[Federal Register Volume 75, Number 217 (Wednesday, November 10, 2010)]
[Notices]
[Pages 69148-69150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-28330]



[[Page 69148]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63244; File No. SR-CBOE-2010-100]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated: Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to PULSe Fees

November 4, 2010.
    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 October 28, 2010, 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 CBOE. The Exchange has designated this proposal as one establishing 
or changing a due, fee, or other charge imposed by CBOE under Section 
19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder.\4\ 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 Exchange is proposing to amend its fees schedule as it relates 
to the PULSe workstation. 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.

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, Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to address the use of 
the PULSe workstation for C2 Options Exchange, Incorporated (``C2''), 
to expand on the description of the PULSe workstation licensing 
process, to revise the monthly PULSe workstation fee schedule to 
introduce a reduction for certain non-Trading Permit Holder (``TPH'') 
workstations, to introduce a new fee for non-standard services, to 
extend the Routing Intermediary fee waiver, and to delete outdated text 
from the CBOE fees schedule.
    By way of background, the PULSe workstation is a front-end order 
entry system designed for use with respect to orders that may be sent 
to the trading systems of CBOE and CBOE Stock Exchange (``CBSX''). In 
addition, the PULSe workstation provides a user with the capability to 
send options orders to other U.S. options exchanges and stock orders to 
other U.S. stock exchanges through a ``PULSe Routing Intermediary'' 
(``away-market routing''). In anticipation of the launch of the PULSe 
workstation, the Exchange previously filed a rule change, SR-CBOE-2010-
051, that established a monthly PULSe workstation fee, an away-market 
routing fee, and a Routing Intermediary fee (which fee has been waived 
through November 30, 2010) for CBOE and CBSX TPHs.\5\
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    \5\ See Securities Exchange Act Release No. 62286 (June 11, 
2010), 75 FR 34799 (June 18, 2010) (SR-CBOE-2010-051). TPHs were 
previously referred to as ``members'' in the Exchange Rules, 
however, references to ``members'' have been replaced with the term 
Trading Permit Holders or TPH. See, e.g., Securities Exchange Act 
Release No. 62382 (June 25, 2010), 75 FR 38164 (July 1, 2010) (SR-
CBOE-2010-058).
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    The first purpose of this proposed rule change is to address the 
use of the PULSe workstation for CBOE/CBSX affiliate, C2, which is 
anticipated to initiate trading on October 29, 2010. In rule filing SR-
CBOE-2010-051, the Exchange noted that C2 had not yet begun trading and 
that use of the PULSe workstation as a front-end system interface to C2 
would be addressed in a separate rule filing prior to the initiation of 
trading on C2. In that regard, C2 intends to submit a separate rule 
change proposing that Signal Trading Systems, LLC (``STS''), an 
affiliate of CBOE, make the PULSe workstation available to C2 TPHs and 
to incorporate the PULSe workstation, away-market routing and Routing 
Intermediary fees into the C2 fees schedule.
    The Exchange notes that the PULSe workstation offers the ability to 
route orders to any market, including C2. Therefore, to the extent a 
CBOE TPH that is also a C2 TPH obtains a PULSe workstation through 
CBOE, it is not necessary for that TPH to obtain a separate PULSe 
workstation through C2 to route orders to C2. When the PULSe 
workstation is made available through CBOE to a CBOE TPH that is also a 
C2 TPH, the PULSe workstation, away-market routing and Routing 
Intermediary fees would be assessed by CBOE only (e.g., the monthly fee 
for a CBOE TPH for one PULSe workstation is $350 and the monthly fee 
for a C2 TPH for one PULSe workstation is $350; if a PULSe workstation 
is made available through CBOE to a CBOE TPH that is also a C2 TPH, the 
monthly fee would be $350, not $700). To the extent a CBOE TPH is also 
a C2 TPH, the away-market routing fee would not apply for the TPH's 
executions on CBOE or C2 because the fee is only applicable for away-
market routing. The TPH would not be routing away, but instead would be 
submitting orders directly to CBOE as a CBOE TPH or C2 as a C2 TPH, as 
applicable, where the TPH's activity would be subject to the 
transaction fee schedule of CBOE or C2, respectively. However, to the 
extent a CBOE TPH is not a C2 TPH, the away-market routing fee would 
apply to the CBOE TPH's executions on C2.
    As described in rule filing SR-CBOE-2010-051, the PULSe workstation 
is currently configured by the Exchange to cause CBOE (CBSX) to be the 
default destination exchange for individually executed marketable 
option (stock) orders if CBOE (CBSX) is at the national best bid or 
offer (``NBBO''), regardless of size or time, but allow any user to 
manually override CBOE (CBSX) as the default destination on an order-
by-order basis. The workstation also incorporates a function allowing 
option (stock) orders at a specified price to be sent to multiple 
exchanges with a single click (``sweep function''), and the sweep 
function is configured by the Exchange to cause an option (stock) order 
to be sent to CBOE (CBSX) for up to the full size quoted by CBOE (CBSX) 
if CBOE (CBSX) is at the NBBO. Given the initiation of trading on C2, 
the Exchange is herein proposing to revise the default parameters with 
respect to options to provide that the PULSe workstation may be 
configured by the Exchange to cause CBOE and/or C2 to be the default 
destination exchange(s). Consistent with rule filing SR-CBOE-2010-051, 
any user may manually override CBOE and/or C2 as the default option 
exchange

