[Federal Register Volume 77, Number 211 (Wednesday, October 31, 2012)]
[Notices]
[Pages 65918-65920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-26712]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68105; File No. SR-CBOE-2012-097]


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

October 25, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\

[[Page 65919]]

notice is hereby given that on October 16, 2012, 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Fees Schedule. The text of the 
proposed rule change is available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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 Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On June 18, 2010, the Exchange established an SPX Tier Appointment 
Fee (the ``Fee'').\3\ The Fee is assessed to any Market-Maker Trading 
Permit Holder that either (a) has an SPX Tier Appointment at any time 
during a calendar month; or (b) conducts any open outcry transactions 
in SPX or SPX Weeklys at any time during a calendar month.\4\
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    \3\ See Securities Exchange Act Release No. 62386 (June 25, 
2012) 75 FR 38566 (July 2, 2012) (SR-CBOE-2012-060) [sic].
    \4\ See CBOE Fees Schedule, table on Trading Permit and Tier 
Appointment Fees.
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    CBOE Rule 24.19 permits the execution of Multi-Class Broad-Based 
Index Option Spread Orders (``Multi-Class Spread Orders''), which are 
generally defined as orders to buy a stated number of contracts of a 
broad-based index option or ETF/ETN option derived from a broad-based 
index and to sell an equal number, or an equivalent number of contracts 
of a different broad-based index option or ETF/ETN option derived from 
a broad-based index. These orders may be represented at the trading 
station of either option involved, subject to the conditions in Rule 
24.19.\5\ For example, a common Multi-Class Spread Order involves 
executing an OEX (which is based on the S&P 100) order along with an 
SPX (which is based on the S&P 500) order. This is often executed by 
Market-Makers who have an OEX Tier Appointment but not an SPX Tier 
Appointment, and who do not otherwise engage in SPX transactions.
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    \5\ See CBOE Rule 24.19.
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    The Fee was not enacted with the intention of assessing it to 
Market-Makers to whom it would only apply due to their execution of 
Multi-Class Spread Orders that included an SPX component; the Fee was 
intended to be assessed on Market-Makers holding an SPX Tier 
Appointment and those doing regular SPX trades in the SPX trading 
crowd. As such, on July 6, 2010, the Exchange put out a regulatory 
circular (the ``Regulatory Circular'') that stated that the Fee is not 
applicable to Multi-Class Spread Orders executed by Market-Makers that 
include SPX options (the ``Exclusion'') because these spread 
transactions also include non-SPX options.\6\ In order to avoid being 
assessed the Fee as a result of the execution of Multi-Class Spread 
Orders with an SPX component, Market-Makers to which the Fee is not 
otherwise applicable were directed to submit a form to the Exchange 
within three business days following the execution of the applicable 
spread transaction(s).\7\
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    \6\ See CBOE Regulatory Circular RG10-80.
    \7\ See CBOE Regulatory Circular RG10-80.
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    The Exchange believed, upon releasing the Regulatory Circular, that 
the Exclusion was fairly and reasonably implied from the language in 
the Fees Schedule that describes the Fee. As such, the Exchange did 
not, at the time, include the Exclusion in such language in the Fees 
Schedule. However, the Exchange now proposes to codify the Exclusion in 
the Fees Schedule by stating that the Fee will not be assessed to a 
Trading Permit Holder Market Maker who (i) does not have an SPX Tier 
Appointment, (ii) only executes SPX or SPX Weeklys open outcry 
transactions as part of multi-class broad-based index spread 
transactions, and (iii) submits the SPX Tier Appointment Fee Exclusion 
for Multi-Class Broad-Based Index Spread Transactions Form (the 
``Form'') within three business days of execution of the applicable 
spread transaction(s). Upon effectiveness of this rule change, the 
Exchange will issue another Regulatory Circular which will explain the 
Exclusion and provide directions on how Market-Makers may access and 
submit the Form.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\8\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \9\ requirements that the rules of 
an exchange be designed to promote just and equitable principles of 
trade, to prevent fraudulent and manipulative acts, to remove 
impediments to and to perfect the mechanism for a free and open market 
and a national market system, and, in general, to protect investors and 
the public interest. Codifying the Exclusion prevents any potential 
confusion regarding whether or not Market-Makers trading Multi-Class 
Spread Orders that include an SPX component will be assessed the Fee. 
This elimination of any potential confusion serves to perfect the 
mechanism for a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange also believes the proposed rule change is consistent 
with Section 6(b)(4) of the Act,\10\ which provides that Exchange rules 
may provide for the equitable allocation of reasonable dues, fees, and 
other charges among its Trading Permit Holders and other persons using 
its facilities. The Exclusion itself is reasonable because it allows 
Market-Makers to whom the Fee would apply only due to their execution 
of Multi-Class Spread Orders with an SPX component to avoid having to 
pay the Fee. The Exclusion is equitable and not unfairly discriminatory 
because the Fee is intended to be assessed on those Market-Makers who 
hold an SPX Tier Appointment or conduct open outcry transactions in SPX 
or SPX Weeklys (i.e., Market-Makers who are engaging in regular SPX 
trades), since those Market-Makers are engaging in transactions for 
which executing SPX trades is the primary purpose of such transactions 
(or are signing up to do so). Market-Makers who only engage in SPX 
transactions through the execution of Multi-Class

[[Page 65920]]

Spread Orders with an SPX component are not engaging in such 
transactions with primary purpose of executing an SPX order, but 
instead are just executing an SPX order as part of a larger Multi-Class 
Spread Order.
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    \10\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \11\ of the Act and paragraph (f)(2) of Rule 19b-4 \12\ 
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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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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 email to [email protected]. Please include 
File Number SR-CBOE-2012-097 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-2012-097. 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 
10:00 a.m. and 3:00 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-2012-097 and should be 
submitted on or before November 21, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-26712 Filed 10-30-12; 8:45 am]
BILLING CODE 8011-01-P