[Federal Register Volume 77, Number 23 (Friday, February 3, 2012)]
[Notices]
[Pages 5595-5603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-2409]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66277; File No. SR-CBOE-2012-008]


 Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend the Fees Schedule

January 30, 2012.
    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 January 17, 2012, the Chicago Board Options Exchange, 
Incorporated (the ``Exchange'' or ``CBOE'') 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 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Fees Schedule. 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 make a series of amendments to its Fees 
Schedule for 2012. First, the Exchange proposes to eliminate the waiver 
for customer fees for transactions in options on the Nasdaq 100 Index 
Tracking Stock (``QQQQ''). Such transactions will now be assessed a fee 
of $0.18 per contract, equivalent to the fee assessed for customer 
transactions in options on other exchange-traded funds (``ETFs''), 
exchange-traded notes (``ETNs'') and HOLDRs. The purpose of this 
proposed change is to make the fees for QQQQ options transactions 
equivalent to the fees for transactions on other ETFs.
    The Exchange also proposes to modify the Liquidity Provider Sliding 
Scale to exclude SPX, VIX or other volatility indexes, OEX and XEO. 
This scale offers consistently-lowering fees for market participants 
who provide increasing liquidity. The Exchange would have preferred to 
modify the Liquidity Provider Sliding Scale to include only multiply-
listed products because the Exchange has expended considerable 
resources in developing its proprietary, singly-listed products. 
However, some CBOE singly-listed products are used to compete with 
multi-listed products that are also listed on CBOE (for example, the 
singly-listed XSP options compete with the multiply-listed SPY options, 
both of which approximate \1/10\ of the S&P 500 Index, and the singly-
listed DJX options compete with the multiply-listed DIA options, both 
of which are based on \1/100\ of the value of the Dow Jones Industrial 
Average). Including the multiply-listed products for qualification 
towards the Liquidity Provider Sliding Scale while excluding their 
singly-listed competitors might create a pricing advantage that might 
discourage trading in some of the singly-listed products that the 
Exchange expended resources to develop. As such, the Exchange now 
proposes to include the singly-listed products for qualification 
towards the Liquidity Provider Sliding Scale along with their multiply-
listed competitors, and only exclude SPX, VIX or other volatility 
indexes, OEX and XEO from the Liquidity Provider Sliding Scale. The 
Exchange also proposes lowering the tier levels in the Liquidity 
Provider Sliding Scale to reflect the exclusion of SPX, VIX or other 
volatility indexes, OEX and XEO. The Exchange also proposes amending 
the prepay amounts relating to the Liquidity Provider Sliding Scale 
that are listed in Footnote 10 to reflect the changed tier levels.
    The Exchange proposes changing the name of the ``Multiply-Listed 
Options Fee Cap'' to the ``Clearing Trading Permit Holder Fee Cap in 
All Products Except SPX, VIX or other Volatility Indexes, OEX or XEO.'' 
In actuality, the Multiply-Listed Options Fee Cap has always applied to 
some singly-listed products, and only excluded the products listed 
above. As such, the name has been somewhat inaccurate, and the Exchange 
hereby proposes to fix this issue in order to clear up any confusion.
    The Exchange also proposes, for competitive reasons, to limit the 
Clearing Trading Permit Holder (``CTPH'') Fee Cap in All Products 
Except SPX, VIX or other Volatility Indexes, OEX or XEO (the ``Cap'') 
to include only orders executed in open outcry or the Exchange's 
Automated Improvement Mechanism (``AIM''), or as qualified contingent 
cross (``QCC'') or FLEXible Options (``FLEX Options'') transactions. 
NASDAQ OMX PHLX LLC (``PHLX'') provides for a similar $75,000 cap which 
also applies to firm open outcry business, but does not apply to their 
PIXL mechanism, which, like AIM, is a price improvement mechanism, and 
does not apply to electronic transactions in select symbols.\3\ The 
Exchange also proposes to include fees from QCCs and FLEX Options 
transactions towards the Cap to attract such orders to the Exchange. 
Limiting the Cap to include only orders executed in open outcry or AIM 
or as QCC or FLEX Options transactions allows CBOE to compete with PHLX 
while not foregoing collecting the necessary fees to continue to 
operate the Exchange.
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    \3\ See PHLX Fee Schedule, Section I, Part C (page 5) and 
Section II (page 7).
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    Correspondingly, the Exchange also proposes to cease excluding AIM 
Contra Execution Fees from counting towards the Cap. Going forward, AIM 
Contra

[[Page 5596]]

