[Federal Register: August 13, 2009 (Volume 74, Number 155)]
[Notices]
[Page 40859-40861]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13au09-92]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-60454; File No. SR-CBOE-2009-054]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Amend the Marketing Fee Program
August 6, 2009.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 31, 2009, the 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 the CBOE.
CBOE has designated this proposal as one establishing or changing a
due, fee, or other charge applicable only to a member under Section
19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\
which renders the proposal effective upon filing with the Commission.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested parties.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CBOE proposes to amend its Marketing Fee Program. 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.
II. Self-Regulatory Organization's Statement of the Purpose of, and
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. The CBOE has prepared summaries, set forth in sections
(A), (B), and (C) below, of the most significant aspects of such
statements.
[[Page 40860]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
(a) Purpose
Currently, CBOE's marketing fee is assessed only on transactions of
Market-Makers, e-DPMs, and DPMs, resulting from (i) orders for less
than 1,000 contracts from payment accepting firms, or (ii) customer
orders for less than 1,000 contracts that have designated a ``Preferred
Market-Maker'' under CBOE Rule 8.13. CBOE proposes to amend its
marketing fee program such that the fee will be assessed on
transactions of Market-Makers, e-DPMs, and DPMs resulting from customer
orders for less than 1,000 contracts from payment accepting firms. CBOE
believes that limiting the collection of the fee to transactions
resulting from customer orders for less than 1,000 contracts from
payment accepting firms is appropriate and will continue to allow its
DPMs to compete for order flow.\5\
---------------------------------------------------------------------------
\5\ CBOE notes that in the past, its marketing fee was assessed
on transactions resulting from customer orders. See Securities
Exchange Act Rel. No. 34-50736 (11/24/04), 69 FR 69966 (12/1/04)
(SR-CBOE-2004-68).
---------------------------------------------------------------------------
CBOE will continue to assess the fee on transactions resulting from
customer orders for less than 1,000 contracts that have designated a
``Preferred Market-Maker'' under CBOE Rule 8.13. CBOE proposes to
implement this change to the marketing fee program beginning on August
1, 2009.
Additionally, CBOE proposes to amend the marketing fee program to
eliminate a limitation pertaining to the manner in which DPMs use the
funds made available to them to attract order flow to CBOE. Currently,
the funds made available to DPMs can only be used to attract orders in
the option classes at the trading station where the fee is assessed.
CBOE imposed this limitation at a time when CBOE Market-Makers'
appointments consisted of those option classes located at a particular
trading station. Market-Makers were required by rule to be physically
present in the trading station in order to quote electronically into
the classes at that station. As a result (and as discussed in CBOE's
rule filing SR-CBOE-2004-58; Rel. No. 34-51429), Market-Makers
effectively had a ``one-station'' appointment.
CBOE subsequently amended its rules to provide the same flexibility
to its on-floor Market-Makers that its former Remote Market-Makers
(``RMM'') had. (CBOE eliminated its RMM program a couple years ago and
all former RMMs were designated as Market-Makers with the same trading
privileges.) Today, as Rule 8.3(c)(i) makes clear, Market-Makers create
customized class appointments, called ``virtual trading crowd''
appointments, which allow Market-Makers to quote electronically into
various option classes irrespective of their geographic location on
CBOE's trading floor. Additionally, as Rule 8.3(c)(ii) states, Market-
Makers have an appointment to trade in open outcry in all Hybrid
classes traded on CBOE, meaning that they are free to go from trading
crowd to trading crowd to trade in open outcry in any Hybrid option
class. Market-Makers are not required to be on the trading floor to
submit electronic quotations into their appointed classes (see Rule
8.3(c)(v)) and also are permitted to enter orders electronically in
non-appointed option classes (see Rule 8.7(b)(iii)B). Also, CBOE has
established Off-Floor DPMs, and the option classes formerly located at
one trading station can be relocated among various trading stations--
even though the same DPM organization continues to function now as the
Off-Floor DPM. As a result of all of these changes, this limitation has
become unnecessary.
For an example of this proposed change, assume the same DPM
operated at two different trading stations on CBOE's trading floor:
Station 1 and Station 5. If $10,000 was generated from the marketing
fee in a given month from transactions in option classes located at
Station 1 and $15,000 from Station 5, under CBOE's proposed change a
total of $25,000 would be made available to the DPM for the month, and
the DPM could use the funds to attract order flow in the option classes
located at Stations 1 and 5. (This example assumes none of these funds
were made available to Preferred Market-Makers.) CBOE believes that
this is fair and reasonable in light of the manner in which Market-
Makers function today on CBOE as described above.
Finally, CBOE proposes to delete reference in footnote 6 to two
option classes it no longer trades: BXO and RUH.
CBOE is not amending its marketing fee program in any other
respects.
(b) Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act \6\ in general, and furthers the
objectives of Section 6(b)(4) of the Act \7\ in particular, in that it
is designed to provide for the equitable allocation of reasonable dues,
fees, and other charges among persons using its facilities.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 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 [sic] 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
Because the foregoing rule change establishes or changes a due,
fee, or other charge imposed by the Exchange, it has become effective
pursuant to Section 19(b)(3)(A) of the Act \8\ and subparagraph (f)(2)
of Rule 19b-4 \9\ thereunder. At any time within 60 days of the filing
of the proposed rule change, the Commission may summarily abrogate 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.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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 rule-comments@sec.gov. Please include
File Number SR-CBOE-2009-054 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-2009-054. This file
number should be included on the subject line if e-mail is used. To
help the
[[Page 40861]]
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 inspection and copying 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 office of CBOE.
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-2009-054
and should be submitted on or before September 3, 2009.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-19376 Filed 8-12-09; 8:45 am]
BILLING CODE 8010-01-P