[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