Execution Fees will be considered in helping a CTPH reach the Cap 
(though CTPHs will still continue to pay the AIM Contra Execution Fees 
after reaching the Cap). The purpose of this change is to align and 
improve the Exchange's competitive position in relation to other 
exchanges. PHLX, as previously stated, has a similar $75,000 cap which 
also applies to firm open outcry business, but does not apply to their 
PIXL mechanism, which, like AIM, is a price improvement mechanism, and 
does not apply to electronic transactions in select symbols.\4\ By 
including AIM Contra Execution Fees towards the Cap, and at a lower 
rate than that which PHLX charges in its PIXL mechanism, the Exchange 
is providing a demonstrably advantageous pricing schedule for this 
business.\5\ Additionally, as at PHLX, electronic fees in the busiest 
options classes are not counted towards the Cap. As such, the Exchange 
proposes to include all AIM transaction fees, including the AIM Contra 
Execution Fees, towards reaching the Cap (when they apply) to improve 
our competitive position. The Exchange would also like to encourage the 
use of AIM, which is a price improvement mechanism. Finally, it should 
be clarified that while a responder to an AIM auction pays a fee that 
is not counted towards the Cap, this is because only Market-Makers can 
respond to an AIM auction, and the Cap only applies to CTPHs (and not 
Market-Makers). The Cap will remain limited to CTPHs, as they 
contribute capital to facilitate execution of customer orders, which in 
turn provides a deeper pool of liquidity that benefits all market 
participants.
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    \4\ See PHLX Fee Schedule, Section I, Part C (page 5) and 
Section II (page 7).
    \5\ See PHLX Fee Schedule, Section IV (page 10).
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    Similarly, PHLX waives its equity options transaction fees for 
firms executing facilitation orders when the firms are trading in their 
own proprietary accounts.\6\ As such, the Exchange, for competitive 
reasons, proposes to waive the transaction fees for CTPH Proprietary 
facilitation orders (other than SPX, VIX or other volatility indexes, 
OEX or XEO) executed in AIM or open outcry, or as a QCC or FLEX Options 
transaction (the ``CTPH Proprietary Facilitation Waiver'') in order to 
align our competitive position and even improve upon it (as PHLX does 
not waive such a fee for orders executed in its PIXL mechanism, in the 
select symbols). The Exchange would have preferred to include only 
multiply-listed products in the CTPH Proprietary Facilitation Waiver 
because those are the only products in which the Exchange faces 
competitive pricing pressures, and the Exchange has expended 
considerable resources in developing its proprietary, singly-listed 
products. However, some CBOE singly-listed products are used to compete 
with multi-listed products that are also listed on CBOE (as explained 
above). Including the multiply-listed products in the CTPH Proprietary 
Facilitation Waiver while excluding their singly-listed competitors 
might create a pricing advantage that might discourage trading in some 
of the singly-listed products that the Exchange expended resources to 
develop. As such, the Exchange proposes to include the singly-listed 
products in the CTPH Proprietary Facilitation Waiver along with their 
multiply-listed competitors, and only exclude SPX, VIX or other 
volatility indexes, OEX and XEO from the CTPH Proprietary Facilitation 
Waiver. The CTPH Proprietary Facilitation Waiver is limited to 
executions in AIM or open outcry, or as a QCC or FLEX Options 
transaction, because those are the only ways to execute a facilitation 
trade on the Exchange.
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    \6\ See PHLX Fee Schedule, Section II (pages 7-8).
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    It should be noted that, for the purposes of the CTPH Proprietary 
Facilitation Waiver, the Exchange is defining ``facilitation order'' as 
any paired order in which a CTPH (``F'') origin code is contra to any 
other origin code, provided the same executing broker and clearing firm 
are on both sides of the order. The reason only CTPH orders can qualify 
as ``facilitation orders'' is that the Exchange's systems cannot 
determine whether or not an order is a facilitation order unless such 
order comes in with the ``F'' origin code, and only CTPH orders come in 
with the ``F'' origin code. As such, the Exchange's systems would be 
unable to determine whether or not an order from any other market 
participant is a facilitation order. Further, PHLX only waives fees on 
facilitation orders for firms (which are similar to CTPHs).\7\
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    \7\ See PHLX Fee Schedule Section II (pages 7-8).
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    Along with ceasing excluding AIM Contra Execution Fees from 
counting towards the Cap, the Exchange also proposes ceasing excluding 
contracts executed in AIM that incur the AIM Contra Execution Fee from 
counting towards the CBOE Proprietary Products Sliding Scale. Going 
forward, contracts executed in AIM that incur the AIM Contra Execution 
Fee will count towards helping a CTPH reach a higher tier in the CBOE 
Proprietary Products Sliding Scale, and thereby pay lower fees for 
executions in CBOE proprietary products. The purpose of this change is 
to improve the Exchange's competitive position. The Exchange would also 
like to encourage the use of AIM, which is a price improvement 
mechanism. The purpose of these changes is to lower fees for CTPHs and 
thereby encourage CTPHs to transact more business on the Exchange, 
thereby increasing volume and liquidity.
    Currently, the Exchange does not assess the marketing fee on 
transactions in a number of securities. The Exchange now proposes to 
remove the ETFs EWC, EWT, MNX, MVR, QQQQ, RSP, VPL, VWO and XBI (the 
``New Marketing Fee Options'') from the list of securities that are not 
assessed the marketing fee, and begin assessing the marketing fee on 
qualifying transactions in those securities. Going forward, 
transactions in the New Marketing Fee Options will be assessed a 
marketing fee of $0.25 per contract, like nearly all other ETFs. The 
purpose of this change is to increase volume on the New Marketing Fee 
Options. By assessing a marketing fee on the New Marketing Fee Options 
transactions, the Exchange will be able to use the money collected to 
attract volume, pursuant to the Exchange's marketing fee plan. The 
Exchange believes that the demographics of the New Marketing Fee 
Options order flow is inclined to seek economic considerations such as 
payment for order flow, so a marketing fee for the New Marketing Fee 
Options trades is necessary to attract volume and liquidity in the New 
Marketing Fee Options.
    CBOE implemented on December 1, 2010,\8\ and extended on April 1, 
2011,\9\ July 1, 2011,\10\ and October 1, 2011 \11\ a pilot program 
relating to the assessment of the marketing fee in the SPY option 
class. Specifically, CBOE previously determined not to assess the 
marketing fee on electronic transactions in options on Standard & 
Poor's Depositary Receipts (``SPY options'') (a unique and active 
class), except that it would continue to assess the marketing fee on 
electronic transactions resulting from AIM pursuant to CBOE Rule 6.74A 
and transactions in open outcry (the ``SPY Marketing Fee Waiver''). The 
SPY Marketing Fee Waiver is intended to

[[Page 5597]]

