Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Exchange Fees for Fiscal Year 2006, 11003-11007 [E6-3014]
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Federal Register / Vol. 71, No. 42 / Friday, March 3, 2006 / Notices
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 rulecomments@sec.gov. Please include File
Number SR–Amex–2006–18 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
20549–1090.
All submissions should refer to File
Number SR–Amex–2006–18. 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 Amex. 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–Amex–2006–18 and should
be submitted on or before March 24,
2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.12
Nancy M. Morris,
Secretary.
[FR Doc. E6–3015 Filed 3–2–06; 8:45 am]
11003
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on January
31, 2006, the Chicago Board Options
Exchange, Incorporated (‘‘CBOE’’ or
‘‘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. 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.5 The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53372; File No. SR–CBOE–
2006–10]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Exchange
Fees for Fiscal Year 2006
The Exchange proposes to amend its
Fees Schedule to make various changes
for fiscal year 2006. The text of the
proposed rule change is included below.
Proposed new language is italicized;
proposed deletions are in [brackets].
Chicago Board Options Exchange, Inc.
Fees Schedule
[January 13] February 1, 2006
1. Options Transaction Fees
(1)(3)(4)(7)(16):
February 24, 2006.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
Per
contract
Equity Options (13):
I. Customer .........................................................................................................................................................................................
II. Market-Maker (MM) (standard rate)(10) ......................................................................................................................................
III. Member Firm Proprietary: (11) ...................................................................................................................................................
• Facilitation Of Customer Order .............................................................................................................................................
• Non-Facilitation Order ...........................................................................................................................................................
IV. Broker-Dealer ...............................................................................................................................................................................
V. Non-Member Market Maker .........................................................................................................................................................
VI. Designated Primary Market-Maker (DPM) (10)(14) ...................................................................................................................
• As of March 1, 2006 ...............................................................................................................................................................
VII. Electronic DPM (e-DPM) (14) ....................................................................................................................................................
VIII. Linkage Orders (8) ....................................................................................................................................................................
IX. Remote Market-Maker (14) .........................................................................................................................................................
QQQQ and SPDR Options: Unchanged.
12 17
CFR 200.30–3(a)(12).
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).
5 The Exchange intends for the proposed changes
to the Fees Schedule to take effect on February 1,
2006.
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.20
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.14
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Per
contract
Index Options (includes Dow Jones DIAMONDS, OEF and other ETF and HOLDRs options)[(17)(18)]: Remainder of section unchanged.
2. Marketing Fee (6)(16) Unchanged.
3. Floor Brokerage Fee
(1)(5)(16)[(17)(18)]:
• [Equity & QQQQ Customer Order ........................................................................................................................................................
• [All Other Equity, QQQQ And Index] DXL, OEX and SPX Options [(8)] .........................................................................................
• DXL, OEX and SPX Crossed Orders ....................................................................................................................................................
4. RAES Access Fee (Retail Automatic
Execution System) (1)(4)(16):
Unchanged.
Footnotes
1.–7. Unchanged.
8. Linkage order fees in effect on a
pilot basis until July 31, 2006, except for
Satisfaction Orders, which are not
assessed Exchange fees per Linkage
rules. The [floor brokerage fee for ‘‘all
other equity, QQQQ and index options’’
and the] RAES access fee for noncustomer transactions also apply to
linkage orders.
9.–16. Unchanged.
[17. Transaction, floor brokerage and
OBO fees are waived through December
15, 2005 for transactions involving
closing a position in reduced-value SPX
LEAPS and simultaneously opening a
corresponding position in full-value
SPX LEAPS.
18. All fees for trading in XSP options
are waived through January 31, 2006.]
5.–9. Unchanged.
10. Member Dues[*] $450 per month.
[ * The Exchange will waive May
2005 member dues for CBOE MarketMakers who automatically execute 2000
contracts or more (through the use of
‘‘M’’ orders) during May 2005 in hybrid
options classes, i.e., all equity options
classes and the MNX, QQQQ and SPDR
options classes.]
11.–17. Unchanged.
18. Customer Large Trade Discount: A
customer large trade discount program
in the form of a cap on customer
transaction fees is in effect for the index
options set forth below. [MNX is not
included in the program since MNX
customer fees were significantly
reduced in June 2002.] Floor brokerage
fees are not subject to the cap on fees.
Regular customer transaction fees will
only be charged up to the following
quantity of contracts per order, for
options based on the following
underlying indexes:
I Dow Jones indexes (including
Diamonds) and SPX—charge only the
first 5,000 contracts.
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1,300,000
1,400,000
1,500,000
1,600,000
1,700,000
1,800,000
1,900,000
2,000,000
Equities
market-maker
reductions
QQQQ/SPDR/
Index marketmaker/DPM
reductions
Equities DPM
trans. fees
reductions
10
15
20
25
30
35
40
45
$.022
.033
.044
.055
.066
.077
.088
.099
$.024
.036
.048
.060
.072
.084
.096
.108
$.012
.018
.024
.030
.036
.042
.048
.054
.............................................................................
.............................................................................
.............................................................................
.............................................................................
.............................................................................
.............................................................................
.............................................................................
.............................................................................
20. Cap on Member Firm Proprietary
and Firm Facilitation Fees: Effective
[February 2, 2004] February 1, 2006, the
Exchange will cap Member Firm**
Proprietary and Firm Facilitation fees at
[$75,000] $100,000 per month per firm.
Specifics of the plan are as follows:
• Fees eligible for the cap program
include Member Firm Proprietary and
Firm Facilitation transaction [and trade
match] fees in all products.
• Member Firm Proprietary and Firm
Facilitation orders must include
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I [SPX—charge only the first 5,000
contracts].
I OEX (including XEO & OEF), NDX
& other indexes—charge only the first
3,000 contracts.
19. Prospective Fee Reduction
Program: Fee reductions will be in effect
[August 1, 2004] February 1, 2006
through [January] December 31, 2006
under the following scenarios:
• If CBOE volume exceeds
[predetermined average] 2,300,000
contracts per day (CPD) [thresholds] at
the end of any month on a fiscal yearto-date (YTD) basis, Market-Maker and
DPM transaction and floor brokerage
fees will be reduced in the subsequent
month [according to the schedule
presented below:] by 10% per contract
from standard rates.
