[Federal Register Volume 77, Number 68 (Monday, April 9, 2012)]
[Notices]
[Pages 21134-21137]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8429]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66727; File No. SR-CBOE-2012-025]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to Exchange Trading Floor Booth Fees and
Policy
April 3, 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 March 26, 2012, Chicago Board Options Exchange, Incorporated
(``CBOE'' or the ``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.
CBOE has designated the proposed rule change as it pertains to fees for
non-standard booths as ``establishing or changing a due, fee or other
charge'' under Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(2)
thereunder,\4\ which renders the proposal effective upon receipt of
this filing by the Commission. Additionally, CBOE has designated the
proposed rule change as it pertains to the Exchange's trading floor
booth policy as constituting a ``non-controversial'' rule change under
Section 19(b)(3)(A) of the Act \5\ and Rule 19b-4(f)(6) thereunder,\6\
which renders the proposal effective upon receipt of this filing by the
Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(2).
\5\ 15 U.S.C. 78s(b)(3)(A).
\6\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to amend its Fees Schedule as it pertains to
Exchange trading floor booth fees and to update the Exchange's current
policy regarding the rental and use of booths on the CBOE trading
floor. 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 the
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 be 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to revise the Exchange's
Fees Schedule to include fees for a ``non-standard booth'' (as defined
below) and to update the Exchange's policy (``Policy'') regarding the
rental and use of booth space on the CBOE trading floor by Trading
Permit Holder (``TPH'') organizations.
Fees
The Exchange has booth space located on its trading floor that it
makes
[[Page 21135]]
available for rental to TPH organizations. These booths are located at
various locations on the trading floor adjacent to the trading crowds
where the actual CBOE trading activity takes place. The booths
generally are used by TPH organizations to perform various functions in
support of their CBOE trading activities.
The Exchange Fees Schedule includes a monthly fee to rent a booth
that is based on the location of the booth on the trading floor. The
fee for booths located along the perimeter of the trading floor is $195
per month. The fee for booths located in the OEX, Dow Jones, MNX and
VIX pits is $550 per month.\7\
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\7\ See CBOE Fees Schedule, Section 8(A).
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The Exchange is proposing to revise the Exchange Fees Schedule to
include fees for a larger type of booth for use by TPH organizations.
This booth type is different in design and much bigger than a standard
booth. These booths can range from several hundred square feet as
compared to 4 square feet for a standard booth.
The Exchange proposes to codify fees charged to TPH organizations
for rental of these larger booths. The proposed fees would be reflected
in Section 8 of the CBOE Fees Schedule as the fees for a ``non-standard
booth.'' A TPH organization would pay the fees per square foot in the
table below on a monthly basis for use of a non-standard booth:
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Booth size Per sq. ft. Per sq. ft. Per sq. ft.
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Extra-Large (1000 sq. ft. or greater) $5.50.................. $5.34.................. $5.23.
Large (800-999 sq. ft.).............. 8.00................... 7.76................... 7.60.
Medium (401-799 sq. ft.)............. 9.50................... 9.22................... 9.03.
Small (400 sq. ft. or less).......... 15.00.................. 14.55.................. 14.25.
LENGTH OF LEASE...................... 1 Year................. 2 Years (97%).......... 3 Years (95%).
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The fee per square foot a TPH organization would pay for a non-
standard booth would be determined based on the size of the booth and
length of the lease the TPH organization enters into with the Exchange.
Greater booth size and longer lease terms would result in a reduced fee
per square foot.
Non-standard booths would be grouped into four size categories:
Small (400 square feet or less), Medium (from 401 to 799 square feet),
Large (from 800 to 999 square feet) and Extra-Large (1000 square feet
or greater). As an example, the fee for a Small non-standard booth
leased for one year would be $15.00 per square foot. Greater booth size
would result in a reduced fee per square foot.
The amount of the fee per square foot would also be reduced based
on the length of the lease. For example, the fee for a Small non-
standard booth leased for two years would be $14.55 per square foot (a
3% discount from the fee for a one year lease) and the fee for a Small
non-standard booth leased for three years would be $14.25 per square
foot (a 5% discount from the fee for a one year lease).