attract more SPY customer volume and allow CBOE market-makers to better 
compete for order flow. The Exchange hereby proposes to extend the SPY 
Marketing Fee Waiver to also include qualifying transactions in QQQQ 
under the same terms as those that now apply to SPY (the ``SPY and QQQQ 
Marketing Fee Waiver'') (previously, transactions in QQQQ were not 
subject to the marketing fee, but as QQQQ is one of the New Marketing 
Fee Options, the Exchange above proposes to make QQQQ transactions 
subject to the marketing fee). Designated Primary Market-Makers and 
Preferred Market-Makers can utilize the marketing fee funds to attract 
orders from payment accepting firms that are executed in AIM and in 
open outcry. The marketing fee funds received by payment-accepting 
firms may be used to offset transaction and other costs related to the 
execution of an order in AIM and in open outcry, including in the SPY 
and QQQQ option classes. CBOE believes that the current demographics of 
electronic, non-AIM SPY and QQQQ option order flow is more driven by 
the displayed best bid or offer (``BBO'') and size than payment for 
order flow considerations, and thus assessment of the marketing fee for 
those transactions is not a differentiator at this time. Going forward, 
the marketing fee will continue to be assessed on open outcry 
transactions in SPY and be assessed on open outcry transactions in QQQQ 
(as QQQQ is one of the New Marketing Fee Options).
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    \8\ See Securities Exchange Act Release No. 63470 (December 8, 
2010), 75 FR 78284 (December 15, 2010) (SR-CBOE-2010-108).
    \9\ See Securities Exchange Act Release No. 64212 (April 6, 
2011), 76 FR 20411 (April 12, 2011) (SR-CBOE-2011-033).
    \10\ See Securities Exchange Act Release No. 64818 (July 6, 
2011), 76 FR 40978 (July 12, 2011) (SR-CBOE-2011-060).
    \11\ See Securities Exchange Act Release No. 65517 (October 7, 
2011), 76 FR 63976 (October 14, 2011) (SR-CBOE-2011-097).
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    This SPY Marketing Fee Waiver pilot program is scheduled to 
terminate on December 31, 2011. The Exchange has periodically continued 
to extend the SPY Marketing Fee Waiver for successive three-month 
periods so that the Exchange could simply allow the SPY Marketing Fee 
Waiver to expire should the Exchange desire that the SPY Marketing Fee 
Waiver would no longer apply. The Exchange now proposes to cease 
extending the SPY Marketing Fee Waiver for three-month periods and 
simply leave the SPY and QQQQ Marketing Fee Waiver in the Fees 
Schedule. If the Exchange later determines that the SPY and QQQQ 
Marketing Fee Waiver should no longer apply, the Exchange would have to 
file to remove the SPY and QQQQ Marketing Fee Waiver from the Fees 
Schedule, just like any other non-temporary provision in the Fees 
Schedule.
    As reflected in Footnote 8 of the Fees Schedule, the Exchange 
currently waives the $.18 per contract transaction fee for public 
customer (``C'' origin code) orders in SPY and XLF options that are 
executed in open outcry or AIM (the ``C Waiver'').\12\ This fee waiver 
is due to expire on December 31, 2011. The Exchange has periodically 
continued to extend the C Waiver for successive three-month periods so 
that the Exchange could simply allow the C Waiver to expire should the 
Exchange desire that the C Waiver would no longer apply. The Exchange 
now proposes to cease extending the C Waiver for three-month periods 
and simply leave the C Waiver in the Fees Schedule. If the Exchange 
later determines that the C Waiver should no longer apply, the Exchange 
would have to file to remove the C Waiver from the Fees Schedule, just 
like any other non-temporary provision in the Fees Schedule.
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    \12\ See Securities Exchange Act Release No. 34-62902 (September 
14, 2010), 75 FR 57313 (September 20, 2010), Securities Exchange Act 
Release No. 34-63422 (December 3, 2010), 75 FR 76770 (December 9, 
2010), Securities Exchange Act Release No. 34-64197 (April 6, 2011), 
76 FR 20390 (April 12, 2011), Securities Exchange Act Release No. 
34-64817 (July 6, 2011), 76 FR 40948 (July 12, 2011), Securities 
Exchange Act Release No. 34-65518 (October 7, 2011), 76 FR 63971 
(October 14, 2011) and CBOE Fees Schedule, footnote 8.
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    The Exchange also proposes to extend the C Waiver to all ETF, ETN 
and HOLDRs options (the ``C Waiver for Index Options''). The C Waiver 
for Index Options is intended to attract more customer volume on the 
Exchange in these products. For competitive reasons, the customer base 
for open outcry and AIM trading in ETF, ETN and HOLDRs options appears 
more sensitive to fees than the customer base for such trading in other 
products. Moreover, CBOE proposes the C Waiver to compete with other 
exchanges. For example, NYSE Arca, Inc. (``Arca'') does not charge 
customer transaction fees for customer transactions in ETF, ETN and 
HOLDRs options.\13\ As such, the Exchange desires to waive customer 
transaction fees for ETF, ETN and HOLDRs options executed in open 
outcry or via AIM in order to better compete (while Arca does not have 
a price improvement mechanism comparable to AIM, the Exchange desires 
to include AIM in the C Waiver to encourage the use of this price 
improvement mechanism). The Exchange also desires to apply the C Waiver 
for Index Options to QCC trades because a QCC trade is a paired order, 
and the only ways to execute paired orders are via AIM and open outcry, 
so QCC trades should then be included in the C Waiver for Index 
Options, too. The Exchange also believes that waiving the transaction 
fee for such customer trades in ETF, ETN and HOLDRs options will 
encourage greater customer trading in these products. The increased 
volume and liquidity resulting from greater customer trading in those 
products will benefit all market participants trading in these 
products. The Exchange also proposes adding trades executed as a FLEX 
Options transaction to the C Waiver for Index Options for competitive 
reasons. A number of other exchanges do not charge for public customer 
FLEX Options transactions in ETF, ETN and HOLDRs options.\14\
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    \13\ See Arca Options Fee Schedule, page 3.
    \14\ See NYSE Amex Options Fee Schedule, page 3, which shows Non 
BD Customer Manual transactions (the manner by which FLEX Options 
are traded on the NYSE Amex Options market) to be assessed a $0.00 
transaction fee.
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    The Exchange proposes raising the Floor Broker Workstation 
(``FBW'') fee from $225 per month (per login ID) to $350 per month (per 
login ID). The Exchange's vendor that provides the FBW charges the 
Exchange more than $225 per month (per login ID) for the FBW (actually, 
more than $350 per month (per login ID)), and the Exchange had been 
subsidizing those costs for FBW users. However, it is no longer 
economically feasible to subsidize those costs to that great an extent. 
As such, the Exchange proposes increasing the FBW fee to $350 per month 
(per login ID), which still includes a subsidy for FBW users (though 
smaller).
    The Exchange also proposes raising the PULSe On-Floor Workstation 
(``PULSe'') fee from $225 per month (per login ID) to $350 per month 
(per login ID). The Exchange expended significant resources developing 
PULSe, and intends to recoup some of those costs. Further, because 
PULSe and FBW serve similar functions, the Exchange desires to assess 
equivalent fees for each so as not to offer a pricing advantage for one 
over the other.
    The Exchange also proposes to reduce Market-Maker Trading Permit 
monthly costs from $6,000 per permit to $5,500 per permit. Furthermore, 
for those who commit to the Market-Maker Trading Permit Holder Sliding 
Scale, which is available for all Market-Maker Trading Permits held by 
affiliated Trading Permit Holders and Trading Permit Holder (``TPH'') 
organizations that are used for appointments in any options classes 
other than SPX, VIX, OEX and XEO, the Exchange proposes to reduce the 
monthly cost from $6,000 per permit to $5,500 per permit for the first 
10 permits, from $4,800 to $4,000 per permit for permits 11-20, and 
from $3,000 to $2,500 per permit for permits 21 and greater. The 
purpose of this change is to reduce access costs and thereby encourage 
greater Market-Maker access, which thereby brings greater

[[Page 5598]]