• If CBOE volume exceeds 2,550,000
contracts per day (CPD) at the end of
any month on a fiscal year-to-date
(YTD) basis, Market-Maker and DPM
transaction and floor brokerage fees will
be reduced in the subsequent month by
20% per contract from standard rates.
Fees discount
(percent)
[FY05 ytd avg. CPD
designated firm origin codes (e.g. ‘‘F’’)
on trade input records to be eligible for
the cap calculation.
• Cap calculations will be performed
after each month-end and credits will be
processed in the next billing period.
License fees for Member Firm
Proprietary and Firm Facilitation fee
cap: Due to CBOE’s obligation to pay
license fees on many products, the
Exchange will assess a ten cent per
contract license fee on all licensed
products, excluding OEX, after a firm
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$.00]
.04
.02
Floor
brokerage
reductions
$.004
.006
.008
.010
.012
.014
.016
.018]
has reached a cap on Member Firm
Proprietary and Firm Facilitation fees
for any month.
—*—
** This program applies to member
organizations for orders for the
proprietary account of any member or
non-member broker dealer that derives
more than 35% of its annual, gross
revenues from commissions and
principal transactions with customers.
Member organizations will be required
to verify this amount to the Exchange by
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certifying that they have reached this
threshold and by submitting a copy of
their annual report, which was prepared
in accordance with Generally Accepted
Accounting Principles (‘‘GAAP’’). In the
event that a member organization has
not been in business for one year, the
most recent quarterly reports, prepared
in accordance with GAAP, will be
accepted.
21. DPM Linkage Fees Credits: PA
Orders: [Effective October 1, 2005
through January 31, 2006,] CBOE will
rebate DPM transaction fees generated
from transactions against customer
orders that underlie outbound principal
acting as agent (PA) orders. In addition,
when DPMs incur fees to execute PA
orders at other exchanges, those DPMs
will be credited up to an additional $.20
per contract, up to the amount of total
fees CBOE receives from inbound
linkage transaction fees. The foregoing
credit is apportioned to DPMs pro-rata
based on the number of contracts
executed by each DPM at other
exchanges via PA orders. This program
shall expire upon the earlier of: (i)
Thirty days after Commission approval
of use of an Exchange account to send
and respond to PA orders; or (ii) July 31,
2006 (the expiration date of the Linkage
fees pilot program).
P Orders: Effective February 1, 2006,
CBOE will rebate DPM transaction fees
generated from transactions against
broker-dealer orders (‘‘B’’ or ‘‘F’’ origin)
that underlie outbound principal (P)
orders (‘‘CBOE Transactions’’). In
addition, when DPMs incur fees to
execute such P orders at other
exchanges (‘‘Away Transactions’’),
those DPMs will be credited up to an
additional $.20 per contract. CBOE will
also credit DPMs up to an additional
$.09 per contract on both CBOE
Transactions and Away Transactions to
help offset Options Clearing Corporation
(OCC) and clearing firm fees incurred by
DPMs on those transactions. The
foregoing credits are up to the amount
of total fees CBOE receives from
inbound linkage transaction fees. The
$.20 per contract credit is apportioned
to DPMs pro-rata based on the number
of contracts executed by each DPM in
connection with Away Transactions.
The $.09 per contract credit is
apportioned to DPMs pro-rata based on
the number of contracts executed by
each DPM in connection with both
CBOE Transactions and Away
Transactions.
22. Reserved
23. Fixed Annual Fee Alternative for
DPMs and e-DPMs: Effective [October 1,
2004] February 1, 2006, DPMs and eDPMs may elect to pay a fixed annual
fee of [$1.75] $2.25 million instead of
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being assessed transaction fees on a per
contract basis for their DPM, [and] eDPM and RMM transactions only in all
equity option classes. The fixed fee does
not cover any floor brokerage fees.
DPMs electing to pay the fixed fee will
neither be charged CBOE transaction
fees for CBOE transactions related to
outgoing P/A orders or P orders (as
defined in section 21 of this Fees
Schedule), nor will they receive the
rebate for such fees as set forth in
Section 21 of this Fees Schedule.
However, [pursuant to the second phase
of linkage fee relief set forth in section
21 of this Fee Schedule,] all CBOE
DPMs, including those electing the fixed
annual fee, [who pay transaction fees at
other exchanges to execute P/A orders
there, will receive a credit of up to $.20
per contract (with the total of such
credits not to exceed the total amount of
inbound linkage transaction fees
received by CBOE) to help offset the
transaction fees of other exchanges that
CBOE DPMs incur in filling P/A orders
at those exchanges] are eligible to
receive the $.20 per contract and $.09
per contract credits set forth in section
21 of this Fees Schedule.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[Effective July 1, 2005, DPMs and eDPMs who elect the fixed annual fee
alternative described above may elect to
pay an RMM fixed annual fee of
$250,000 instead of being assessed
transaction fees on a per contract basis
for their RMM transactions only in all
equity options.]
The Exchange proposes to increase
the equity options Designated Primary
Market-Maker (‘‘DPM’’) transaction fee.
The Exchange believes that increasing
this fee is appropriate given that DPM
costs are expected to decrease as the
result of implementation of the PAR
Official program.6 The current equity
options DPM transaction fee is $.12 per
contract. The Exchange proposes to
increase the fee to $.14 per contract as
of March 1, 2006 to coincide with the
PAR Official program roll-out, which is
expected to be completed in February
2006.
If a DPM or e-DPM who has elected
the fixed annual fee alternative merges
or combines operations with a DPM or
e-DPM who has not elected the fixed
annual fee alternative, then the fixed
annual fee will be increased and
assessed to the surviving DPM/e-DPM
entity. The amount of the increase will
be based on the number of contracts
traded and transaction fees paid during
the previous twelve months by the DPM
or e-DPM organization who had not
previously elected the fixed annual fee
alternative. The amount of the increase
will be prorated based on the amount of
time remaining in the then current year
of the fixed fee annual program. If two
DPMs or e-DPMs who elected the fixed
annual fee alternative merge or combine
operations, the fixed fee paid to CBOE
by these two organizations will be
unaffected. No adjustments or refunds
will be made to either entity.
