[Federal Register Volume 76, Number 136 (Friday, July 15, 2011)]
[Notices]
[Pages 41842-41844]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-17794]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64851; File No. SR-CBOE-2011-062]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to Amend Its Fees Schedule Regarding Automated
Improvement Mechanism Fees
July 11, 2011.
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 June 30, 2011, the 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 regarding
Automated Improvement Mechanism (``AIM'') fees. The text of the
proposed rule change is available on the Exchange's Web site (http://www.cboe.org/legal), 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 self-regulatory organization
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 those 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 parts 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 regarding broker-
dealer Automated Improvement Mechanism orders. Specifically, the
Exchange proposes to adopt a $0.20 per contract fee to be applied to
broker-dealer orders entered as the agency/primary side of an AIM
transaction (the ``Broker-Dealer AIM Agency Fee'') and make related
clarifying changes to the Fees Schedule.\3\
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\3\ The Commission notes that the Exchange proposes to add
footnote 19 to the Fees Schedule to define the AIM Agency/Primary
Fee as applying to all broker-dealer orders in all products, except
volatility indexes, executed in AIM that were initially entered into
AIM as a Primary/Agency Order (i.e., the ``AIM Agency/Primary'' fee
applies to the original order submitted to AIM that is being
facilitated if such order is for a broker-dealer and does not
involve a volatility index). The AIM Agency/Primary Fee will apply
to such executions instead of the applicable standard transaction
fee except in volatility indexes where standard transaction fees
will apply. As discussed below, the ``AIM contra execution fee''
applies to the contra party's side of the trade (i.e., the contracts
submitted by the participant that is facilitating the order). See
email from Jeff Dritz, Attorney, CBOE to Arisa Tinaves, Special
Counsel, Division of Trading and Markets, dated July 7, 2011.
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On June 13, 2011, the Commission approved a proposed rule change to
allow the Exchange to establish the Qualified Contingent Cross
(``QCC'') order type.\4\ In conjunction with that approval, on June 29,
2011, the Exchange filed, for immediate effectiveness, a proposed rule
change to adopt fees related to the QCC order type.\5\ Included in that
proposed rule change is a proposal to adopt a $0.20 per contract
transaction fee for the execution of broker-dealer QCC orders (the
``Broker-Dealer QCC Fee''). The Exchange intends to make available the
QCC order type and make effective the related fees, including the
Broker-Dealer QCC Fee, on July 1, 2011.
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\4\ See Securities Exchange Act Release No. 64653 (June 13,
2011), 76 FR 35491 (June 17, 2011) (SR-CBOE-2011-041) and CBOE Rule
6.53(u).
\5\ See SR-CBOE-2011-058.
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Like QCC, AIM involves the crossing of paired orders. AIM can be
used to cross options orders through an exposed auction process. QCC
can be used to cross options orders in an unexposed procedure, as long
as the orders are tied to stock in a manner consistent with
[[Page 41843]]
Rule 6.53(u).\6\ Therefore, in the case of options orders that are
represented as tied to a stock transaction, broker-dealers can elect to
use either the QCC or the AIM mechanism to cross orders.
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\6\ See CBOE Rule 6.53(u).
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Currently, the transaction fee for broker-dealers to execute the
agency/primary side of an AIM order is $0.45 per contract (as such
orders are entered electronically). However, the Broker-Dealer QCC Fee
is $0.20. While there are differences between using QCC and AIM, they
can both be used for the execution of paired orders. Therefore, the
Exchange proposes to adopt the Broker-Dealer AIM Agency Fee of $0.20 in
order to place AIM on an equal competitive footing with QCC regarding
the entrance of broker-dealer orders. The Exchange does not want cost
to discourage broker-dealers from using the exposed auction mechanism
and encourage them to use the QCC mechanism.
Additionally, the amount of the Broker-Dealer AIM Agency Fee of
$0.20 per contract is competitive with similar fees charged by other
exchanges.\7\
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\7\ The International Securities Exchange, LLC (``ISE'') charges
$0.20 per contract for similar orders transacted through its Price
Improvement Mechanism. See ISE Schedule of Fees, page 16-17.
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The Exchange also proposes to make clarifying changes to the Fees
Schedule related to AIM fees. Specifically, the Exchange proposes to
clarify that the current AIM Execution Fee applies only to the contra
party to the AIM Agency/Primary Order by changing the title of the fee
to the ``AIM Contra Execution Fee.'' While the footnote describing the
AIM Execution Fee explains this fact, the modification of the title is
more descriptive for users and will help to distinguish this existing
fee in the Fees Schedule from the new AIM Agency/Primary Order fee for
broker-dealer orders that is discussed above.
The Exchange also proposes to make a non-substantive technical
correction to the Fees Schedule. Under the Broker-Dealer Index Options
Transaction Fees in Section 1, the first bullet point lists the per-
contract fee for transactions in OEX, XEO, SPX, S&P 500 Divided Index
and Volatility Indexes. It should read ``S&P 500 Dividend Index'', not
``S&P 500 Divided Index.'' The Exchange proposes to correct this
inadvertent error by adding the letter ``n'' in the correct place to
make the word ``Dividend.''
The proposed rule change will take effect on July 1, 2011.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\8\ in general, and furthers the objectives of Section 6(b)(4) \9\
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 other persons using Exchange
facilities. Adopting a fee of the same amount per contract for broker-
dealer orders entered as the agency/primary side of an AIM transaction
as is charged for the execution of broker-dealers QCC orders is an
equitable allocation of reasonable fees because both AIM and QCC are
mechanisms that can be used for the execution of paired orders and the
equivalent fee puts the two on a level competitive footing. Further,
the amount of the proposed fee is competitive with similar fees charged
by other exchanges.\10\
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4).
\10\ See Note 7.
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In amending the Fees Schedule to change the title of the ``AIM
Execution Fee'' to the ``AIM Contra Execution Fee,'' and making a non-
substantive technical correction, the proposed rule change is more
descriptive for users and should help to distinguish this existing fee
from the new AIM Agency/Primary Order Execution Fee, and avoids any
potential confusion about the applicability of the fees. These
technical changes, which are designed to make the Fees Schedule more
descriptive and avoid confusion, further the objectives of Section
6(b)(5) \11\ of the Act in particular, in that they remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general, protect investors and the public
interest.
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\11\ 15 U.S.C. 78f(b)(5).
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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 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
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change is designated by the Exchange as
establishing or changing a due, fee, or other charge, thereby
qualifying for effectiveness on filing pursuant to Section 19(b)(3)(A)
of the Act \12\ and subparagraph (f)(2) of Rule 19b-4 \13\ 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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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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 e-mail to [email protected]. Please include
File Number SR-CBOE-2011-062 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-2011-062. This file
number should be included on the subject line if e-mail 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
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printing in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, 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 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-2011-062, and should be
submitted on or before August 5, 2011.
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-17794 Filed 7-14-11; 8:45 am]
BILLING CODE 8011-01-P