trading activity, volume and liquidity, benefitting all market 
participants.
    The Exchange would also like to amend the date by which a Market-
Maker TPH (``MMTPH'') must commit to the Market-Maker Trading Permit 
Sliding Scale. The Market-Maker Trading Permit Holder Sliding Scale was 
instituted in SR-CBOE-2011-004, which was filed on January 3, 2011. As 
such, the text of the Market-Maker Trading Permit Sliding Scale was 
drafted to allow MMTPHs to notify the Registration Services Department 
of their commitments to the Market-Maker Trading Permit Sliding Scale 
for a year as late as January 25 of that year. However, since the rule 
is now in place, and the Exchange notified MMTPHs of this proposed 
change on December 8, 2011,\15\ giving them ample time to commit, the 
Exchange proposes to amend the language to require that a MMTPH notify 
the Registration Services Department of such a commitment by December 
25th (or the preceding business day if the 25th is not a business day) 
of the year prior to each year in which the MMTPH would like to commit 
to the Market-Maker Trading Permit Sliding Scale.
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    \15\ See Exchange Regulatory Circular RG11-158.
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    The Exchange also proposes to raise the VIX Tier Appointment fee 
from $1,000 per month to $2,000 per month. ``VIX'' stands for CBOE 
Market Volatility Index, and VIX options are a proprietary product 
developed by the Exchange. In order for a Market-Maker Trading Permit 
to be used to act as a Market-Maker in VIX options, the TPH must obtain 
a VIX Tier Appointment for that Market-Maker Trading Permit. Each VIX 
Tier Appointment may only be used with one designated Market-Maker 
Trading Permit. The VIX Tier Appointment fee is currently assessed to 
any Market-Maker Trading Permit Holder that either (a) has a VIX Tier 
Appointment at any time during a calendar month; or (b) trades at least 
1,000 VIX options contracts in open outcry during a calendar month. VIX 
trading volume has increased recently, and due to increased demand, the 
Exchange proposes to raise the VIX Tier Appointment fee in order to 
recoup costs from developing VIX options, as well as other 
administrative costs. In a related change, the Exchange also proposes 
to raise the amount of the fee assessed to any Floor Broker Trading 
Permit Holder that executes more than 20,000 VIX contracts during a 
month from $1,000 to $2,000 in order to remain consistent with the 
amount of the VIX Tier Appointment fee assessed to Market-Makers. If 
and to the extent that a TPH or TPH organization has more than one 
Floor Broker Trading Permit that is utilized to execute VIX options 
transactions, the VIX options executions of that TPH or TPH 
organization shall be aggregated for purposes of determining this 
additional monthly fee and the Trading Permit Holder or TPH 
organization shall be charged a single $2,000 fee for the combined VIX 
options executions through those Floor Broker Trading Permits if the 
executions exceed 20,000 contracts per month.
    Also, the Exchange proposes to remove from the regulatory circular 
regarding Trading Permit Holder Application and Other Fees language 
that would apply this fee to any Floor Broker Trading Permit Holder 
whose aggregate VIX options executed contracts during the month 
comprise more than 30% of the Floor Broker Trading Permit Holder's 
exchange-wide total executed contracts. This language was to have been 
removed in SR-CBOE-2011-073, and indeed was removed from one section of 
the regulatory circular, as well as the Fees Schedule, but was 
inadvertently left in another section of the regulatory circular.\16\ 
Removing this language will alleviate any confusion.
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    \16\ See Securities Exchange Act Release No. 65019 (August 3, 
2011), 76 FR 48931 (August 9, 2011) (SR-CBOE-2011-073).
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    The Exchange also proposes to amend the qualification for the VIX 
Tier Appointment fee to state that a Market-Maker TPH that has a VIX 
Tier Appointment during a given month will not be assessed the VIX Tier 
Appointment fee unless that Market-Maker TPH trades at least 100 VIX 
options contracts electronically while that appointment is active. 
Occasionally, a Market-Maker accidentally elects for a VIX Tier 
Appointment, or elects for a VIX Tier Appointment and for some reason 
does not end up trading VIX options. Under the current language of the 
Fees Schedule, such a Market-Maker would still be assessed the VIX Tier 
Appointment fee, despite not actually trading in VIX options. The VIX 
Tier Appointment fee is intended to be assessed only to those Market-
Makers that actually trade in VIX options. As such, the proposed change 
would ensure that only those Market-Makers that actually do trade in 
VIX options are assessed the VIX Tier Appointment fee.
    The Exchange proposes to institute a Floor Broker Trading Permit 
Sliding Scale, which will be available for all Floor Broker Trading 
Permits held by affiliated TPHs and TPH organizations. Most floor 
broker firms have, and need, at least two floor brokers: One to answer 
the phones and receive trade and order information, and another to 
execute trades. However, for floor broker ``firms'' that only have one 
floor broker, that broker answers the phones and the Exchange often 
ends up executing the trades for the floor broker. As such, in order to 
recoup the costs involved for the Exchange, as well as normalize base 
business costs across Floor Broker Trading Permit Holder operations to 
ensure that the Exchange is not unduly subsidizing one operation over 
another, the base rate for Floor Broker Trading Permits will be $9,000 
per month. However, the Exchange will also institute a sliding scale 
for Floor Broker Trading Permit Holders that commit to a minimum number 
of Floor Broker Trading Permits for the calendar year. For those who 
do, the TPH's first Floor Broker Trading Permit will cost $9,000 per 
month. Permits 2 through 7 will cost $6,000 per month per permit (Tier 
1), and any permits above 7 will cost a TPH $3,000 per permit per month 
(Tier 2). The purpose of the Floor Broker Trading Permit Sliding Scale 
is to encourage floor broker firms to increase their scale and 
commitment to the Exchange, thereby bringing more business to the 
Exchange, resulting in greater trading volume and liquidity, which 
benefits all market participants.
    To qualify for the rates set forth in Tiers 1 and 2 in the Floor 
Broker Trading Permit Sliding Scale, the applicable Trading Permit 
Holder(s) and/or TPH organization(s) must commit in advance to a 
specific tier that includes a minimum number of eligible Floor Broker 
Trading Permits for each calendar year. To do so, a Floor Broker 
Trading Permit Holder must notify the Exchange's Registration Services 
Department by December 25th (or the preceding business day if the 25th 
is not a business day) of the year prior to each year in which the 
Floor Broker Trading Permit Holder would like to commit to this sliding 
scale of the tier of eligible Floor Broker Trading Permits committed to 
by that Floor Broker Trading Permit Holder for that year (Floor Brokers 
were notified of this on December 8, 2011 \17\). Floor Brokers are not 
obligated to commit to either tier. However, the discounts will apply 
only to those that do commit to Tier 1 or Tier 2 for the calendar year. 
Trading Permit Holders that are not eligible for and/or do not commit 
to Tier 1 or Tier 2 will pay the standard rate of $9,000 for each Floor 
Broker Trading Permit, regardless of the total number of Floor Broker 
Trading Permits used. If a TPH chooses to

[[Page 5599]]