Remainder of Fees Schedule—
Unchanged.
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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 purpose of this proposed rule
change is to amend the CBOE Fees
Schedule to make various fee changes.
The proposed changes are the product
of the Exchange’s annual budget review.
The Exchange proposes to amend the
fees as noted below.
a. Equity Options DPM Transaction Fee
b. Floor Brokerage Fees
The Exchange proposes to eliminate
floor brokerage fees in all products
except options on the Jumbo Dow Jones
Industrial Average (‘‘DXL’’), options on
the S&P 100 index (‘‘OEX’’) and options
on the S&P 500 index (‘‘SPX’’). Effective
February 1, 2006, only floor brokers
executing orders in DXL, OEX and SPX
options will be charged the $.04 floor
6 On November 18, 2005, Commission approved
a CBOE rule change that proposed to remove a
DPM’s obligation and ability to execute orders as an
agent, including as a floor broker, in its allocated
securities on the Exchange in any trading station
and that allows the Exchange to appoint an
Exchange employee or independent contractor
(‘‘PAR Official’’) to assume much of the functions
and obligations that DPMs previously held. See
Securities Exchange Act Release No. 52798
(November 18, 2005), 70 FR 71344 (November 28,
2005).
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brokerage fee and the $.02 fee for
crossed orders.7 The Exchange believes
eliminating floor brokerage fees in the
foregoing manner will make the
Exchange’s fees more competitive with
the floor brokerage fees charged by other
exchanges.
c. Customer Large Trade Discount
Program
The Exchange proposes to include
options on the Mini-Nasdaq-100 index
(‘‘MNX’’) in the Customer Large Trade
Discount program. The Customer Large
Trade Discount program provides a
discount in the form of a cap on the
quantity of customer contracts that are
assessed transaction fees for most CBOE
index options.8 When the program was
first established in July 2003,9 MNX
options were not included since MNX
customer transaction fees had been
significantly reduced in June 2002.10
The Exchange now proposes to include
MNX options in the program, effective
February 1, 2006. MNX regular
customer transaction fees will only be
charged up to the first 3,000 contracts
per order.
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d. Prospective Fee Reduction Program
The Exchange proposes to modify and
continue its Prospective Fee Reduction
Program for fiscal year 2006. The
Program is intended to limit MarketMaker and DPM fees in periods of high
volume.11 The thresholds for fee
reductions have been reviewed and
adjusted, as they are each year, to
account for the anticipated working
capital needs of the Exchange for the
coming year. Fee reductions will be in
effect February 1, 2006 under the
scenarios noted below.
If CBOE volume exceeds 2,300,000
contracts per day (‘‘CPD’’) at the end of
any month on a fiscal year-to-date
(‘‘YTD’’) basis, Market-Maker and DPM
transaction and floor brokerage fees will
be reduced in the subsequent month by
10% per contract from standard rates. If
7 See CBOE Fees Schedule, section 3. The
Exchange also proposes a non-substantive change to
Footnote 8 of the Fees Schedule regarding Linkage
orders to reflect the changes to section 3. In
addition, the Exchange notes that DXL, OEX and
SPX options are currently singly-listed; therefore,
orders for these options are not sent through the
Intermarket Options Linkage (‘‘Linkage’’).
Telephone conversation between Jaime Galvan,
Assistant Secretary, CBOE and Nancy J. Sanow,
Assistant Director, Geoffrey Pemble, Special
Counsel, and Sara Gillis, Attorney, Division of
Market Regulation, Commission on February 13,
2006.
8 See CBOE Fees Schedule, section 18.
9 See Securities Exchange Act Release No. 48223
(July 24, 2003), 68 FR 44978 (July 31, 2003).
10 See Securities Exchange Act Release No. 46045
(June 6, 2002), 67 FR 41284 (June 17, 2002).
11 See CBOE Fees Schedule, Section 19.
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CBOE volume exceeds 2,550,000 CPD at
the end of any month on a fiscal YTD
basis, Market-Maker and DPM
transaction and floor brokerage fees will
be reduced in the subsequent month by
20% per contract from standard rates.
e. Member Firm Proprietary and Firm
Facilitation Fee Cap
The Exchange currently caps member
firm proprietary and firm facilitation
fees at $75,000 per month per firm.12
The Exchange proposes to increase the
cap to $100,000 per month per firm. No
other changes to the program are
proposed.
f. Extension of DPM Linkage Fee Credit
for P/A Orders
The Exchange, pursuant to section 21
of the CBOE Fees Schedule, credits
DPMs for transaction fees they incur
related to the execution of outbound
principal acting as agent (‘‘P/A’’) orders,
as defined in the Linkage Plan. This
‘‘DPM Linkage Fees Credit’’ is
accomplished via a rebate and a credit,
as follows: (i) The Exchange rebates
transaction fees that DPMs incur when
they trade against a customer order that
underlies a P/A order the DPM sent
through the Linkage; and (ii) the
Exchange credits the DPMs up to an
additional $.20 per contract to help
offset some of the fees the DPMs incur
for submitting P/A orders through the
Linkage (this program is referred to
herein as the ‘‘P/A Rebate Program’’).
The P/A Rebate Program is currently
due to expire on January 31, 2006.13
The Exchange proposes to extend the
P/A Rebate Program. A proposed
amendment to the Linkage Plan has also
been separately submitted to the
Commission to permit an Exchange
account, instead of the DPM’s account,
to be used by PAR Officials to send and
respond to P/A orders (‘‘Linkage
Account Plan Amendment’’).14 When an
Exchange account is used to send and
respond to P/A orders, there would no
longer be a need for the P/A Rebate
Program. Therefore, the Exchange
proposes to extend the P/A Rebate
Program until the earlier of: (i) Thirty
days after Commission approval of the
Linkage Account Plan Amendment (i.e.,
Commission approval of use of an
Exchange account to send and respond
12 See CBOE Fees Schedule, Section 20, and
Securities Exchange Act Release No. 49341 (March
1, 2004), 69 FR 10492 (March 5, 2004).
