[Federal Register Volume 77, Number 219 (Tuesday, November 13, 2012)]
[Notices]
[Pages 67703-67704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-27511]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68169; File No. SR-CBOE-2012-105]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend the Fees Schedule
November 6, 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 October 26, 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 the
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.
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange intends to introduce its Automated Improvement
Mechanism (``AIM'') for FLexible EXchange Options (``FLEX Options'')
transactions beginning November 1, 2012. In conjunction with that
introduction, the Exchange proposes to amend its CFLEX fees in order to
encourage greater FLEX Options trading activity. Specifically, the
Exchange proposes to eliminate the CFLEX Surcharge Fee as it applies to
equity, ETF, ETN, HOLDRs and index (excluding SPX, SPXW, SPX Range
Options, OEX, XEO, VIX and Volatility Indexes, XSP and DJX (the
``Excluded Classes'')) FLEX Options transactions (the ``Fee
Elimination'').
The Exchange also proposes to provide a $0.10-per-contract credit
for all equity, ETF, ETN, HOLDRs and index (excluding the Excluded
Classes) FLEX Options orders executed via a CFLEX AIM auction from
November 1, 2012 through December 31, 2012 (the ``CFLEX AIM Credit'').
The CFLEX AIM Credit would apply to transactions executed via AIM
because the Exchange wants to encourage the distribution of the newly-
developed CFLEX AIM technology among Trading Permit Holders (``TPHs'')
in order to attract greater FLEX Options order flow. AIM is a
facilitation mechanism, and facilitation trades are the manner in which
most FLEX Options trades are currently executed, and so the Exchange
correspondingly wants to attract more FLEX Options facilitation trades
to the Exchange via this CFLEX AIM technology. The CFLEX AIM Credit is
limited to the Agency/Primary side of a FLEX Options AIM transaction
because this will encourage the entry of FLEX Options AIM orders, as
well as the adoption of the FLEX Options AIM technology by any party
wishing to execute a FLEX Options AIM order. The CFLEX AIM Credit would
be capped at $250 (2,500 contracts) per trade in order to limit the
Exchange's potential exposure for providing the CFLEX AIM Credit and
ensure that the provision of the CFLEX AIM Credit is economically
viable to the Exchange. In addition, $250 per trade is the current
maximum fee for the CFLEX Surcharge Fee.
Each TPH may only receive the CFLEX AIM Credit on one order per
underlying product per day, and the CFLEX AIM Credit will be applied to
the smallest-sized order in each underlying product sent to the
Exchange by that TPH on each day. The purpose of this limitation is to
limit the Exchange's potential exposure for providing rebates and
ensure that the provision of the CFLEX AIM Credit is economically
viable to the Exchange. For purposes of the CFLEX AIM Credit, multiple
legs of a complex order will be considered separate simple orders in
order to prevent parties from being able to receive the CFLEX AIM
Credit on multiple orders in the same underlying product in the same
day. These details of the CFLEX AIM Credit will be explained in new
Footnote 28 to the Exchange Fees Schedule.
The purpose of this is to encourage greater FLEX Options trading
via the newly-introduced AIM (which encourages facilitation) and the
distribution of the FLEX Options AIM technology among the Exchange's
TPHs. The proposed changes are to take effect on November 1, 2012.
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.\3\ Specifically, the Exchange believes the proposed rule change is
consistent with Section 6(b)(4) of the Act,\4\ 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 Fee Elimination is reasonable
because it will allow market participants who are currently engaging in
FLEX Options trades in equity, ETF, ETN, HOLDRs and index options
(excluding the Excluded Classes) to avoid having to pay the CFLEX
Surcharge Fee in the future. Eliminating the CFLEX Surcharge Fee for
equity, ETF, ETN, HOLDRs and most index options while not eliminating
the CFLEX Surcharge Fee for the Excluded Classes is equitable and not
unfairly discriminatory because the Exchange expended significant
resources developing the products listed in the Excluded Classes and
must receive fees in order to recoup such expenditures.
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\3\ 15 U.S.C. 78f(b).
\4\ 15 U.S.C. 78f(b)(4).
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The CFLEX AIM Credit is reasonable because it will allow market
participants who engage in FLEX Options trades in equity, ETF, ETN,
HOLDRs and index options (excluding the Excluded Classes) to receive a
rebate for such transactions. Excluding the
[[Page 67704]]
Excluded Classes from the CFLEX AIM Credit is equitable and not
unfairly discriminatory because the Exchange expended significant
resources developing the products listed in the Excluded Classes and
must receive fees in order to recoup such expenditures. Limiting the
CFLEX AIM Credit to FLEX Options AIM transactions is equitable and not
unfairly discriminatory because the Exchange expended considerable
resources to develop the new FLEX Options AIM technology and therefore
desires to encourage the adoption of such technology. Further, AIM is a
facilitation mechanism and greater facilitation of FLEX Options trading
will encourage greater trading of FLEX Options. Limiting the CFLEX AIM
Credit to the Agency/Primary side of FLEX Options AIM transactions is
equitable and not unfairly discriminatory because the Agency/Primary
side of an AIM transaction is the side on which an order is entered.
Providing the CFLEX AIM Credit for the Primary side of FLEX Options AIM
orders will encourage the entry of more FLEX Options orders, which will
benefit parties wishing to take the Contra side of FLEX Options AIM
orders by providing them with more FLEX Options AIM orders on which to
take the Contra side. Capping the CFLEX AIM Credit at $250 per
transaction and limiting the CFLEX AIM Credit to one order per
underlying product per TPH (per day and only the smallest order from
that TPH) is equitable and not unfairly discriminatory because such
limitations are necessary to ensure the financial viability of the
CFLEX AIM Credit, and without such limitations the Exchange would not
be able to offer the CFLEX AIM Credit at all. Further, these
limitations will apply to all market participants equally.
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) \5\ of the Act and paragraph (f) of Rule 19b-4 \6\
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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\5\ 15 U.S.C. 78s(b)(3)(A).
\6\ 17 CFR [sic] 240.19b-4(f).
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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-2012-105 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-2012-105. 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-2012-105, and should be
submitted on or before December 4, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27511 Filed 11-9-12; 8:45 am]
BILLING CODE 8011-01-P