commit to either Tier 1 or Tier 2, that TPH will be responsible for the 
minimum number of permits in the commitment tier for the remainder of 
the calendar year. Even if a TPH does not maintain the minimum level of 
eligible Trading Permits in the tier, that TPH is still responsible for 
the minimum payment for that commitment tier for the remainder of the 
calendar year. For example, a TPH that commits to eight eligible 
permits per month will be subject to a minimum monthly access fee of 
$48,000 (1 at $9,000 plus 6 at $6,000 plus 1 at $3,000 = $48,000) for 
that calendar year. Any additional Permits will increase the fee by the 
applicable amount.
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    \17\ See Exchange Regulatory Circular RG11-158.
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    A TPH will be able to commit to a higher tier of the sliding scale 
for the remainder of a calendar year, during a commitment year, if the 
TPH obtains enough eligible Floor Broker Trading Permits and provides 
written notification to the Registration Services Department by the 
25th day of the month preceding the month in which the higher tier will 
be effective (or the preceding business day if the 25th is not a 
business day). For example, a TPH may provide written notice to commit 
to Tier 1 effective July 1 for the remainder of the calendar year as 
long as the TPH obtains enough eligible Trading Permits and provides 
written notice by June 25th that the TPH would like to participate in 
the sliding scale starting in July for the remainder of that calendar 
year. Even if that TPH subsequently falls below the minimum number of 
eligible Floor Broker Trading Permits (in the committed calendar year), 
for the committed tier, the TPH will remain responsible for paying for 
the tier minimum for the remainder of the calendar year.
    TPHs will be responsible to pay for at least the minimum amount of 
eligible Floor Broker Trading Permits in the committed tier for the 
calendar year on a monthly basis unless the TPH entirely terminates as 
a TPH during the year. If a TPH combines, merges, or is acquired during 
the course of the calendar year, the surviving TPH will maintain 
responsibility for the committed number of eligible Floor Broker 
Trading Permits.
    The proposed Floor Broker Trading Permit Sliding Scale is available 
to all floor brokers. In essence, CBOE is offering a discounted fee in 
return for a commitment for a designated period of time. Trading Permit 
Holders are not precluded from providing notice that they wish to 
participate in the Floor Broker Trading Permit Sliding Scale throughout 
a calendar year as long as such notice is provided by the 25th day of 
the preceding month of effectiveness. CBOE is proposing to offer the 
Floor Broker Trading Permit Sliding Scale as a benefit to those Trading 
Permit Holders that commit in advance. There is no obligation to commit 
to either Tier 1 or Tier 2 of the Floor Broker Trading Permit Sliding 
Scale.
    The Exchange also proposes to assess an additional monthly fee of 
$3,000 per month to any Floor Broker Trading Permit Holder that 
executes more than 20,000 SPX contracts during the month. If and to the 
extent that a Trading Permit Holder or TPH organization has more than 
one Floor Broker Trading Permit that is utilized to execute SPX options 
transactions, the SPX executions of that Trading Permit Holder or TPH 
organization shall be aggregated for purposes of determining this 
additional monthly fee and the Trading Permit Holder or TPH 
organization shall be charged a single $3,000 fee for the combined SPX 
executions through those Floor Broker Trading Permits if the executions 
exceed 20,000 contracts per month. The Exchange already assesses a 
similar fee to Floor Broker Trading Permit Holders that execute more 
than 20,000 VIX transactions during a month. The purpose of this change 
is to reflect the opportunity provided to agents servicing customers in 
such a high-volume product. Further, this fee will equalize the 
opportunity between Market-Makers and Floor Brokers in SPX options. 
Also, the Exchange expended considerable resources developing SPX 
options and desires to recoup such expenses and other administrative 
costs.
    The Exchange also proposes to lower the fee for the Quoting and 
Order Entry Bandwidth Packet (the ``Packet'') from $3,000 per month to 
$2,750 per month. The amount of the fee for the Packet has always been 
set at half the price of the base rate for a Market-Maker Trading 
Permit. Since the Exchange proposes to lower that amount from $6,000 to 
$5,500, the Exchange correspondingly proposes to lower the amount of 
the fee for the Packet to $2,750.
    The Exchange proposes amending a number of the TPH Application 
fees, as listed below:

------------------------------------------------------------------------
                                         Current fee    Proposed new fee
                 Fee                       amount            amount
------------------------------------------------------------------------
Individual..........................            $2,500            $3,000
Non-Trading Permit Holder Customer               2,500             3,000
 Business...........................
Associated Person...................               350               500
TPH Organization Application........             4,000             5,000
Subject to Statutory                             2,750             5,000
 Disqualification...................
Inactive Nominee Status Change
 (Trading Permit Swap)..............
a. Submission before 4pm (day prior                 50                55
 to effective date).................
b. Submission after 4pm (day prior                 100               110
 to effective date).................
c. Submission after effective date..               200               220
TPH Organization Renewal Fee........             2,000             2,500
------------------------------------------------------------------------

As before, application fees related to a TPH organization's structural 
change are capped at $10,000 (e.g. change from a limited partnership to 
a limited liability corporation). The Trading Permit Transfer Fee is 
capped at $2,000 for a Trading Permit transfer request covering 
multiple Trading Permits. The costs of processing of these applications 
and activities have increased, and the Exchange therefore proposes 
increasing the fees in order to recoup such increased costs.
    The Exchange proposes to adopt an Initial Proprietary Registration 
fee of $50 and an Annual Proprietary Registration fee of $25. During 
2011 CBOE implemented a new proprietary trading registration 
requirement (the ``Proprietary Trading Registration Program''), 
primarily at the direction of the Commission. The Proprietary Trading 
Registration Program, which is operated through WebCRD, caused a 
significant workload increase in the Exchange's Registration 
Department. Over the course of the year, CBOE processed over 4,000 
registrations via Web-CRD under this new requirement, of which about 
2,500 required further consideration of a waiver request. The 
Proprietary Trading Registration Program involved significant work in

[[Page 5600]]

implementing the registrations, examining waiver requests and answering 
testing related questions. Due to the Proprietary Trading Registration 
Program, the Exchange hired an extra staff member to address this 
increased workload, as well as paid a sizable set-up fee to FINRA and 
incurred significant testing costs. The Proprietary Trading 
Registration Program will continue to require on-going work and testing 
and monitoring of the Web-CRD system, as well as consideration of new 
applicants and waiver requests. In order to offset these costs, the 
Exchange proposes the Initial Proprietary Registration fee and the 
Annual Proprietary Registration fee. The Initial Proprietary 
Registration fee will be payable by any TPH organization for the 
registration of any associated person on WebCRD with the Proprietary 
Trader registration. The Annual Proprietary Registration fee will be 
payable annually by any TPH organization for each associated person 
that the TPH organization maintains registered on WebCRD with the 
Proprietary Trader registration.
    The Exchange also proposes to increase the fees charged for access 
to a Network Access Port (1 Gigabyte) to $500 per month for regular 
access and $1000 per month for Sponsored User access. The Exchange 
recently made a sizable investment to upgrade the equipment involved in 
the Network Access Port, and thereby proposes to increase the fees in 
order to recoup such costs and maintain such equipment in the future. 
The Exchange currently charges a different rate for regular access and 
Sponsored User access, and merely proposes to increase the rates in 
equal proportion. Moreover, this change in Network Access Port fees is 
in line with the amounts assessed for similar access at other 
exchanges. The International Securities Exchange, Inc. (``ISE'') 
assesses a fee of $500 for network access up to and including 1 
gigabyte.\18\
---------------------------------------------------------------------------

    \18\ See ISE Schedule of Fees, page 9.
---------------------------------------------------------------------------

    The Exchange also proposes to increase the fees charged for a CMI 
Login ID and FIX Login ID to $500 per month for regular access and 
$1000 per month for Sponsored User access. Firms may access CBOEdirect 
via either a CMI Client Application Server or a FIX Port, depending on 
how their systems are configured. As with the Network Access Port, the 
Exchange recently made a sizable investment to upgrade the equipment 
involved in the CMI Client Application Servers and FIX Ports, and 
thereby proposes to increase the fees in order to recoup such costs and 
maintain such equipment in the future. Moreover, these changes are in 
line with amounts assessed for connectivity at other exchanges. ISE 
assesses a FIX fee of $1000 for a minimum of two monthly login IDs (so, 
$500 for one).\19\ The NASDAQ Stock Market LLC's Options Market 
(``NOM'') assesses a fee of $500 per FIX port per month, as well.\20\ 
Regarding the Sponsored User fees, the Exchange currently charges a 
different rate for regular access and Sponsored User access, and merely 
proposes to increase the rates in equal proportion.
---------------------------------------------------------------------------