13 See Securities Exchange Act Release No. 53044
(December 30, 2005), 71 FR 957 (January 6, 2006).
14 Telephone conversation between Jaime Galvan,
Assistant Secretary, CBOE and Nancy J. Sanow,
Assistant Director, Geoffrey Pemble, Special
Counsel, and Sara Gillis, Attorney, Division of
Market Regulation, Commission on February 13,
2006.
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to P/A orders); or (ii) July 31, 2006,
which is the expiration date of the
Linkage fees pilot program. The thirty
day time period after Commission
approval of the Linkage Account Plan
Amendment is intended to allow for the
P/A Rebate Program to continue while
the Exchange rolls-out the required
systems changes needed to utilize the
Exchange account.
g. DPM Linkage Fee Credit for Certain
P Orders
The Exchange proposes to adopt a
program similar to the P/A Rebate
Program (but with one difference) to
credit DPMs for transaction fees they
incur related to the execution of
outbound Principal orders on behalf of
orders that are for the account of a
broker-dealer (for purposes of the
proposed program, such Principal
orders are referred to as ‘‘P orders’’).
Specifically, the Exchange proposes to
adopt a rebate program (‘‘P Rebate
Program’’) under which: (i) The
Exchange will rebate transaction fees
that DPMs incur when they trade
against a broker-dealer order (orders that
are marked with either a ‘‘B’’ or ‘‘F’’
origin code) that underlies a P order the
DPM sent through the Linkage; and (ii)
the Exchange will credit DPMs up to an
additional $.20 per contract to help
offset some of the fees DPMs incur for
submitting such P orders through the
Linkage.15
In addition, the Exchange proposes to
credit DPMs up to an additional $.09
per contract on both P order-related
executions (the CBOE transaction
against the broker-dealer order
underlying the outbound P order and
the P order transaction at another
exchange), to help offset the OCC and
clearing firm fees DPMs incur on those
transactions.16
As under the P/A Rebate Program, the
aggregate amount of the $.20 per
contract and $.09 per contract credits for
all DPMs under the P Rebate Program
will be limited to no more than the total
amount of fees that the Exchange earns
from fees generated by inbound Linkage
transaction fees. The $.20 per contract
credit will be apportioned to DPMs pro15 The Exchange has represented that, although
not specifically referenced in the rule text, this
rebate program will be subject to the July 31, 2006
expiration of the Linkage fee pilot program noted
in Footnote 8 of the Fees Schedule. Telephone
conversation between Jaime Galvan, Assistant
Secretary, CBOE and Nancy J. Sanow, Assistant
Director, Geoffrey Pemble, Special Counsel, and
Sara Gillis, Attorney, Division of Market Regulation,
Commission on February 13, 2006.
16 The $.09 per contract credit is based on a
estimated OCC fee of $.02 per contract and
estimated average clearing firm fee of $.07 per
contract.
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rata based on the number of contracts
executed by each DPM at other
exchanges via such P orders. The $.09
per contract credit will be apportioned
to DPMs pro-rata based on the number
of contracts executed by each DPM at
CBOE against broker-dealer orders that
underlie outbound P orders and at other
exchanges via such P orders. A DPM
will be expected to reimburse the
Exchange to the extent that the funds
received by the DPM via the P Rebate
Program exceed the DPM’s actual costs
incurred in executing Linkage-related
transactions.17
The purpose of the P Rebate Program
is to further assist DPMs in offsetting the
additional costs they incur in routing
orders to other exchanges in order to
obtain the National Best Bid or Offer
(‘‘NBBO’’). Unlike the P/A Rebate
Program, the P Rebate Program is not
proposed to expire, except subject to the
Linkage fees pilot specified in Footnote
8 of the CBOE Fees Schedule. The
Exchange intends to implement the P
Rebate Program on February 1, 2006.
h. Fixed Annual Fee
Pursuant to section 23 of the CBOE
Fees Schedule, the Exchange offers a
fixed annual fee program for DPMs and
Electronic Designated Primary MarketMakers (‘‘e-DPMs’’). The program offers
DPMs and e-DPMs the alternative of
choosing a fixed annual fee of $2
million instead of being assessed
transaction fees on a per contract basis
for its DPM, e-DPM and Remote MarketMaker (‘‘RMM’’) transactions in equity
options classes.18
The Exchange proposes to increase
the DPM and e-DPM fixed annual fee for
fiscal year 2006 to $2.25 million for
DPM, e-DPM and RMM equity options
transactions. No other changes to the
program are proposed.
wwhite on PROD1PC61 with NOTICES
i. Miscellaneous, Non-substantive
Changes
The Exchange proposes a few nonsubstantive changes to its Fees Schedule
to remove references to fee waiver
programs that have expired.
Specifically, the Exchange proposes to
delete Footnotes 17 and 18, which relate
to expired fee waiver programs
applicable to SPX LEAPS and XSP
17 Section 23 of the Fees Schedule, which
includes a cross reference to section 21, is also
proposed to be amended to reflect the changes to
section 21.
18 The DPM and e-DPM fixed annual fee for 2005
was $1.75 million for DPM and e-DPM equity
options transactions and $250,000 for RMM equity
options transactions. See Securities Exchange Act
Release No. 50058 (July 22, 2004), 69 FR 45861
(July 30, 2004), and Securities Exchange Act
Release No. 51746 (May 26, 2005), 70 FR 32855
(June 6, 2005).
VerDate Aug<31>2005
16:43 Mar 02, 2006
Jkt 208001
11007
options. The Exchange also proposes to
delete a reference to an expired member
dues waiver program in section 10 of
the Fees Schedule.
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–CBOE–2006–10 on the
subject line.
2. Statutory Basis
The CBOE believes that the proposed
rule change is consistent with section
6(b) of the Act,19 in general, and furthers
the objectives of section 6(b)(4) 20 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 members and other
persons using its facilities.
