[Federal Register Volume 77, Number 220 (Wednesday, November 14, 2012)]
[Notices]
[Pages 67847-67849]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-27628]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68178; File No. SR-CBOE-2012-104]
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 7, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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
(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 proposes to amend its Fees Schedule to remove dividend
spreads from the list of strategy executions for which fee caps apply.
Under the Exchange's current Fees Schedule, Market-maker, Clearing
Trading Permit Holder, broker-dealer and non-Trading Permit Holder
market-maker transaction fees are capped at $1,000 for a number of
strategy executions.\3\ The cap applies to each strategy execution
executed on the same trading day in the same option class. Transaction
fees for these strategies are further capped at $25,000 per month per
initiating Trading Permit Holder or Clearing Trading Permit Holder
(both caps described herein collectively as the ``Strategy Caps'').\4\
The Strategy Caps
[[Page 67848]]
may provide an incentive to engage in the strategy executions.
---------------------------------------------------------------------------
\3\ See CBOE Fees Schedule, Footnote 13.
\4\ Id.
---------------------------------------------------------------------------
One strategy execution listed is a ``dividend strategy'', which is
defined as transactions done to achieve a dividend arbitrage involving
the purchase, sale and exercise of in-the-money options of the same
class, executed prior to the date on which the underlying stock goes
ex-dividend.\5\ Dividend strategy transactions are only executed by
Market-Makers. The Exchange proposes to remove dividend strategies from
the list of strategy executions that are subject to the Strategy Caps.
The Exchange has determined that it does not wish to continue to
provide an incentive via its Fees Schedule to engage in dividend
strategy trading because this strategy may encourage high volumes of
trading of certain securities near the ex-dividend date and present
operational risks to market participants with respect to clearing,
exercise, and assignment or other issues that may prevent the market
participant from the timely exercise of call options and collecting the
dividend owed. As such, the Exchange proposes to remove references to
dividend strategies from the Strategy Caps described in Footnote 13 of
the Fees Schedule. The definition of ``dividend strategy'' will be
removed from Footnote 13 as will all references to dividend strategies,
including references regarding the Strategy Caps and Index License
surcharge fees.
---------------------------------------------------------------------------
\5\ Id.
---------------------------------------------------------------------------
Footnote 11 of the CBOE Fees Schedule states that transaction fees
and contract volume resulting from any of the strategies defined in
Footnote 13 will not apply towards reaching the Exchange's Clearing
Trading Permit Holder Fee Cap in all Products Except SPX, SRO, VIX or
other Volatility Indexes, OEX or XEO (the ``CTPH Fee Cap'') and CBOE
Proprietary Products Sliding Scale for Clearing Trading Permit Holder
Proprietary Orders (the ``CTPH Sliding Scale'') volume thresholds.\6\
By removing dividend strategies from the list of strategy executions
described in Footnote 13, it would appear as though dividend strategy
executions would begin to apply towards reaching the CTPH Fee Cap and
CTPH Sliding Scale volume thresholds. However, because only Market-
Makers execute dividend strategy trades and the CTPH Fee Cap and CTPH
Sliding Scale both only apply to Clearing Trading Permit Holders, it
would be impossible for dividend strategy executions to apply towards
reaching the CTPH Fee Cap and CTPH Sliding Scale volume thresholds.
Therefore, no changes need to be made to the Fees Schedule regarding
dividend strategy executions and the CTPH Fee Cap and CTPH Sliding
Scale.
---------------------------------------------------------------------------
\6\ See CBOE Fees Schedule, Footnote 11.
---------------------------------------------------------------------------
The proposed change is not otherwise intended to address any other
matter, and the Exchange is not aware of any significant problem that
the affected market participants would have in complying with the
proposed change. The proposed change is 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.\7\ Specifically, the Exchange believes the proposed rule change is
consistent with Section 6(b)(4) of the Act,\8\ 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 Exchange believes that the
proposed change is reasonable because the Strategy Caps may provide an
incentive to engage in dividend spreads and the Exchange has determined
that it no longer wishes to offer any potential incentive via its Fees
Schedule in light of the operational risks that dividend spreads may
present. The Exchange also believes that the proposed change is
equitable and not unfairly discriminatory because it would apply
equally to all market participants and because the remaining strategy
executions that would continue to be subject to the fee caps do not
present the same type of potential operational risks.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
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) \9\ of the Act and paragraph (f) of Rule 19b-4 \10\
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.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 C.F.R. 240.19b-4(f).
---------------------------------------------------------------------------
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-2012-104 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-2012-104. 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
[[Page 67849]]
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of
the 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-2012-104 and should be submitted on or before
December 5, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27628 Filed 11-13-12; 8:45 am]
BILLING CODE 8011-01-P