    \19\ See ISE Schedule of Fees, page 8.
    \20\ See NOM Rule 7053.
---------------------------------------------------------------------------

    These proposed changes to the Fees Schedule took effect on January 
1, 2012, per SR-CBOE-2011-121, which was withdrawn on January 17, 2012, 
the same day that this rule filing is being submitted.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\21\ in general, and furthers the objectives of Section 6(b)(4) 
\22\ 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. Amending the fee for customer QQQQ transactions is 
reasonable because the amount of the fee is equivalent for customer 
transactions on all other ETF options, and is equitable and not 
unfairly discriminatory because the same fee will be assessed for all 
customer transactions in QQQQ options. The amount being charged to 
customers, less than that assessed to other market participants for 
similar transactions, recognizes a historical preference towards 
encouraging customer transactions. Further, offering lower transaction 
fees for customer transactions incentivizes customers to execute trades 
on the Exchange, and this increased customer activity provides greater 
market volume and liquidity, which benefit all market participants.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    Excluding SPX, VIX or other volatility indexes, OEX or XEO from the 
Liquidity Provider Sliding Scale is reasonable because market 
participants trading in those products will simply pay the normal 
execution fees for trading in such products, fees which have been and 
currently are accepted fee levels. Excluding SPX, VIX or other 
volatility indexes, OEX or XEO from the Liquidity Provider Sliding 
Scale is equitable and not unfairly discriminatory because all 
similarly-situated market participants trading in those products will 
be charged the same fees for such transactions, and because the 
Exchange expended significant resources in developing those products. 
The Exchange would have preferred to modify the Liquidity Provider 
Sliding Scale to include only multiply-listed products. However, some 
CBOE singly-listed products are used to compete with multi-listed 
products that are also listed on CBOE (as explained above). Therefore, 
the Exchange proposes to include the singly-listed products for 
qualification towards the Liquidity Provider Sliding Scale along with 
their multiply-listed competitors, and only exclude SPX, VIX or other 
volatility indexes, OEX and XEO from the Liquidity Provider Sliding 
Scale. Finally, lowering the tier levels in the Liquidity Provider 
Sliding Scale is reasonable because these lowered amounts reflect the 
subtraction of trades in the products that are being excluded, and 
because this will allow market participants to more easily reach those 
tiers and pay lower fees, and is equitable and not unfairly 
discriminatory because the same tier amounts are applicable to all 
market participants that qualify for the Liquidity Provider Sliding 
Scale.
    Limiting the Cap to include only orders executed in open outcry and 
AIM or as a QCC or FLEX Options transaction, and thereby excluding 
regular non-AIM electronic orders, is reasonable because the execution 
of regular non-AIM electronic orders will merely continue to incur the 
same transaction fees they normally would; the only change is that they 
will no longer be cut off at the amount of the Cap. Further, other 
exchanges also limit similar firm fee caps in a similar, and even less-
inclusive, manner.\23\ Limiting the Cap in this fashion is equitable 
and not unfairly discriminatory because AIM and open outcry, as auction 
mechanisms, are used by CTPHs to bring liquidity to the Exchange, which 
benefits all market participants, while regular electronic transactions 
are used by CTPHs to take liquidity (since only Market-Makers can send 
quotes through the regular electronic system, while CTPHs can only send 
orders, which take liquidity) (QCC transactions can only be executed 
via AIM, and FLEX Options transactions can only be executed via the 
auction mechanisms of open outcry

[[Page 5601]]

and CFLEX (which is a FLEX Options auction platform similar to AIM)). 
Moreover, limiting the Cap in this fashion is equitable and not 
unfairly discriminatory because other exchanges also limit similar firm 
fee caps in a similar, and even less-inclusive, manner,\24\ and because 
these limits apply to all CTPHs equally. Further, while a responder to 
an AIM auction pays a transaction fee that is not counted towards the 
Cap, this is equitable and not unfairly discriminatory because only 
Market-Makers can respond to an AIM auction, and the Cap only applies 
to CTPHs, and not Market-Makers. This situation is the same for open 
outcry. The Cap is limited to CTPHs because they contribute capital to 
facilitate execution of customer orders, which in turn provides a 
deeper pool of liquidity that benefits all market participants.
---------------------------------------------------------------------------

    \23\ See PHLX Fee Schedule, Section I, Part C (page 5) and 
Section II (page 7), provides for a similar $75,000 cap which also 
applies to firm open outcry business, but does not apply to their 
PIXL mechanism, which, like AIM, is a price improvement mechanism, 
and does not apply to electronic transactions in select symbols.
    \24\ See PHLX Fee Schedule, Section I, Part C (page 5) and 
Section II (page 7), provides for a similar $75,000 cap which also 
applies to firm open outcry business, but does not apply to their 
PIXL mechanism, which, like AIM, is a price improvement mechanism, 
and does not apply to electronic transactions in select symbols.
---------------------------------------------------------------------------

    Assessing no transaction fees for CTPH Proprietary facilitation 
orders (other than SPX, VIX or other volatility indexes, OEX or XEO) 
executed in open outcry or AIM or as a QCC or FLEX Options transaction 
is reasonable because other exchanges also waive equity options 
transaction fees for firms executing facilitation orders when the firms 
are trading in their own proprietary account.\25\ This change is 
equitable and not unfairly discriminatory because it will encourage 
CTPHs to transact more business on the Exchange, thereby increasing 
volume and liquidity, which will benefit all market participants, and 
also because it will apply to all firms equally. The CTPH Proprietary 
Facilitation Waiver is limited to executions in AIM or open outcry, or 
as a QCC or FLEX Options transaction, because those are the only ways 
to execute a facilitation trade on the Exchange.
---------------------------------------------------------------------------

    \25\ See PHLX Fee Schedule, Section II (pages 7-8).
---------------------------------------------------------------------------