Paper Comments
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 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 21 and
subparagraph (f)(2) of Rule 19b–4 22
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.23
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:
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–CBOE–2006–10. 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–2006–10 and should
be submitted on or before March 24,
2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.24
Nancy M. Morris,
Secretary.
[FR Doc. E6–3014 Filed 3–2–06; 8:45 am]
BILLING CODE 8010–01–P
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
19 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
21 15 U.S.C. 78s(b)(3)(A).
22 17 C.F.R. 240.19b–4(f)(2).
23 Id.
20 15
PO 00000
Frm 00058
Fmt 4703
Sfmt 4703
24 17
E:\FR\FM\03MRN1.SGM
CFR 200.30–3(a)(12).
03MRN1
]]>Agencies
[Federal Register Volume 71, Number 42 (Friday, March 3, 2006)]
[Notices]
[Pages 11003-11007]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-3014]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53372; File No. SR-CBOE-2006-10]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to Exchange Fees for Fiscal Year 2006
February 24, 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 31, 2006, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``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.
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.\5\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
\5\ The Exchange intends for the proposed changes to the Fees
Schedule to take effect on February 1, 2006.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Fees Schedule to make various
changes for fiscal year 2006. The text of the proposed rule change is
included below. Proposed new language is italicized; proposed deletions
are in [brackets].
Chicago Board Options Exchange, Inc.
Fees Schedule
[January 13] February 1, 2006
1. Options Transaction Fees (1)(3)(4)(7)(16):
Per
contract
Equity Options (13):
I. Customer............................................. .00
II. Market-Maker (MM) (standard rate)(10)............... .22
III. Member Firm Proprietary: (11)...................... ..........
Facilitation Of Customer Order............. .20
Non-Facilitation Order..................... .24
IV. Broker-Dealer....................................... .25
V. Non-Member Market Maker.............................. .26
VI. Designated Primary Market-Maker (DPM) (10)(14)...... .12
As of March 1, 2006........................ .14
VII. Electronic DPM (e-DPM) (14)........................ .25
VIII. Linkage Orders (8)................................ .24
IX. Remote Market-Maker (14)............................ .26
QQQQ and SPDR Options: Unchanged.
[[Page 11004]]
Index Options (includes Dow Jones DIAMONDS, OEF and
other ETF and HOLDRs options)[(17)(18)]: Remainder of
section unchanged.
2. Marketing Fee (6)(16) Unchanged.
3. Floor Brokerage Fee (1)(5)(16)[(17)(18)]:
[Equity & QQQQ Customer Order...................... $.00]
[All Other Equity, QQQQ And Index] DXL, OEX and SPX .04
Options [(8)]..............................................
DXL, OEX and SPX Crossed Orders.................... .02
4. RAES Access Fee (Retail Automatic Execution System) (1)(4)(16):
Unchanged.
Footnotes
1.-7. Unchanged.
8. Linkage order fees in effect on a pilot basis until July 31,
2006, except for Satisfaction Orders, which are not assessed Exchange
fees per Linkage rules. The [floor brokerage fee for ``all other
equity, QQQQ and index options'' and the] RAES access fee for non-
customer transactions also apply to linkage orders.
9.-16. Unchanged.
[17. Transaction, floor brokerage and OBO fees are waived through
December 15, 2005 for transactions involving closing a position in
reduced-value SPX LEAPS and simultaneously opening a corresponding
position in full-value SPX LEAPS.
18. All fees for trading in XSP options are waived through January
31, 2006.]
5.-9. Unchanged.
10. Member Dues[*] $450 per month.
[ * The Exchange will waive May 2005 member dues for CBOE Market-
Makers who automatically execute 2000 contracts or more (through the
use of ``M'' orders) during May 2005 in hybrid options classes, i.e.,
all equity options classes and the MNX, QQQQ and SPDR options classes.]
11.-17. Unchanged.
18. Customer Large Trade Discount: A customer large trade discount
program in the form of a cap on customer transaction fees is in effect
for the index options set forth below. [MNX is not included in the
program since MNX customer fees were significantly reduced in June
2002.] Floor brokerage fees are not subject to the cap on fees.
Regular customer transaction fees will only be charged up to the
following quantity of contracts per order, for options based on the
following underlying indexes:
[squf] Dow Jones indexes (including Diamonds) and SPX--
charge only the first 5,000 contracts.
[squf] [SPX--charge only the first 5,000 contracts].
[squf] OEX (including XEO & OEF), NDX & other indexes--
charge only the first 3,000 contracts.
19. Prospective Fee Reduction Program: Fee reductions will be in
effect [August 1, 2004] February 1, 2006 through [January] December 31,
2006 under the following scenarios:
If CBOE volume exceeds [predetermined average] 2,300,000
contracts per day (CPD) [thresholds] at the end of any month on a
fiscal year-to-date (YTD) basis, Market-Maker and DPM transaction and
floor brokerage fees will be reduced in the subsequent month [according
to the schedule presented below:] by 10% per contract from standard
rates.
If CBOE volume exceeds 2,550,000 contracts per day (CPD)
at the end of any month on a fiscal year-to-date (YTD) basis, Market-
Maker and DPM transaction and floor brokerage fees will be reduced in
the subsequent month by 20% per contract from standard rates.
----------------------------------------------------------------------------------------------------------------
QQQQ/SPDR/
Fees discount Equities Index market- Equities DPM Floor
[FY05 ytd avg. CPD (percent) market-maker maker/DPM trans. fees brokerage
reductions reductions reductions reductions
----------------------------------------------------------------------------------------------------------------
1,300,000....................... 10 $.022 $.024 $.012 $.004
1,400,000....................... 15 .033 .036 .018 .006
1,500,000....................... 20 .044 .048 .024 .008
1,600,000....................... 25 .055 .060 .030 .010
1,700,000....................... 30 .066 .072 .036 .012
1,800,000....................... 35 .077 .084 .042 .014
1,900,000....................... 40 .088 .096 .048 .016
2,000,000....................... 45 .099 .108 .054 .018]
----------------------------------------------------------------------------------------------------------------
20. Cap on Member Firm Proprietary and Firm Facilitation Fees:
Effective [February 2, 2004] February 1, 2006, the Exchange will cap
Member Firm** Proprietary and Firm Facilitation fees at [$75,000]
$100,000 per month per firm. Specifics of the plan are as follows:
Fees eligible for the cap program include Member Firm
Proprietary and Firm Facilitation transaction [and trade match] fees in
all products.
