[Federal Register Volume 76, Number 136 (Friday, July 15, 2011)]
[Notices]
[Pages 41842-41844]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-17794]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64851; File No. SR-CBOE-2011-062]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change to Amend Its Fees Schedule Regarding Automated 
Improvement Mechanism Fees

July 11, 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 30, 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 amend its Fees Schedule regarding 
Automated Improvement Mechanism (``AIM'') fees. 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
    The Exchange proposes to amend its Fees Schedule regarding broker-
dealer Automated Improvement Mechanism orders. Specifically, the 
Exchange proposes to adopt a $0.20 per contract fee to be applied to 
broker-dealer orders entered as the agency/primary side of an AIM 
transaction (the ``Broker-Dealer AIM Agency Fee'') and make related 
clarifying changes to the Fees Schedule.\3\
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    \3\ The Commission notes that the Exchange proposes to add 
footnote 19 to the Fees Schedule to define the AIM Agency/Primary 
Fee as applying to all broker-dealer orders in all products, except 
volatility indexes, executed in AIM that were initially entered into 
AIM as a Primary/Agency Order (i.e., the ``AIM Agency/Primary'' fee 
applies to the original order submitted to AIM that is being 
facilitated if such order is for a broker-dealer and does not 
involve a volatility index). The AIM Agency/Primary Fee will apply 
to such executions instead of the applicable standard transaction 
fee except in volatility indexes where standard transaction fees 
will apply. As discussed below, the ``AIM contra execution fee'' 
applies to the contra party's side of the trade (i.e., the contracts 
submitted by the participant that is facilitating the order). See 
email from Jeff Dritz, Attorney, CBOE to Arisa Tinaves, Special 
Counsel, Division of Trading and Markets, dated July 7, 2011.
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    On June 13, 2011, the Commission approved a proposed rule change to 
allow the Exchange to establish the Qualified Contingent Cross 
(``QCC'') order type.\4\ In conjunction with that approval, on June 29, 
2011, the Exchange filed, for immediate effectiveness, a proposed rule 
change to adopt fees related to the QCC order type.\5\ Included in that 
proposed rule change is a proposal to adopt a $0.20 per contract 
transaction fee for the execution of broker-dealer QCC orders (the 
``Broker-Dealer QCC Fee''). The Exchange intends to make available the 
QCC order type and make effective the related fees, including the 
Broker-Dealer QCC Fee, on July 1, 2011.
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    \4\ 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).
    \5\ See SR-CBOE-2011-058.
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    Like QCC, AIM involves the crossing of paired orders. AIM can be 
used to cross options orders through an exposed auction process. QCC 
can be used to cross options orders in an unexposed procedure, as long 
as the orders are tied to stock in a manner consistent with

[[Page 41843]]

Rule 6.53(u).\6\ Therefore, in the case of options orders that are 
represented as tied to a stock transaction, broker-dealers can elect to 
use either the QCC or the AIM mechanism to cross orders.
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    \6\ See CBOE Rule 6.53(u).
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    Currently, the transaction fee for broker-dealers to execute the 
agency/primary side of an AIM order is $0.45 per contract (as such 
orders are entered electronically). However, the Broker-Dealer QCC Fee 
is $0.20. While there are differences between using QCC and AIM, they 
can both be used for the execution of paired orders. Therefore, the 
Exchange proposes to adopt the Broker-Dealer AIM Agency Fee of $0.20 in 
order to place AIM on an equal competitive footing with QCC regarding 
the entrance of broker-dealer orders. The Exchange does not want cost 
to discourage broker-dealers from using the exposed auction mechanism 
and encourage them to use the QCC mechanism.
    Additionally, the amount of the Broker-Dealer AIM Agency Fee of 
$0.20 per contract is competitive with similar fees charged by other 
exchanges.\7\
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    \7\ The International Securities Exchange, LLC (``ISE'') charges 
$0.20 per contract for similar orders transacted through its Price 
Improvement Mechanism. See ISE Schedule of Fees, page 16-17.
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    The Exchange also proposes to make clarifying changes to the Fees 
Schedule related to AIM fees. Specifically, the Exchange proposes to 
clarify that the current AIM Execution Fee applies only to the contra 
party to the AIM Agency/Primary Order by changing the title of the fee 
to the ``AIM Contra Execution Fee.'' While the footnote describing the 
AIM Execution Fee explains this fact, the modification of the title is 
more descriptive for users and will help to distinguish this existing 
fee in the Fees Schedule from the new AIM Agency/Primary Order fee for 
broker-dealer orders that is discussed above.
    The Exchange also proposes to make a non-substantive technical 
correction to the Fees Schedule. Under the Broker-Dealer Index Options 
Transaction Fees in Section 1, the first bullet point lists the per-
contract fee for transactions in OEX, XEO, SPX, S&P 500 Divided Index 
and Volatility Indexes. It should read ``S&P 500 Dividend Index'', not 
``S&P 500 Divided Index.'' The Exchange proposes to correct this 
inadvertent error by adding the letter ``n'' in the correct place to 
make the word ``Dividend.''
    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,\8\ in general, and furthers the objectives of Section 6(b)(4) \9\ 
of the Act in particular, in that it is designed to provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
CBOE Trading Permit Holders and other persons using Exchange 
facilities. Adopting a fee of the same amount per contract for broker-
dealer orders entered as the agency/primary side of an AIM transaction 
as is charged for the execution of broker-dealers QCC orders is an 
equitable allocation of reasonable fees because both AIM and QCC are 
mechanisms that can be used for the execution of paired orders and the 
equivalent fee puts the two on a level competitive footing. Further, 
the amount of the proposed fee is competitive with similar fees charged 
by other exchanges.\10\
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
    \10\ See Note 7.
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    In amending the Fees Schedule to change the title of the ``AIM 
Execution Fee'' to the ``AIM Contra Execution Fee,'' and making a non-
substantive technical correction, the proposed rule change is more 
descriptive for users and should help to distinguish this existing fee 
from the new AIM Agency/Primary Order Execution Fee, and avoids any 
potential confusion about the applicability of the fees. These 
technical changes, which are designed to make the Fees Schedule more 
descriptive and avoid confusion, further the objectives of Section 
6(b)(5) \11\ of the Act in particular, in that they remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, protect investors and the public 
interest.
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    \11\ 15 U.S.C. 78f(b)(5).
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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 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 \12\ and subparagraph (f)(2) of Rule 19b-4 \13\ 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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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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-2011-062 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-2011-062. 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 Web site 
viewing and

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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-2011-062, and should be 
submitted on or before August 5, 2011.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-17794 Filed 7-14-11; 8:45 am]
BILLING CODE 8011-01-P