    Excluding SPX, VIX or other volatility indexes, OEX or XEO from the 
CTPH Proprietary Facilitation Waiver is equitable and not unfairly 
discriminatory because all similarly-situated market participants 
trading in those products will be charged the same fees for such 
transactions, and because the Exchange expended significant resources 
in developing those products. The Exchange would have preferred to 
modify the CTPH Proprietary Facilitation Waiver to include only 
multiply-listed products. However, some CBOE singly-listed products are 
used to compete with multi-listed products that are also listed on CBOE 
(as described above). Therefore, the Exchange proposes to include the 
singly-listed products for qualification towards the CTPH Proprietary 
Facilitation Waiver along with their multiply-listed competitors, and 
only exclude SPX, VIX or other volatility indexes, OEX and XEO from the 
CTPH Proprietary Facilitation Waiver. Limiting the CTPH Proprietary 
Facilitation Waiver to orders executed via AIM or open outcry or as a 
QCC or FLEX Options transaction is equitable and not unfairly 
discriminatory because these limits apply to all CTPHs equally, and 
because these are the only manners in which facilitation trades can be 
effected.
    Ceasing excluding AIM Contra Execution Fees from counting towards 
the Cap as well as ceasing excluding contracts executed in AIM that 
incur the AIM Contra Execution Fee from counting towards the CBOE 
Proprietary Products Sliding Scale is reasonable because it will allow 
for CTPHs to pay lower regular transaction fees than they currently do 
(though the AIM Contra Execution Fee will still be assessed). These 
changes are equitable and not unfairly discriminatory because they 
apply equally to all CTPHs, just as the Cap and the CBOE Proprietary 
Products Sliding Scale had prior to these changes. Additionally, these 
changes will encourage CTPHs to transact more business on the Exchange, 
thereby increasing volume and liquidity, which will benefit all market 
participants.
    Removing the New Marketing Fee Options from the list of securities 
that are not assessed the marketing fee, and beginning to assess a 
$0.25 per contract marketing fee on qualifying transactions in those 
securities, is reasonable because it is the same amount as is charged 
for transactions in other ETFs. This proposed change is equitable and 
not unfairly discriminatory because it is designed and intended to 
attract additional order flow in the New Marketing Fee Options to the 
Exchange, which would increase liquidity and benefit all market 
participants, and because the same fee is assessed similar [sic] 
transactions in nearly all other the [sic] New Marketing Fee Options.
    The SPY and QQQQ Marketing Fee Waiver is designed to provide for 
the equitable allocation of reasonable dues, fees, and other charges 
among Trading Permit Holders in that it is intended to attract more 
customer volume on the Exchange in SPY and QQQQ options. The SPY and 
QQQQ options classes are among the most active and liquid classes and 
trade with significant electronic trading volume. Because of their 
current trading profiles, CBOE believes it might be better able to 
attract electronic liquidity by not assessing the marketing fee on 
electronic SPY and QQQQ transactions and therefore proposes to make 
permanent the current waiver. However, CBOE believes that continuing to 
collect the marketing fee on open outcry transactions, as well as 
electronic orders submitted to AIM for price improvement, from Market-
Makers that trade with customer orders from payment accepting firms 
would continue to attract liquidity in SPY and QQQQ to the floor and 
AIM mechanism, respectively. Brokers take payment for order flow (the 
payments received from the collection of the marketing fee) into their 
decision-making equations regarding AIM and open outcry when deciding 
where to send orders in SPY and QQQQ. Accordingly, CBOE believes making 
permanent the waiver is equitable and not unfairly discriminatory 
because it reflects the trading profiles of SPY and QQQQ and is 
designed and intended to attract additional order flow in SPY and QQQQ 
to the Exchange, which would benefit all market participants.
    The Exchange believes the proposed extension of the C Waiver for 
Index Options is equitable and not unfairly discriminatory because it 
would apply uniformly to all public customers trading ETF, ETN and 
HOLDRs options in open outcry and AIM, and because waiving the 
transaction fee for such customer trades is designed to attract new 
order flow to the Exchange. The resulting increased volume and 
liquidity will benefit all market participants trading in these 
products. The Exchange believes the proposed extension of the C Waiver 
for Index Options is reasonable because it would continue to provide 
cost savings during the extended waiver period for public customers 
trading SPY and XLF options and begin to provide such savings to public 
customers trading all other ETF, ETN and HOLDRs. Further, the Exchange 
believes the proposed C Waiver for Index Options is consistent with 
other fees assessed by the Exchange. Specifically, the Exchange 
assesses manually executed broker-dealer orders a different rate ($.25 
per contract) as compared to electronically executed broker-dealer 
orders ($.45 per contract).\26\ Other exchange fee schedules also 
distinguish between electronically and non-electronically

[[Page 5602]]

executed orders.\27\ Finally, Arca does not charge customer transaction 
fees for customer transactions in ETF, ETN and HOLDRs options.\28\ 
Adding FLEX Options to the C Waiver for Index Options is reasonable 
because it will allow customer FLEX Options transactions in ETF, ETN 
and HOLDRs options to no longer be assessed a fee, thereby saving such 
customers money. This addition is equitable and not unfairly 
discriminatory because waiving the fee for such trades is designed to 
attract new order flow to the Exchange. The resulting increased volume 
and liquidity will benefit all market participants trading in these 
products. Moreover, other exchanges do not charge for public customer 
FLEX Options transactions in ETF, ETN and HOLDRs options.\29\ The C 
Waiver for Index Options is limited to AIM and open outcry executions 
in order to encourage use of these price improvement mechanisms, and 
QCC trades are included in the C Waiver for Index Options as well 
because QCC trades can only be executed via AIM and open outcry.
---------------------------------------------------------------------------

    \26\ See CBOE Fees Schedule, Section 1.
    \27\ PHLX categorizes its equity options transaction fees for 
Specialists, ROTs, SQTs, RSQTs and Broker-Dealers as either 
electronic or non-electronic. See PHLX Fees Schedule, Equity Options 
Fees. NYSE Amex, Inc. categorizes its options transaction fees for 
Non-NYSE Amex Options Market Makers, Broker-Dealers, Professional 
Customers, Non BD Customers and Firms as either electronic or 
manual. See NYSE Amex Options Fees Schedule, Trade Related Charges. 
Arca categorizes its options transaction fees for Customers, Firms 
and Broker-Dealers as either electronic or manual. See Arca Options 
Fees Schedule, Trade Related Charges.
    \28\ See Arca Options Fee Schedule, page 3.
    \29\ See NYSE Amex Options Fee Schedule, page 3, which shows Non 
BD Customer Manual transactions (the manner by which FLEX Options 
are traded on the NYSE Amex Options market) to be assessed a $0.00 
transaction fee.
---------------------------------------------------------------------------

