Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Its Marketing Fee Program, 4947-4949 [E6-1089]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 71, Number 19 (Monday, January 30, 2006)]
[Notices]
[Pages 4947-4949]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-1089]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53168; File No. SR-CBOE-2006-06]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Its Marketing Fee Program

January 23, 2006.
    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 January 12, 2006, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule

[[Page 4948]]

change as described in Items I, II, and III below, which Items have 
been prepared by the Exchange. The CBOE has designated this proposal as 
one establishing or changing a due, fee, or other charge imposed by the 
CBOE 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 persons.
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    \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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CBOE proposes to amend its Fees Schedule and its marketing fee 
program. Below is the text of the proposed rule change. Proposed new 
language is in italics; deletions are in [brackets].

CHICAGO BOARD OPTIONS EXCHANGE, INC.

FEES SCHEDULE

[December 26, 2005] January 12, 2006

1. No Change.
2. MARKETING FEE (6)(16)......................................      $.65
3.-4. No Change.
 

FOOTNOTES:

    (1)-(5) No Change.
    (6) Commencing on December 12, 2005, the Marketing Fee will be 
assessed only on transactions of Market-Makers, RMMs, e-DPMs, DPMs, and 
LMMs resulting from orders for less than 1,000 contracts (i) from 
payment accepting firms, or (ii) that have designated a ``Preferred 
Market-Maker'' under CBOE Rule 8.13 at the rate of $.65 per contract on 
all classes of equity options, options on HOLDRs, options on SPDRs, and 
options on DIA. The fee will not apply to Market-Maker-to-Market-Maker 
transactions or transactions resulting from P/A orders. This fee shall 
not apply to index options and options on ETFs (other than options on 
SPDRs and options on DIA). A Preferred Market-Maker will only be given 
access to the marketing fee funds generated from a Preferred order if 
the Preferred Market-Maker has an appointment in the class in which the 
Preferred order is received and executed. If less than 80% of the 
marketing fee funds are paid out by the DPM/LMM or Preferred Market-
Maker in a given month, then the Exchange would refund such surplus at 
the end of the month on a pro rata basis based upon contributions made 
by the Market-Makers, RMMs, e-DPMs, DPMs and LMMs. However, if 80% or 
more of the accumulated funds in a given month are paid out by the DPM/
LMM or Preferred Market-Maker, there will not be a rebate for that 
month and the funds will carry over and will be included in the pool of 
funds to be used by the DPM/LMM or Preferred Market-Maker the following 
month. At the end of each quarter, the Exchange would then refund any 
surplus, if any, on a pro rata basis based upon contributions made by 
the Market-Makers, RMMs, DPMs, e-DPMs and LMMs. CBOE's marketing fee 
program as described above will be in effect until June 2, 2006.

Remainder of Fees Schedule--No change.

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 CBOE 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
    On December 12, 2005, CBOE amended its marketing fee program in a 
number of respects.\5\ CBOE states that, as amended, the fee is 
assessed upon DPMs, LMMs, e-DPMs, RMMs, and Market-Makers at the rate 
of $.65 per contract on transactions of Market-Makers, RMMs, e-DPMs, 
DPMs, and LMMs resulting from orders for less than 1,000 contracts (i) 
from payment accepting firms (``PAFs'') or (ii) that have designated a 
``Preferred Market-Maker'' under CBOE Rule 8.13 (``Preferred orders''). 
CBOE notes that the fee does not apply to Market-Maker-to-Market-Maker 
transactions (which includes all transactions between any combination 
of DPMs, e-DPMs, RMMs, LMMs, and Market-Makers), or transactions of 
Market-Makers, RMMs, e-DPMs, DPMs, and LMMs resulting from inbound P/A 
orders. CBOE states that the marketing fee is assessed in all equity 
option classes and options on HOLDRs[supreg], options on SPDRs[supreg], 
and options on DIA.
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    \5\ See Securities Exchange Act Release No. 53016 (December 22, 
2005), 70 FR 77209 (December 29, 2005) (SR-CBOE-2005-107).
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    With respect to the manner in which funds generated by the 
marketing fee will be allocated between the DPM or LMM and Preferred 
Market-Makers, CBOE states that it amended its marketing fee program to 
provide that:
     If a Market-Maker (including any DPM, e-DPM, LMM, and RMM) 
is designated as a Preferred Market-Maker on an order for less than 
1,000 contracts, the Market-Maker will be given access to the marketing 
fee funds generated from the Preferred order, even if the Preferred 
Market-Maker did not participate in the execution of the Preferred 
order because the Market-Maker was not quoting at the NBBO at the time 
the Preferred order was received on CBOE; and
     The DPM or LMM, as applicable, will be given access to the 
marketing fee funds generated from all other orders for less than 1,000 
contracts from PAFs in its appointed classes in a particular trading 
station.
    CBOE now proposes to amend its marketing fee program to make clear 
that a Preferred Market-Maker would only be given access to the 
marketing fee funds generated from a Preferred order if the Preferred 
Market-Maker has an appointment in the class in which the Preferred 
order is received and executed. As before, to receive access to the 
funds, the Preferred Market-Maker would not be required to participate 
in the execution of the Preferred order if the Market-Maker was not 
quoting at the NBBO at the time the Preferred order was received on 
CBOE. However, the Preferred Market-Maker would have to have an 
appointment in the option class in order to receive access to the 
marketing fee funds. CBOE states that, if a Preferred Market-Maker does 
not have an appointment in the option class in which a Preferred order 
designating that Market-Maker as the ``Preferred Market-Maker'' is 
received and executed, then the funds generated from the order would be 
provided to the DPM or LMM. CBOE believes it is appropriate and 
reasonable to require that a Preferred Market-Maker have an appointment 
in an option class (and presumably be meeting the Market-Maker's 
obligations under CBOE's rules), in order to receive access to the 
marketing fee funds.
    CBOE states that it is not amending its marketing fee program in 
any other respect.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b)

[[Page 4949]]

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 its members.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate 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 either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing proposed rule change has been designated as a fee 
change pursuant to Section 19(b)(3)(A)(ii) of the Act \8\ and Rule 19b-
4(f)(2) \9\ thereunder, because it establishes or changes a due, fee, 
or other charge imposed by the Exchange. Accordingly, the proposal will 
take effect upon filing with the Commission. At any time within 60 days 
of the filing of such 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.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 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 (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2006-06 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.

All submissions should refer to File Number SR-CBOE-2006-06. 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 (https://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. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the 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-2006-06 and should be submitted on or before 
February 21, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-1089 Filed 1-27-06; 8:45 am]
BILLING CODE 8010-01-P