A TPH organization that terminates its lease prior to its
expiration date would, on the effective date of such termination, pay
to the Exchange an amount equal to twenty five percent (25%) of the
balance of the monthly charges remaining in the lease term. In
addition, a TPH Organization would be responsible for all costs
associated with any modifications and alterations to any trading floor
booths leased by the TPH Organization and would be required to
reimburse CBOE for all costs incurred by CBOE in connection therewith.
This fee would be reflected in Section 8 of the CBOE Fees Schedule as a
``booth pass-through fee.''
The proposed fees will take effect on April 1, 2012.
Policy
The Exchange memorialized the Policy and filed it with the
Commission in 1994.\8\ The Exchange proposes to update the Policy in a
few respects. First, the Exchange proposes to change references to
``member organization'' and ``member firm'' to ``TPH Organization'' and
to replace a reference to the ``Facilities Committee'', which no longer
exists, with ``the Exchange''.
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\8\ Securities Exchange Act Release No. 33972 (April 28, 1994),
59 FR 23242 (May 5, 1994).
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Second, the Exchange proposes to amend the Policy with respect to
eligibility requirements for booths. The Policy currently sets forth
four broad categories of TPH organizations that may rent booth space on
the floor. These categories accommodate TPH organizations having the
greatest need of working space in close proximity to CBOE trading
activity, and they encompass almost all major types of CBOE TPH
organizations. Market-maker organizations are the only major category
that may not obtain a booth under the Policy. Clearing firms lease the
majority of the booths on the trading floor and market-maker
organizations customarily obtain booth space through their clearing
firms. Until recent years, demand for booth space on the trading floor
exceeded the supply. Prior to establishment of the Policy, the low
supply of booths coupled with the fact that clearing firms leased most
of the booths (many of which were used by their market-maker clients)
meant there was little booth space on the floor to accommodate order
flow providing firms. To help address this issue, market-maker
organizations were not allowed to obtain a booth under the Policy since
they could obtain booths through their clearing firms. At this time,
there is an ample supply of booth space on the trading floor.
Therefore, the Exchange believes there is no longer a need to prohibit
market-maker organizations from directly leasing booths. The Exchange
proposes to amend the Policy to provide that booths on the trading
floor will be allocated to any TPH organization that is in good
standing.
No changes are proposed to the section of the Policy that addresses
the potential future need for the adoption of allocation and assignment
guidelines with respect to booth space. The Exchange has no such
guidelines in effect today and does not currently envision implementing
any in the foreseeable future. In the event that demand for booth space
at some point threatens to exceed availability, the Exchange would
establish allocation guidelines. The Policy informs TPH organizations
of this possibility and identifies the general nature of the criteria
upon which such guidelines would be based. Any such guidelines
established by the Exchange would be filed with the Commission under
Section 19(b) of the Act.
At this time, the Exchange has ample space on its trading floor for
booth space. The Exchange will consider any reasonable request from a
TPH organization with respect to the
[[Page 21136]]
specifications for building a non-standard booth. The Exchange may deny
a request from a TPH organization to build a non-standard booth if the
Exchange determines the request is unreasonable with respect to the
specifications for the non-standard booth. A TPH organization that has
been denied a request to build a non-standard booth may appeal the
decision to the Appeals Committee under Chapter 19 of the Exchange's
rules.
The Policy includes a section that sets forth the requirement that
all TPH organizations renting booths execute a ``Trading Floor Booth
Rental Agreement'' (hereinafter, ``Agreement'') which sets forth the
contractual terms, conditions and restrictions governing rental and use
of booths by TPH organizations.\9\ A copy of the Agreement was included
in the Exchange's 1994 rule filing noted above for the Commission's
information.\10\ The Agreement specifically sets forth the details of
the parties' contractual relationship regarding rental and use of the
booths. Among other provisions, the Agreement includes specific
provisions delineating the termination rights of both the TPH
organization and the Exchange and sets forth a procedure for adding
booths to and deleting booths from the Agreement. The Agreement also
spells out requirements respecting the TPH's use of the booths, such as
those governing the installation of equipment, the conduct of business,
and access of persons to the booths.
