[Federal Register Volume 76, Number 196 (Tuesday, October 11, 2011)]
[Notices]
[Pages 62881-62883]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-26139]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65481; File No. SR-CBOE-2011-092


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

October 4, 2011.
    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 3, 2011, 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 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\ 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 
availableon 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 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 adopt a PULSe 
routing fee for executions of orders on CBOE and CBOE Stock Exchange, 
LLC (``CBSX,'' CBOE's stock execution facility) that originate from 
non-Trading Permit Holder (``TPH'') PULSe workstations. The Exchange is 
also proposing some non-substantive changes to the fees schedule text 
to clarify the existing operation of the Routing Intermediary fee. 
These changes, which are described in more detail below, will be 
effective October 3, 2011.\5\
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    \5\ See e-mail from Jennifer M. Lamie, Assistant Secretary, 
CBOE, to Steve L. Kuan, Attorney, Division of Trading and Markets, 
Commission, on October 3, 2011.
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    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 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 and trading centers (``away-market routing'').\6\ To use the 
away-market routing functionality, a CBOE or CBSX TPH must either be a 
PULSe Routing Intermediary or establish a relationship with a third 
party PULSe Routing Intermediary. A ``PULSe Routing Intermediary'' is a 
CBOE or CBSX TPH that has connectivity to, and is a member of, other 
options exchanges and/or stock exchanges and trading

[[Page 62882]]

centers. If a TPH sends an order from the PULSe workstation, the PULSe 
Routing Intermediary will route that order to the designated market on 
behalf of the entering TPH.\7\
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    \6\ For a more detailed description of the PULSe workstation and 
its other functionalities, see, e.g., Securities Exchange Act 
Release Nos. 62286 (June 11, 2010), 75 FR 34799 (June 18, 2010) (SR-
CBOE-2010-051); 63244 (November 4, 2010), 75 FR 69148 (November 10, 
2010) (SR-CBOE-2010-100); 63721 (January 14, 2011), 76 FR 3929 
(January 21, 2011) (SR-CBOE-2011-001); and 65280 (September 7, 
2011), 76 FR 56838 (September 14, 2011) (SR-CBOE-2011-083).
    \7\ The PULSe workstation offers the ability to route orders to 
any market including, among others, CBOE/CBSX affiliate C2 Options 
Exchange, Incorporated (``C2''). To the extent a CBOE/CBSX 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. See, e.g., SR-CBOE-2010-100 and 
SR-CBOE-2011-083, note 5, supra. It is also not necessary for that 
TPH to utilize the services of a Routing Intermediary to route 
orders to C2. As such, to the extent a CBOE/CBSX TPH is also a C2 
TPH, the ``Away-Market Routing'' and ``Routing Intermediary'' fees 
detailed in the Exchange Fees Schedule are not be applicable because 
the fees are only applicable for away-market routing. The TPH would 
not be away-market routing, but instead would be submitting orders 
directly to CBOE as a CBOE TPH, CBSX as a CBSX TPH or C2 as a C2 
TPH, as applicable, where the TPH's activity would be subject to the 
transaction fee schedule of CBOE, CBSX or C2, respectively. To the 
extent a CBOE/CBSX TPH is not a C2 TPH, the Away-Market Routing and 
Routing Intermediary fees would apply for the CBOE/CBSX TPH's 
executions on C2.
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    The first purpose of this proposed rule change is to adopt a CBOE/
CBSX Routing fee. This fee would be payable by a TPH that makes the 
PULSe workstation available to non-TPHs and would only be applicable 
for routing to CBOE/CBSX from such non-TPH PULSe workstations. The fee 
would be $0.02 per contract or share equivalent for the first 1 million 
contracts or share equivalent executed in a month on CBOE/CBSX that 
originate from the non-TPH PULSe workstations made available by the 
TPH, and $0.03 per contract or share equivalent for each additional 
contract or share equivalent executed on CBOE/CBSX in the same month 
from the non-TPH PULSe workstations made available by the TPH.\8\
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    \8\ The Exchange notes that C2 is submitting a similar rule 
change to introduce a ``C2 Routing'' fee that will be applicable to 
C2 TPHs. See SR-C2-2011-028. To the extent that a CBOE TPH making 
the non-TPH PULSe workstations available is not also a CBSX TPH or a 
C2 TPH, routing from the non-TPH workstations to CBSX or C2 would 
not be considered ``CBOE/CBSX Routing'' or ``C2 Routing,'' 
respectively, and, therefore, would not be subject to those fees (it 
would instead be considered ``away-market routing'' and subject to 
the Away-Market Routing and Routing Intermediary fees described 
above). To the extent that a CBOE TPH making the non-TPH PULSe 
workstations available is also a CBSX TPH or C2 TPH, routing from 
the non-TPH workstations to CBSX or C2 would be considered ``CBOE/
CBSX Routing'' or ``C2 Routing,'' respectively, and therefore would 
be subject to the respective fee.
    Example 2: Assume a CBOE TPH that is not a C2 TPH makes a PULSe 
workstation available to Non-TPH User A. To the extent that orders 
originating from Non-TPH User A's PULSe workstation are routed to 
CBOE, any resulting executions would be subject to the CBOE/CBSX 
Routing fee. To the extent that orders originating from Non-TPH User 
A's PULSe workstation are routed to C2, any resulting executions 
would be considered away-market routing and subject to the Away-
Market Routing and Routing Intermediary fees (and not subject to the 
C2 Routing fee).
    Example 1: Assume a CBOE TPH that is also a C2 TPH makes a PULSe 
workstation available to Non-TPH User A. To the extent that orders 
originating from Non-TPH User A's PULSe workstation are routed to 
CBOE, any resulting executions would be subject to the CBOE/CBSX 
Routing fee. To the extent that orders originating from Non-TPH User 
A's PULSe workstation are routed to C2, any resulting executions 
would be subject to the C2 Routing fee. (Given the CBOE TPH's status 
as a C2 TPH, such orders are not considered away-market routing and 
therefore are not subject to the Away-Market Routing and Routing 
Intermediary fees.)
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    The CBOE/CBSX Routing fee will allow for the recoupment of the 
costs of developing, maintaining, and supporting the PULSe workstation 
and for income from the value-added services being provided through use 
of the PULSe workstation. The Exchange believes the fee structure 
represents an equitable allocation of reasonable fees in that the same 
fees will be applicable to all TPHs that make PULSe workstations 
available to non-TPHs. The Exchange also believes that the 
establishment of the fee, which is payable by TPHs only for 
transactions originating from non-TPH workstations, is equitable and 
not unfairly discriminatory because non-TPHs are able to obtain the 
benefits of utilizing the PULSe workstation--including the ability to 
route orders to the Exchange--without becoming a TPH (and incurring the 
associated costs of TPH membership). In addition, the Exchange believes 
that the $0.02/$0.03 CBOE/CBSX Routing fee is reasonable and 
appropriate in light of the facts that it is small in relation to the 
total costs typically incurred in routing and executing orders and that 
the amount is comparable to the Exchange's existing Routing 
Intermediary fee for away-market routing. The Exchange notes that the 
lower $0.02 rate for the first 1 million contracts or share equivalent 
(as compared to the $0.03 rate for each additional contract or share 
equivalent) is reasonable in that it is designed to help attract and 
encourage use of the PULSe workstation. The Exchange also notes that 
use of the PULSe workstation, and the routing technology available 
through the PULSe workstation, are not compulsory. The service is 
offered as a convenience and is not the exclusive means available to 
send or route orders to CBOE or CBSX (or another market).
    The second purpose of this proposed rule change is to revise and 
expand on the description in the Fees Schedule text of the ``Routing 
Intermediary'' fee.\9\ In particular, the Exchange is renaming the fee 
from ``Routing Intermediary'' fee to ``Away-Market Routing 
Intermediary'' fee. Because this fee is only applicable when a Routing 
Intermediary is routing to away markets, the Exchange believes this 
change in title will be more descriptive and helpful to persons reading 
the Fees Schedule. Likewise, the Exchange is expanding on the 
description in the text to make clear that the ``Away-Market Routing 
Intermediary'' fee is payable by a Routing Intermediary and is only 
applicable for away-market routing from any PULSe workstation. The 
expanded description also makes clear that the fee rates are determined 
based on the aggregate level of transactions across all away-markets 
and across all PULSe workstations for which firm serves as the Routing 
Intermediary. This level of detail on the meaning and application of 
the fee was previously included in the discussion section of prior rule 
filings and is consistent with the Exchange's original intent and 
understanding the fee structure.\10\ The Exchange is simply proposing 
to include the clarifying information within the text of the Fees 
Schedule.
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    \9\ This fee is currently $0.02 per contract or share equivalent 
for the first 1 million contracts or share equivalent executed in a 
month and $0.03 per contract or share equivalent for each additional 
contract or share equivalent executed in the same month.
    \10\ See, e.g., SR-CBOE-2011-083, note 5, supra.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\11\ in general, and furthers the objectives of Section 6(b)(4) of 
the Act,\12\ 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 are applicable to all TPHs that utilize the 
PULSe workstation or make it available to non-TPHs.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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    With respect to the CBOE/CBSX Routing fee in particular, the 
Exchange believes that the establishment of the CBOE/CBSX Routing fee, 
which is payable by TPHs only for transactions originating from non-TPH 
workstations, is equitable and not unfairly discriminatory because, 
from the TPH perspective, as indicated above, the same fees are 
applicable to all TPHs that make the PULSe workstation available to 
non-TPHs. In addition, because non-TPHs are able to obtain the benefits 
of utilizing the PULSe workstation--including the ability to route 
orders to the Exchange--without becoming a TPH (and incurring the 
associated costs of TPH membership), the Exchange believes it is 
equitable and not unfairly