Member Firm Proprietary and Firm Facilitation orders must
include designated firm origin codes (e.g. ``F'') on trade input
records to be eligible for the cap calculation.
Cap calculations will be performed after each month-end
and credits will be processed in the next billing period.
License fees for Member Firm Proprietary and Firm Facilitation fee
cap: Due to CBOE's obligation to pay license fees on many products, the
Exchange will assess a ten cent per contract license fee on all
licensed products, excluding OEX, after a firm has reached a cap on
Member Firm Proprietary and Firm Facilitation fees for any month.
--*--
** This program applies to member organizations for orders for the
proprietary account of any member or non-member broker dealer that
derives more than 35% of its annual, gross revenues from commissions
and principal transactions with customers. Member organizations will be
required to verify this amount to the Exchange by
[[Page 11005]]
certifying that they have reached this threshold and by submitting a
copy of their annual report, which was prepared in accordance with
Generally Accepted Accounting Principles (``GAAP''). In the event that
a member organization has not been in business for one year, the most
recent quarterly reports, prepared in accordance with GAAP, will be
accepted.
21. DPM Linkage Fees Credits: PA Orders: [Effective October 1, 2005
through January 31, 2006,] CBOE will rebate DPM transaction fees
generated from transactions against customer orders that underlie
outbound principal acting as agent (PA) orders. In addition, when DPMs
incur fees to execute PA orders at other exchanges, those DPMs will be
credited up to an additional $.20 per contract, up to the amount of
total fees CBOE receives from inbound linkage transaction fees. The
foregoing credit is apportioned to DPMs pro-rata based on the number of
contracts executed by each DPM at other exchanges via PA orders. This
program shall expire upon the earlier of: (i) Thirty days after
Commission approval of use of an Exchange account to send and respond
to PA orders; or (ii) July 31, 2006 (the expiration date of the Linkage
fees pilot program).
P Orders: Effective February 1, 2006, CBOE will rebate DPM
transaction fees generated from transactions against broker-dealer
orders (``B'' or ``F'' origin) that underlie outbound principal (P)
orders (``CBOE Transactions''). In addition, when DPMs incur fees to
execute such P orders at other exchanges (``Away Transactions''), those
DPMs will be credited up to an additional $.20 per contract. CBOE will
also credit DPMs up to an additional $.09 per contract on both CBOE
Transactions and Away Transactions to help offset Options Clearing
Corporation (OCC) and clearing firm fees incurred by DPMs on those
transactions. The foregoing credits are up to the amount of total fees
CBOE receives from inbound linkage transaction fees. The $.20 per
contract credit is apportioned to DPMs pro-rata based on the number of
contracts executed by each DPM in connection with Away Transactions.
The $.09 per contract credit is apportioned to DPMs pro-rata based on
the number of contracts executed by each DPM in connection with both
CBOE Transactions and Away Transactions.
22. Reserved
23. Fixed Annual Fee Alternative for DPMs and e-DPMs: Effective
[October 1, 2004] February 1, 2006, DPMs and e-DPMs may elect to pay a
fixed annual fee of [$1.75] $2.25 million instead of being assessed
transaction fees on a per contract basis for their DPM, [and] e-DPM and
RMM transactions only in all equity option classes. The fixed fee does
not cover any floor brokerage fees. DPMs electing to pay the fixed fee
will neither be charged CBOE transaction fees for CBOE transactions
related to outgoing P/A orders or P orders (as defined in section 21 of
this Fees Schedule), nor will they receive the rebate for such fees as
set forth in Section 21 of this Fees Schedule. However, [pursuant to
the second phase of linkage fee relief set forth in section 21 of this
Fee Schedule,] all CBOE DPMs, including those electing the fixed annual
fee, [who pay transaction fees at other exchanges to execute P/A orders
there, will receive a credit of up to $.20 per contract (with the total
of such credits not to exceed the total amount of inbound linkage
transaction fees received by CBOE) to help offset the transaction fees
of other exchanges that CBOE DPMs incur in filling P/A orders at those
exchanges] are eligible to receive the $.20 per contract and $.09 per
contract credits set forth in section 21 of this Fees Schedule.
[Effective July 1, 2005, DPMs and e-DPMs who elect the fixed annual fee
alternative described above may elect to pay an RMM fixed annual fee of
$250,000 instead of being assessed transaction fees on a per contract
basis for their RMM transactions only in all equity options.]
If a DPM or e-DPM who has elected the fixed annual fee alternative
merges or combines operations with a DPM or e-DPM who has not elected
the fixed annual fee alternative, then the fixed annual fee will be
increased and assessed to the surviving DPM/e-DPM entity. The amount of
the increase will be based on the number of contracts traded and
transaction fees paid during the previous twelve months by the DPM or
e-DPM organization who had not previously elected the fixed annual fee
alternative. The amount of the increase will be prorated based on the
amount of time remaining in the then current year of the fixed fee
annual program. If two DPMs or e-DPMs who elected the fixed annual fee
alternative merge or combine operations, the fixed fee paid to CBOE by
these two organizations will be unaffected. No adjustments or refunds
will be made to either entity.
Remainder of Fees Schedule--Unchanged.
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 purpose of this proposed rule change is to amend the CBOE Fees
Schedule to make various fee changes. The proposed changes are the
product of the Exchange's annual budget review. The Exchange proposes
to amend the fees as noted below.
a. Equity Options DPM Transaction Fee
The Exchange proposes to increase the equity options Designated
Primary Market-Maker (``DPM'') transaction fee. The Exchange believes
that increasing this fee is appropriate given that DPM costs are
expected to decrease as the result of implementation of the PAR
Official program.\6\ The current equity options DPM transaction fee is
$.12 per contract. The Exchange proposes to increase the fee to $.14
per contract as of March 1, 2006 to coincide with the PAR Official
program roll-out, which is expected to be completed in February 2006.
