[Federal Register Volume 76, Number 132 (Monday, July 11, 2011)]
[Notices]
[Pages 40763-40765]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-17306]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64806; File No. SR-CBOE-2011-058]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Adopt Changes To Its Fees Schedule Related to 
Qualified Contingent Cross Orders

July 5, 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 June 29, 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to adopt changes to its Fees Schedule related 
to qualified contingent cross (``QCC'') orders. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On June 13, 2011, the Commission approved a proposed rule change to 
allow the Exchange to establish the QCC order type.\3\ The Exchange now 
proposes to adopt changes to its Fees Schedule related to this new 
order type. Specifically, the Exchange proposes to apply its applicable 
standard transaction fees to QCC transactions, with three exceptions. 
First, QCC trades will not be subject to the marketing fee, therefore 
the Exchange is proposing to amend the description of the marketing fee 
program contained in Footnote 6 of the Fees Schedule to indicate that 
the fee will not apply to transactions executed as a QCC under CBOE 
Rule 6.53(u). The Exchange does not believe it is necessary to assess a 
marketing fee to QCC transactions. This is consistent with other 
exchanges, such as the

[[Page 40764]]

International Securities Exchange, LLC (``ISE''), which does not 
collect Payment for Order Flow fees on transactions, including QCC 
transactions, in a large number of select symbols.\4\
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    \3\ See Securities Exchange Act Release No. 64653 (June 13, 
2011), 76 FR 35491 (June 17, 2011) (SR-CBOE-2011-041) and CBOE Rule 
6.53(u).
    \4\ See the ISE Fees Schedule, pages 16-17.
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    Second, the Exchange intends to waive the transaction fee for 
public customer (``C'' origin code) orders in options on Standard & 
Poor's Depositary Receipts (``SPY options'') that are executed as part 
of a QCC transaction, therefore the Exchange is proposing to amend the 
description of the fee waiver in Footnote 8 of the Fees Schedule to 
indicate that this waiver will apply to QCC transactions. The proposed 
fee waiver for QCC transactions is consistent with the existing waiver 
which currently applies to public customer trades in SPY options 
executed in open outcry or through the Automated Improvement Mechanism. 
The Exchange notes that this fee waiver is due to expire on June 30, 
2011 (though the Exchange intends to file to extend this waiver through 
a separate rule change filing).
    Third, with respect to broker-dealer QCC transactions, the 
transaction fee will be $0.20 per contract. This fee level is within 
the range of fees currently assessed by the Exchange for equity 
options, QQQQ and SPY options, and index options. For example, the 
Exchange assesses a transaction fee of $0.20 per contract for many 
transactions in those products executed by voluntary professionals, 
professionals, CBOE market-makers, DPMs, E-DPMs and Clearing Trader 
Permit Holders making proprietary trades. The $0.20 per contract 
transaction fee for broker-dealer QCC transaction is also near, though 
actually slightly below, the range of fees charged for execution of 
other broker-dealer orders ($0.25-$0.45).\5\ Further, this fee level is 
within the range of fees assessed by other exchanges for QCC 
transactions by broker-dealers, including ISE and NASDAQ OMX PHLX LLC 
(``Phlx''), both of which also assess a $0.20 per contract fee for such 
transactions.\6\
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    \5\ See the Exchange Fees Schedule, Section 1.
    \6\ See Securities Act Release Nos. 64112 (March 23, 2011), 76 
FR 17462 (March 29, 2011) (SR-ISE-2011-14) and 64520 (May 19, 2011), 
76 FR 30223 (May 24, 2011) (SR-Phlx-2011-66) and the ISE Schedule of 
Fees (page 16) and the Phlx Fee Schedule (page 8).
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    The proposed rule change will take effect on July 1, 2011.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
\7\ in general, and furthers the objectives of Section 6(b)(4) \8\ of 
the Act in particular, in that it is designed to provide for the 
equitable allocation of reasonable dues, fees and other charges among 
Trading Permit Holders (``TPHs'') and other persons using Exchange 
facilities, and the objectives of Section 6(b)(5) \9\ of the Act in 
particular in that it is not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers. The Exchange believes 
that applying its applicable standard transaction fees to QCC 
transactions (apart from the three exceptions discussed above) is 
equitable and not unfairly discriminatory because these same fees are 
already being paid by market participants for other transactions on the 
CBOE.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that excepting QCC transactions from the 
marketing fee for reasons of consistency and competitiveness is 
equitable and reasonable because this exception will apply uniformly 
for all QCC transactions. The Exchange believes waiving the transaction 
fee for public customer orders in SPY options that are executed as part 
of a QCC transaction is equitable and reasonable because the fee waiver 
would apply uniformly to all public customers trading SPY options 
executed as part of a QCC transaction. The Exchange also believes the 
proposed waiver of the transaction fee for public customer orders in 
SPY options that are executed as part of a QCC transaction is 
reasonable because it would continue to provide cost savings during the 
extended waiver period for public customers trading SPY options. The 
Commission has a history of permitting differential treatment of 
customers and non-customer investors generally\10\ and has permitted at 
least one other exchange to offer different pricing for customer and 
non-customer QCC orders specifically.\11\
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    \10\ See the Exchange Fees Schedule, which provides for 
differential treatment of customer and non-customer orders in at 
least 14 places, and has been permitted by the Commission.
    \11\ See Securities Act Release No. 64520 (May 19, 2011), 76 FR 
30223 (May 24, 2011) (SR-Phlx-2011-66), in which the Commission 
permits Phlx to offer different pricing for customer and non-
customer QCC orders.
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    The Exchange believes that, with respect to broker-dealer QCC 
transactions, the transaction fee of $0.20 is equitable because it is 
within the range of fees currently assessed by the Exchange for other 
transactions, as well as the range of fees assessed by other exchanges 
for QCC transactions by broker-dealers, including ISE and Phlx.\12\
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    \12\ See supra note 6.
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    The Exchange operates in a highly competitive market comprised of 
nine U.S. options exchanges in which sophisticated and knowledgeable 
market participants readily can, and do, send order flow to competing 
exchanges if they deem fee levels at a particular exchange to be 
excessive. The Exchange believes that the proposed QCC fees it assesses 
must be competitive with fees assessed on other options exchanges. The 
Exchange believes that this competitive marketplace impacts the fees 
present on the Exchange today and influences the proposals set forth 
above.

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 \13\ and subparagraph (f)(2) of Rule 19b-4 \14\ 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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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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

[[Page 40765]]

Number SR-CBOE-2011-058 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-2011-058. 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 website 
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 
available publicly. All submissions should refer to File Number SR-
CBOE-2011-058, and should be submitted on or before August 1, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-17306 Filed 7-8-11; 8:45 am]
BILLING CODE 8011-01-P