[[Page 62883]]

discriminatory for the Exchange to assess the CBOE/CBSX Routing fee to 
TPHs for executions of orders originating from non-TPH PULSe 
workstations. The Exchange believes that the $0.02/$0.03 CBOE/CBSX 
Routing fee rate itself--which will allow for the recoupment of the 
costs of developing, maintaining, and supporting the PULSe workstation 
and for income from the value-added services being provided through use 
of the PULSe workstation--is reasonable and appropriate in light of the 
facts that it is small in relation to the total costs typically 
incurred in routing and executing orders and that the amount is 
comparable to the Exchange's existing Routing Intermediary fee for 
away-market routing. The Exchange also believes that the lower $0.02 
rate for the first 1 million contracts or share equivalent (as compared 
to the $0.03 rate for each additional contract or share equivalent) is 
reasonable in that it is designed to help attract and encourage use of 
the PULSe workstation. Finally, in our consideration that the fee is 
equitable and not unfairly discriminatory, the Exchange note that use 
of the PULSe workstation, and the routing technology available through 
the PULSe workstation, are not compulsory. The service is offered as a 
convenience and is not the exclusive means available to send or route 
orders to CBOE or CBSX (or another market).

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 \13\ and subparagraph (f)(2) of Rule 19b-4 
\14\ thereunder.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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-2011-092 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-2011-092. 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 
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-2011-092 and should be 
submitted on or before November 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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26139 Filed 10-7-11; 8:45 am]
BILLING CODE 8011-01-P