---------------------------------------------------------------------------
\6\ On November 18, 2005, Commission approved a CBOE rule change
that proposed to remove a DPM's obligation and ability to execute
orders as an agent, including as a floor broker, in its allocated
securities on the Exchange in any trading station and that allows
the Exchange to appoint an Exchange employee or independent
contractor (``PAR Official'') to assume much of the functions and
obligations that DPMs previously held. See Securities Exchange Act
Release No. 52798 (November 18, 2005), 70 FR 71344 (November 28,
2005).
---------------------------------------------------------------------------
b. Floor Brokerage Fees
The Exchange proposes to eliminate floor brokerage fees in all
products except options on the Jumbo Dow Jones Industrial Average
(``DXL''), options on the S&P 100 index (``OEX'') and options on the
S&P 500 index (``SPX''). Effective February 1, 2006, only floor brokers
executing orders in DXL, OEX and SPX options will be charged the $.04
floor
[[Page 11006]]
brokerage fee and the $.02 fee for crossed orders.\7\ The Exchange
believes eliminating floor brokerage fees in the foregoing manner will
make the Exchange's fees more competitive with the floor brokerage fees
charged by other exchanges.
---------------------------------------------------------------------------
\7\ See CBOE Fees Schedule, section 3. The Exchange also
proposes a non-substantive change to Footnote 8 of the Fees Schedule
regarding Linkage orders to reflect the changes to section 3. In
addition, the Exchange notes that DXL, OEX and SPX options are
currently singly-listed; therefore, orders for these options are not
sent through the Intermarket Options Linkage (``Linkage'').
Telephone conversation between Jaime Galvan, Assistant Secretary,
CBOE and Nancy J. Sanow, Assistant Director, Geoffrey Pemble,
Special Counsel, and Sara Gillis, Attorney, Division of Market
Regulation, Commission on February 13, 2006.
---------------------------------------------------------------------------
c. Customer Large Trade Discount Program
The Exchange proposes to include options on the Mini-Nasdaq-100
index (``MNX'') in the Customer Large Trade Discount program. The
Customer Large Trade Discount program provides a discount in the form
of a cap on the quantity of customer contracts that are assessed
transaction fees for most CBOE index options.\8\ When the program was
first established in July 2003,\9\ MNX options were not included since
MNX customer transaction fees had been significantly reduced in June
2002.\10\ The Exchange now proposes to include MNX options in the
program, effective February 1, 2006. MNX regular customer transaction
fees will only be charged up to the first 3,000 contracts per order.
---------------------------------------------------------------------------
\8\ See CBOE Fees Schedule, section 18.
\9\ See Securities Exchange Act Release No. 48223 (July 24,
2003), 68 FR 44978 (July 31, 2003).
\10\ See Securities Exchange Act Release No. 46045 (June 6,
2002), 67 FR 41284 (June 17, 2002).
---------------------------------------------------------------------------
d. Prospective Fee Reduction Program
The Exchange proposes to modify and continue its Prospective Fee
Reduction Program for fiscal year 2006. The Program is intended to
limit Market-Maker and DPM fees in periods of high volume.\11\ The
thresholds for fee reductions have been reviewed and adjusted, as they
are each year, to account for the anticipated working capital needs of
the Exchange for the coming year. Fee reductions will be in effect
February 1, 2006 under the scenarios noted below.
---------------------------------------------------------------------------
\11\ See CBOE Fees Schedule, Section 19.
---------------------------------------------------------------------------
If CBOE volume exceeds 2,300,000 contracts per day (``CPD'') at the
end of any month on a fiscal year-to-date (``YTD'') basis, Market-Maker
and DPM transaction and floor brokerage fees will be reduced in the
subsequent month by 10% per contract from standard rates. If CBOE
volume exceeds 2,550,000 CPD at the end of any month on a fiscal YTD
basis, Market-Maker and DPM transaction and floor brokerage fees will
be reduced in the subsequent month by 20% per contract from standard
rates.
e. Member Firm Proprietary and Firm Facilitation Fee Cap
The Exchange currently caps member firm proprietary and firm
facilitation fees at $75,000 per month per firm.\12\ The Exchange
proposes to increase the cap to $100,000 per month per firm. No other
changes to the program are proposed.
---------------------------------------------------------------------------
\12\ See CBOE Fees Schedule, Section 20, and Securities Exchange
Act Release No. 49341 (March 1, 2004), 69 FR 10492 (March 5, 2004).
---------------------------------------------------------------------------
f. Extension of DPM Linkage Fee Credit for P/A Orders
The Exchange, pursuant to section 21 of the CBOE Fees Schedule,
credits DPMs for transaction fees they incur related to the execution
of outbound principal acting as agent (``P/A'') orders, as defined in
the Linkage Plan. This ``DPM Linkage Fees Credit'' is accomplished via
a rebate and a credit, as follows: (i) The Exchange rebates transaction
fees that DPMs incur when they trade against a customer order that
underlies a P/A order the DPM sent through the Linkage; and (ii) the
Exchange credits the DPMs up to an additional $.20 per contract to help
offset some of the fees the DPMs incur for submitting P/A orders
through the Linkage (this program is referred to herein as the ``P/A
Rebate Program''). The P/A Rebate Program is currently due to expire on
January 31, 2006.\13\
---------------------------------------------------------------------------
\13\ See Securities Exchange Act Release No. 53044 (December 30,
2005), 71 FR 957 (January 6, 2006).
---------------------------------------------------------------------------
The Exchange proposes to extend the P/A Rebate Program. A proposed
amendment to the Linkage Plan has also been separately submitted to the
Commission to permit an Exchange account, instead of the DPM's account,
to be used by PAR Officials to send and respond to P/A orders
(``Linkage Account Plan Amendment'').\14\ When an Exchange account is
used to send and respond to P/A orders, there would no longer be a need
for the P/A Rebate Program. Therefore, the Exchange proposes to extend
the P/A Rebate Program until the earlier of: (i) Thirty days after
Commission approval of the Linkage Account Plan Amendment (i.e.,
Commission approval of use of an Exchange account to send and respond
to P/A orders); or (ii) July 31, 2006, which is the expiration date of
the Linkage fees pilot program. The thirty day time period after
Commission approval of the Linkage Account Plan Amendment is intended
to allow for the P/A Rebate Program to continue while the Exchange
rolls-out the required systems changes needed to utilize the Exchange
account.