    Increasing the FBW fee from $225 per month (per login ID) to $350 
per month (per login ID) is reasonable because the Exchange is charged 
by the vendor that provides the FBW more than $225 per month (per login 
ID) (actually, more than $350 per month (per login ID)) and simply 
wants to reduce the extent to which the Exchange subsidizes such costs. 
This change is equitable and not unfairly discriminatory because all 
market participants who desire to use the FBW will be assessed the same 
fee.
    Increasing the PULSe fee from $225 per month (per login ID) to $350 
per month (per login ID) is reasonable because the Exchange expended 
significant resources developing PULSe and desires to recoup some of 
those costs. Moreover, the Exchange will be assessing the same amount 
for the FBW, which is a similar product. This change is equitable and 
not unfairly discriminatory because all market participants who desire 
to use PULSe will be assessed the same fee, and because the same amount 
is being assessed for use of a similar product, the FBW.
    The lowered costs for Market-Maker Trading Permits is reasonable 
because the fees will be lower than previously, and are equitable and 
not unfairly discriminatory because, as before, the tiers are available 
to all TPHs. Lower Market-Maker Trading Permit fees encourage more 
Market-Makers to access the Exchange, and more Market-Makers gives 
market participants more trading options and increased trading 
activity, volume and liquidity, which benefit all market participants. 
Amending the date by which MMTPHs must commit to the Market-Maker 
Trading Permit Holder Sliding Scale is reasonable because a commitment 
by December 25th of the preceding year still gives MMTPHs plenty of 
time to determine whether or not to commit to the Market-Maker Trading 
Permit Holder Sliding Scale, and is equitable and not unfairly 
discriminatory because all MMTPHs will be subject to that same 
deadline.
    Amending the qualification for the VIX Tier Appointment fee to 
state that a Market-Maker TPH that has a VIX Tier Appointment during a 
given month will not be assessed the VIX Tier Appointment fee unless 
said Market-Maker TPH trades at least 100 VIX contracts electronically 
while that appointment is active is reasonable because the change will 
prevent those that do not at least somewhat regularly trade in VIX from 
being assessed the VIX Tier Appointment fee. This change is equitable 
and not unfairly discriminatory because it ensures that the VIX Tier 
Appointment fee is not assessed to those Market-Makers who are not 
trading in VIX. The 100-contract threshold achieves this purpose 
because it is a sufficiently small number of contracts and yet leaves 
some small room for an accidental or minor VIX trade.
    Increasing the VIX Tier Appointment fee is reasonable because the 
amount, $2,000, is within the range of other tier appointment fees 
assessed by the Exchange (for example, the SPX Tier Appointment fee is 
$3,000) \30\, and because market demand will sustain such a fee. This 
proposed change is also equitable and not unfairly discriminatory 
because it will be assessed to all MMTPHs that either (a) have a VIX 
Tier Appointment at any time during a calendar month and trade at least 
100 VIX contracts electronically while that appointment is active; or 
(b) trade at least 1,000 VIX options contracts in open outcry during a 
calendar month. Increasing the monthly fee for a Floor Broker Trading 
Permit Holder that executes more than 20,000 VIX contracts in a month 
is reasonable because this amount is equal to the amount of the VIX 
Tier Appointment fee (as they were equal prior to these changes), and 
is equitable and not unfairly discriminatory because the fee will be 
assessed to any and all Floor Broker Trading Permit Holders that 
qualify for the fee.
---------------------------------------------------------------------------

    \30\ See Exchange Fees Schedule, Section 10(A)(ii).
---------------------------------------------------------------------------

    The proposed increase in the fee assessed for one Floor Broker 
Trading Permit is reasonable because lone floor brokers almost always 
require the Exchange to do extra work for the floor broker, while floor 
brokers with two or more trading permits never do, and the Exchange 
must recoup related costs. This increase is equitable and not unfairly 
discriminatory because the same amount will be assessed to all lone 
floor brokers. The Floor Broker Trading Permit Sliding Scale is 
reasonable because the amounts for Tier 1 are the same on a per permit 
basis as they currently are, and the amounts for Tier 2 are lower than 
the current amounts. The Floor Broker Trading Permit Sliding scale is 
equitable and not unfairly discriminatory because offering lower costs 
to TPHs that get more permits will encourage floor broker firms to 
bring more floor brokers to the Exchange, thereby bringing more 
business to the Exchange, resulting in greater trading volume and 
liquidity, which benefits all market participants.
    The proposed monthly fee of $3,000 per month to any Floor Broker 
Trading Permit Holder that executes more than 20,000 SPX contracts 
during the month is reasonable because the same amount is assessed to 
Market-Makers for an SPX tier appointment. This fee is equitable and 
not unfairly discriminatory because it will equalize opportunity 
between Market-Makers and Floor Brokers trading in SPX options, because 
it reflects the opportunity provided to agents servicing customers in 
such a high-volume product, and because the Exchange expended 
considerable resources in developing SPX and desires to recoup such 
expenses and other administrative costs.
    The lowered fee for the Packet is reasonable because the fee will 
be lower than previously, and is equitable and not unfairly 
discriminatory because, as before, the fee will be applied to all 
parties who desire the Packet. Lower Packet fees encourage more Market-

[[Page 5603]]

Makers to access the Exchange, and more Market-Makers gives market 
participants more trading options and increased trading activity, 
volume and liquidity, which benefit all market participants.
    The proposed increases in TPH Application fees are reasonable 
because such increases are necessary to cover the increased costs of 
processing such applications and activities. The proposed increases in 
TPH Application fees are equitable and not unfairly discriminatory 
because they apply equally to all qualifying market participants.
    The proposed adoption of the Initial Proprietary Registration fee 
and the Annual Proprietary Registration fee is reasonable because both 
fees are necessary to offset the costs of the Proprietary Trading 
Registration Program, and because the amount of the fees are minimal. 
The adoption of these fees is equitable and not unfairly discriminatory 
because they will be assessed equally to all market participants that 
qualify for the fees.
    The proposed change to increase the Network Access Port fees is 
reasonable because the fees are within the same range as those assessed 
on other exchanges,\31\ and because such increase will assist in 
recouping expenditures recently made by the Exchange to upgrade the 
CBOEdirect connectivity equipment. This proposed change is equitable 
and not unfairly discriminatory because the fees, as before, will be 
assessed to all market participants. The proposed changes to increase 
the fees assessed for CMI Login IDs and FIX Login IDs are also 
reasonable because such fees are within the same range as those 
assessed on other exchanges \32\, and because such increases will 
assist in recouping expenditures recently made by the Exchange to 
upgrade the CBOEdirect connectivity equipment. This proposed change is 
equitable and not unfairly discriminatory because the fees, as before, 
will be assessed to all market participants. Assessing higher fees for 
Sponsored Users is equitable and not unfairly discriminatory because 
Sponsored Users are able to access the Exchange and use the equipment 
provided without purchasing a trading permit. As such, Trading Permit 
Holders who have purchased a trading permit will have a higher level of 
commitment to transacting business on the Exchange and using Exchange 
facilities than Sponsored Users. Finally, these increases maintain the 
same proportionate amounts that are paid by regular users relative to 
Sponsored Users.
---------------------------------------------------------------------------

    \31\ See ISE Schedule of Fees, page 9.
    \32\ See ISE Schedule of Fees, page 8 and NOM Rule 7053.
---------------------------------------------------------------------------

    Changing the name of the Cap to more accurately reflect its nature 
furthers the objectives of Section 6(b)(5) \33\ of the Act in 
particular in that it is designed to clear up any potential confusion, 
which serves to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 \34\ and subparagraph (f)(2) of Rule 19b-4 \35\ thereunder.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78s(b)(3)(A).
    \35\ 17 C.F.R. 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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 email to [email protected]. Please include 
File Number SR-CBOE-2012-008 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-2012-008. This file 
number should be included on the subject line if email 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 will also 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 No. SR-CBOE-2012-008 and should be 
submitted on or before February 24, 2012.
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    \36\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-2409 Filed 2-2-12; 8:45 am]
BILLING CODE 8011-01-P