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destination(s) on an order-by-order basis. The Exchange notes that the 
away-market routing functionality is offered as a convenience to TPHs 
and is not an exclusive means available to a TPH to send orders 
intermarket.\6\
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    \6\ With respect to options (stocks), the Exchange also notes 
that the away-market functionality in the PULSe workstation will not 
displace the provisions of the Options Order Protection and Locked/
Crossed Market Plan (Regulation NMS), which will continue to apply 
in the circumstances described in the Plan (Regulation NMS).
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    The second purpose of this proposed rule change is to refine the 
PULSe workstation licensing process. In rule filing SR-CBOE-2010-051, 
the Exchange indicated that the PULSe workstation will be made 
available by STS. The filing indicated that STS will grant licenses to 
use the workstation directly to CBOE and CBSX TPHs. In addition, the 
filing indicated that TPHs may also make the workstation available to 
their customers, including sponsored users.\7\ CBOE is herein proposing 
to expand on the description of the licensing process to provide that 
STS has the ability to grant licenses to use the workstation directly 
to TPHs or TPHs' customers. STS would also have the ability, if it 
determines to do so, to permit TPHs to make the workstation available 
to their customers, including sponsored users, through the use of a 
sublicense. Whether the workstation technology is made available to 
TPHs' customers through a direct license or sublicense, any order 
routed to CBOE or CBSX through a PULSe workstation must continue to be 
routed through a TPH or by a sponsored user (whose orders are sponsored 
by a TPH). The TPH will also remain responsible for any applicable 
PULSe fees.
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    \7\ The PULSe workstation may be made available by a TPH to its 
customers on a pass-through basis (where orders pass through the 
TPH's systems prior to reaching the Exchange) or a sponsored access 
basis. To the extent that a TPH makes the workstation available to a 
customer on a sponsored access basis, the customer would be 
considered a ``sponsored user'' and the TPH-customer relationship 
would be considered a Sponsoring Participant/Sponsored User 
relationship subject to the requirements of Rule 6.20A, Sponsored 
Users.
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    The third purpose of this proposed rule change is to revise the 
monthly PULSe workstation fee schedule. As indicated above, TPHs may 
make the workstation available to their customers, which may include 
non-broker dealer public customers and non-TPH broker dealers (referred 
to herein as ``non-TPHs''). For such non-TPH workstations, the Exchange 
is proposing to introduce a flat fee of $350/month per workstation. In 
instances where two or more TPHs wish to make a PULSe workstation 
available to the same non-TPH customer, the Exchange is proposing to 
introduce a fee reduction. Under the reduction, if two or more TPHs 
make the PULSe workstation available to the same non-TPH customer, then 
the monthly fee will be $250 per workstation per TPH. The Exchange 
believes it is reasonable and appropriate to reduce the monthly fee in 
these instances because, while we would still establish and maintain 
PULSe workstation technology arrangements with each TPH, we also 
anticipate that the non-TPH's use of the workstation would be 
distributed among the TPHs.
    The fourth purpose of this proposed rule change is to introduce a 
fee for non-standard services provided by STS. Non-standard services 
may include time and materials for non-standard installations of or 
modifications to PULSe to accommodate a TPH's use of PULSe with other 
technologies. The Exchange is proposing a fee of $350 per hour plus 
costs.
    The fifth purpose of this proposed rule change is to extend the 
waiver of the Routing Intermediary fee. Currently the Exchange has 
waived the Routing Intermediary through November 30, 2010. The Exchange 
is proposing to extend this waiver through December 31, 2010. Thus this 
fee will be assessed beginning January 1, 2011.
    Finally, the sixth purpose of this proposed rule change is to 
delete outdated text from the CBOE fees schedule. Specifically, the 
Exchange had waived the PULSe workstation and away-market routing fees 
through September 15, 2010 and September 30, 2010, respectively. As 
those dates have passed and the Exchange does not intend to extend the 
fee waivers, the Exchange is proposing to remove references to the 
waiver dates from the fees schedule.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\8\ in general, and furthers the objectives of Section 6(b)(4) of 
the Act,\9\ in particular, in that it is designed to provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
TPHs in that the same fees and fee waivers are applicable to all users 
of the PULSe workstation.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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 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)(ii) of the Act \10\ and subparagraph (f)(2) of Rule 19b-4 
\11\ thereunder.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
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    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.

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-2010-100 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-2010-100. 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

[[Page 69150]]

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 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-2010-100 and should be submitted on or before 
December 1, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-28330 Filed 11-9-10; 8:45 am]
BILLING CODE 8011-01-P