---------------------------------------------------------------------------
\14\ Telephone conversation between Jaime Galvan, Assistant
Secretary, CBOE and Nancy J. Sanow, Assistant Director, Geoffrey
Pemble, Special Counsel, and Sara Gillis, Attorney, Division of
Market Regulation, Commission on February 13, 2006.
---------------------------------------------------------------------------
g. DPM Linkage Fee Credit for Certain P Orders
The Exchange proposes to adopt a program similar to the P/A Rebate
Program (but with one difference) to credit DPMs for transaction fees
they incur related to the execution of outbound Principal orders on
behalf of orders that are for the account of a broker-dealer (for
purposes of the proposed program, such Principal orders are referred to
as ``P orders''). Specifically, the Exchange proposes to adopt a rebate
program (``P Rebate Program'') under which: (i) The Exchange will
rebate transaction fees that DPMs incur when they trade against a
broker-dealer order (orders that are marked with either a ``B'' or
``F'' origin code) that underlies a P order the DPM sent through the
Linkage; and (ii) the Exchange will credit DPMs up to an additional
$.20 per contract to help offset some of the fees DPMs incur for
submitting such P orders through the Linkage.\15\
---------------------------------------------------------------------------
\15\ The Exchange has represented that, although not
specifically referenced in the rule text, this rebate program will
be subject to the July 31, 2006 expiration of the Linkage fee pilot
program noted in Footnote 8 of the Fees Schedule. Telephone
conversation between Jaime Galvan, Assistant Secretary, CBOE and
Nancy J. Sanow, Assistant Director, Geoffrey Pemble, Special
Counsel, and Sara Gillis, Attorney, Division of Market Regulation,
Commission on February 13, 2006.
---------------------------------------------------------------------------
In addition, the Exchange proposes to credit DPMs up to an
additional $.09 per contract on both P order-related executions (the
CBOE transaction against the broker-dealer order underlying the
outbound P order and the P order transaction at another exchange), to
help offset the OCC and clearing firm fees DPMs incur on those
transactions.\16\
---------------------------------------------------------------------------
\16\ The $.09 per contract credit is based on a estimated OCC
fee of $.02 per contract and estimated average clearing firm fee of
$.07 per contract.
---------------------------------------------------------------------------
As under the P/A Rebate Program, the aggregate amount of the $.20
per contract and $.09 per contract credits for all DPMs under the P
Rebate Program will be limited to no more than the total amount of fees
that the Exchange earns from fees generated by inbound Linkage
transaction fees. The $.20 per contract credit will be apportioned to
DPMs pro-
[[Page 11007]]
rata based on the number of contracts executed by each DPM at other
exchanges via such P orders. The $.09 per contract credit will be
apportioned to DPMs pro-rata based on the number of contracts executed
by each DPM at CBOE against broker-dealer orders that underlie outbound
P orders and at other exchanges via such P orders. A DPM will be
expected to reimburse the Exchange to the extent that the funds
received by the DPM via the P Rebate Program exceed the DPM's actual
costs incurred in executing Linkage-related transactions.\17\
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\17\ Section 23 of the Fees Schedule, which includes a cross
reference to section 21, is also proposed to be amended to reflect
the changes to section 21.
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The purpose of the P Rebate Program is to further assist DPMs in
offsetting the additional costs they incur in routing orders to other
exchanges in order to obtain the National Best Bid or Offer (``NBBO'').
Unlike the P/A Rebate Program, the P Rebate Program is not proposed to
expire, except subject to the Linkage fees pilot specified in Footnote
8 of the CBOE Fees Schedule. The Exchange intends to implement the P
Rebate Program on February 1, 2006.
h. Fixed Annual Fee
Pursuant to section 23 of the CBOE Fees Schedule, the Exchange
offers a fixed annual fee program for DPMs and Electronic Designated
Primary Market-Makers (``e-DPMs''). The program offers DPMs and e-DPMs
the alternative of choosing a fixed annual fee of $2 million instead of
being assessed transaction fees on a per contract basis for its DPM, e-
DPM and Remote Market-Maker (``RMM'') transactions in equity options
classes.\18\
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\18\ The DPM and e-DPM fixed annual fee for 2005 was $1.75
million for DPM and e-DPM equity options transactions and $250,000
for RMM equity options transactions. See Securities Exchange Act
Release No. 50058 (July 22, 2004), 69 FR 45861 (July 30, 2004), and
Securities Exchange Act Release No. 51746 (May 26, 2005), 70 FR
32855 (June 6, 2005).
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The Exchange proposes to increase the DPM and e-DPM fixed annual
fee for fiscal year 2006 to $2.25 million for DPM, e-DPM and RMM equity
options transactions. No other changes to the program are proposed.
i. Miscellaneous, Non-substantive Changes
The Exchange proposes a few non-substantive changes to its Fees
Schedule to remove references to fee waiver programs that have expired.
Specifically, the Exchange proposes to delete Footnotes 17 and 18,
which relate to expired fee waiver programs applicable to SPX LEAPS and
XSP options. The Exchange also proposes to delete a reference to an
expired member dues waiver program in section 10 of the Fees Schedule.
2. Statutory Basis
The CBOE believes that the proposed rule change is consistent with
section 6(b) of the Act,\19\ in general, and furthers the objectives of
section 6(b)(4) \20\ 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 members and other persons using its
facilities.
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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(4).
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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 that is not necessary or appropriate in
furtherance of 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 \21\ and subparagraph (f)(2)
of Rule 19b-4 \22\ 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.\23\
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\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 17 C.F.R. 240.19b-4(f)(2).
\23\ Id.
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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-2006-10 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 20549-1090.
All submissions should refer to File Number SR-CBOE-2006-10. 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-2006-10 and should be submitted on or before March
24, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-3014 Filed 3-2-06; 8:45 am]
BILLING CODE 8010-01-P
