting Fee section of Item 17 of the Fees Schedule.
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    Under the existing fee, all liquidity providers who are submitting 
electronic quotations to the Exchange in Hybrid and Hybrid 2.0 option 
classes are assessed a monthly fee of $450. Each month, each liquidity 
provider receives an allocation of 1,000,000 quotes. If a liquidity 
provider submits to CBOE more than 1,000,000 quotes in a month, the 
liquidity provider is assessed an additional fee of $.03 per 1,000 
quotes in excess of 1,000,000.
    As amended, CBOE will continue to assess all liquidity providers 
who are submitting electronic quotations to the Exchange in Hybrid and 
Hybrid 2.0 option classes a monthly fee of $450 per membership 
utilized. However, CBOE proposes to assess or credit liquidity 
providers a Hybrid Electronic Quoting Fee that varies depending on: (i) 
The quality of the liquidity providers' quotation (a quotation is a bid 
and an offer); and (ii) the value of the underlying security and CBOE's 
bid in the option series.\6\ CBOE also proposes to vary the fee 
slightly in ``high premium series'' \7\ with respect to Market-Makers 
and RMMs on the one hand, and DPMs and e-DPMs on the other hand due to 
the difference in their quoting obligations. Market-Makers and RMMs 
have an obligation to continuously quote 60% of the series in each of 
their appointed classes that have a time to expiration of less than 9 
months. DPMs and e-DPMs, however, have a greater obligation and must 
continuously quote either 100% of the series in their appointed classes 
(DPMs) or 90% if the series in their appointed classes (e-DPMs). CBOE 
generally has found that there are a significant amount of quotations 
in high premium series, but very little volume.
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    \6\ The value of the underlying security is the closing price of 
the underlying security on the preceding trading day. The bid is the 
closing bid in the option series at CBOE on the preceding trading 
day.
    \7\ For purposes of this fee, ``high premium series'' are those 
series in which the value of the underlying security is less than or 
equal to $100 and CBOE's bid is greater than $10, or those series in 
which the value of the underlying security is greater than $100 and 
CBOE's bid is greater than 15% of the underlying security.
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    Specifically, the Hybrid Electronic Quoting Fee will be assessed/
credited as follows:
    If the value of the underlying security is less than or equal to 
$100 and CBOE's bid is less than or equal to $10, or if the value of 
the underlying security is greater than $100 and CBOE's bid is less 
than or equal to 15% of the underlying security, then:
     A liquidity provider's quotation that improves the NBBO on 
at least one side of the market will be credited $0.02 per 1,000 
quotes.
     A liquidity provider's quotation that matches the NBBO on 
both sides of the market will be credited $0.01 per 1,000 quotes.
     A liquidity provider's quotation that matches the NBBO on 
only one side of the market will be assessed a fee of $0.02 per 1,000 
quotes.
     A liquidity provider's quotation that matches the CBOE BBO 
(which is not the NBBO) on at least one side of the market will be 
assessed a fee of $0.02 per 1,000 quotes.
     A liquidity provider's quotation that is a duplicate 
quote,\8\ or that does

[[Page 57621]]

not satisfy any of the above conditions will be assessed a fee of $0.05 
per 1,000 quotes.
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    \8\ A ``duplicate quote'' is one where there is no change in bid 
and offer price and size. See proposed Item 17 of the Fees Schedule, 
at note 5, as set forth in CBOE's Form 19b-4.
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    If the value of the underlying security is less than or equal to 
$100 and CBOE's bid is greater than $10, or if the value of the 
underlying security is greater than $100 and CBOE's bid is greater than 
15% of the underlying security, then:
     A liquidity provider's quotation that improves the NBBO on 
at least one side of the market will be credited $0.02 per 1,000 
quotes.
     A liquidity provider's quotation that matches the NBBO on 
both sides of the market will be credited $0.01 per 1,000 quotes.
     A liquidity provider's quotation that matches the NBBO on 
only one side of the market will be assessed a fee of $0.02 per 1,000 
quotes.
     A Market-Maker's or RMM's quotation that matches the CBOE 
BBO (which is not the NBBO) on at least one side of the market will be 
assessed a fee of $0.05 per 1,000 quotes; and a DPM's or e-DPM's 
quotation that matches the CBOE BBO (which is not the NBBO) on at least 
one side of the market will be assessed a fee of $0.02 per 1,000 
quotes.
     A liquidity provider's quotation that is a duplicate 
quote, or that does not satisfy any of the above conditions will be 
assessed a fee of $0.05 per 1,000 quotes.
    As before, the Hybrid Electronic Quoting Fee will be assessed by 
liquidity provider acronym. In the event a liquidity provider is 
utilizing more than one membership and submits electronic quotations 
for all of the memberships under the same acronym, the Hybrid 
Electronic Quoting Fee will be assessed per membership utilized by the 
liquidity provider. Because a liquidity provider's total credits cannot 
exceed the total debits assessed according to the schedule of credits 
and debits set forth in the two tables in Item 17 of the Fees Schedule, 
if the total credits were to exceed the total debits, the Hybrid 
Electronic Quoting Fee assessed to that liquidity provider would be 
$450.
    Also, if a liquidity provider is assessed the Hybrid Electronic 
Quoting Fee, the liquidity provider does not pay a member dues fee. The 
Exchange intends to implement this revised Hybrid Electronic Quoting 
Fee effective October 1, 2007.
    CBOE believes that the Hybrid Electronic Quoting Fee, as amended, 
is fair and reasonable and will promote and encourage more efficient 
quoting and help to reduce quote traffic. The fee encourages and 
rewards liquidity providers that quote competitively, and imposes costs 
on liquidity providers that do not. The fee also fairly and reasonably 
takes into consideration the different quoting obligations of the 
various liquidity providers and, therefore, represents an equitable 
allocation of fees among members.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\9\ in general, and furthers the objectives of Section 6(b)(4) of 
the Act,\10\ in particular, in that it is designed to provide for the 
equitable allocation of reasonable fees, and other charges among CBOE 
members and other persons using its facilities.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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)(ii) of the Act \11\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\12\ since 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 the furtherance of the 
purposes of the Act.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 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-2007-116 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-2007-116. 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, 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 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 No. SR-CBOE-2007-116 and should be 
submitted on or before October 31, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E7-19910 Filed 10-9-07; 8:45 am]
BILLING CODE 8011-01-P