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\9\ The Agreement is non-negotiable and its terms are the same
for every TPH organization.
\10\ Supra Footnote 8.
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The Exchange has updated the Agreement (which is now referred to as
the Agreement for ``standard booths'') and created a separate form of
the Agreement for non-standard booths. A copy of each form of Agreement
is included with this filing in Exhibit 3. The forms are substantially
similar except for the differences in the lease terms (standard booths
are leased on a month-to-month basis), termination provisions \11\ and
applicable fees. The Exchange proposes to update this section of the
Policy to set forth the requirement that all TPH organizations renting
booths execute the applicable form of the Agreement. The Exchange will
disseminate the updated Policy and forms of the Agreement to Trading
Permit Holders by posting them on the Trading Permit Holder portion of
the CBOE web site (www.cboe.org).
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\11\ The form of the Agreement for non-standard booths provides
that a TPH Organization may terminate the Agreement at any time for
any reason upon at least one hundred eighty (180) days prior written
notice to CBOE.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Securities Exchange Act of 1934 (``Act''),\12\ in
general, and furthers the objectives of Section 6(b)(4) \13\ 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 the objectives of Section 6(b)(5) \14\ of
the Act in particular in that it is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers. The
Exchange believes the proposed fees for non-standard booths are
reasonable because there are higher costs related to operation of these
large size booths (e.g., utilities, routine maintenance, etc.) as
compared with a standard booth. The Exchange believes the proposed fees
are equitable and not unfairly discriminatory in that the fee per
square foot each TPH organization would pay would be determined in an
objective manner based on the size of the booth and length of the lease
the TPH organization enters into with the Exchange. The proposed fees
would be applied uniformly to all eligible TPH organizations that wish
to use a non-standard booth.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4).
\14\ 15 U.S.C. 78f(b)(5).
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In addition, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) 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. The proposed rule change would update the Policy to reflect
non-standard booths and the requirement that TPH organizations enter
into the applicable booth lease agreement as well as make other non-
substantive changes that merely clarify the Policy and make it more
accurate. The Exchange believes these changes are designed to promote
just and equitable principles of trade by helping to make the Policy
easier to understand and putting TPH organizations on notice of the new
requirements for non-standard booths. The Exchange believes that
providing in the Policy for building non-standard booths for TPH
organizations may help provide additional depth and liquidity to
options traded on the CBOE trading floor by providing TPH organizations
more booth space from which to execute additional options transactions,
thereby removing impediments to and perfecting the mechanism for a free
and open market and a national market system.
The proposed rule change would also establish a standard for the
Exchange's consideration of requests to build non-standard booths and
an appeals process for denials of such requests. The Exchange believes
the proposed standard and procedures for consideration of requests to
build non-standard booths and denials of such requests are reasonable
and designed to promote just and equitable principles of trade in that
they will help ensure Exchange decisions on building non-standard
booths are made in a fair and equitable manner while also protecting
the Exchange by providing it with the ability to deny any unreasonable
request.
In addition, the proposed rule change would update the Policy to
eliminate a prohibition against market-maker organizations directly
leasing trading floor booths. Any TPH organization in good standing
would be eligible to lease a booth. Therefore the Exchange believes the
proposed rule change is not designed to permit unfair discrimination
between TPH organizations in that it will help ensure that trading
floor booths are leased to TPH organizations on equal and non-
discriminatory terms.
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 portion of the foregoing rule change pertaining to fees for
non-standard booths has become effective pursuant to Section
19(b)(3)(A) \15\ of the
[[Page 21137]]
Act and paragraph (f)(2) of Rule 19b-4 \16\ thereunder.
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(2).
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Additionally, because the portion of the foregoing proposed rule
change pertaining to the Exchange's trading floor booth policy does
not: (i) Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \17\ and Rule 19b-
4(f)(6) thereunder.\18\
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6).
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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 email to rule-comments@sec.gov. Please include
File Number SR-CBOE-2012-025 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-2012-025. 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 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 offices 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-2012-025, and should be submitted on or before
April 30, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-8429 Filed 4-6-12; 8:45 am]
BILLING CODE 8011-01-P