Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to the Communications Review Fee and DPM Linkage Fees Credit Program, 31237-31239 [E6-8476]

Download as PDF Federal Register / Vol. 71, No. 105 / Thursday, June 1, 2006 / Notices to retroactively apply the fee suspension. The Exchange notes that specialists are subject to a variety of Exchange fees other than transaction charges, such as a floor clerk fee, a floor facility fee, a post fee, and a registration fee.6 In addition, specialists and other floor members of the Exchange are subject to technology and membership fees.7 Certain market participants, such as customers, non-member broker-dealers and market-makers and member brokerdealers are not subject to the majority of these fees. In addition, a specialist unit, in order to adequately ‘‘make a market’’ in assigned securities, must be sufficiently staffed 8 and have adequate technology resources to handle the volume of orders (especially in the QQQQ) that are sent to the Exchange. The Exchange believes that these operational costs borne by a specialist further support the proposal to temporarily suspend QQQQ transaction fees on specialist orders. Specialists have certain obligations under Exchange rules, as well as the Act, that do not exist for other market participants. For example, a specialist, pursuant to Amex Rule 170, is required to maintain a fair and orderly market in his or her assigned securities. Other members of the Exchange, as well as non-member market participants, do not have this obligation. As a result, the Exchange believes that the proposed retroactive suspension of transaction charges for specialist orders in the QQQQ is reasonable and equitable, given the obligations that specialists must adhere to in making markets. The Exchange further submits that the fee suspension will provide greater incentive to the specialist to continue to provide market liquidity, rendering the Exchange an attractive venue for market participants to execute orders. wwhite on PROD1PC61 with NOTICES 2. Statutory Basis The Exchange believes that the proposed fee change is consistent with section 6(b) of the Act,9 in general, and furthers the objectives of section 6(b)(4) of the Act,10 in particular, in that it is an equitable allocation of reasonable 6 The floor clerk, floor facility, post, and registration fees, on an annual basis, are $900, $2,400, $1,000, and $800, respectively. 7 A technology fee of $3,000 per year is assessed on all specialists and other floor participants at the Exchange. Annual membership dues of $1,500 must be paid by all members while annual membership fees are payable depending on the type of membership and circumstances. Non-members are not subject to these fees. 8 See Securities Exchange Act Release No. 53386 (February 28, 2006), 71 FR 11250 (March 6, 2006). 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(4). VerDate Aug<31>2005 19:10 May 31, 2006 Jkt 208001 dues, fees, and other charges among its members and issuers and other persons using its facilities.11 B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange believes that the proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the 1934 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 Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: (A) By order approve such proposed rule change, as amended, or (B) Institute proceedings to determine whether the proposed rule change, as amended, should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: 31237 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 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 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–2006–42 and should be submitted on or before June 22, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.12 J. Lynn Taylor, Assistant Secretary. [FR Doc. E6–8486 Filed 5–31–06; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–53866; File No. SR–CBOE– 2006–44] Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–Amex–2006–42 on the subject line. Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to the Communications Review Fee and DPM Linkage Fees Credit Program Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–Amex–2006–42. This file number should be included on the 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 May 18, 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 11 At the request of the Exchange, the Commission staff conformed this sentence to the statement made by the Exchange in the statutory basis section of the Exchange’s Form 19b–4 for this filing (Section 3(b)). PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 May 25, 2006. 12 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\01JNN1.SGM 01JNN1 31238 Federal Register / Vol. 71, No. 105 / Thursday, June 1, 2006 / Notices 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: (i) Increase the communication review fee; and (ii) amend the DPM Linkage Fees Credit Program (‘‘Program’’). The text of the proposed rule change is available on the Exchange’s Web site (http:// www.cboe.com), 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 Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposal. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Fees Schedule to: (i) Increase the communication review fee, and (ii) amend the Program. The Exchange implemented the proposed Fee changes on May 18, 2006.5 a. Communication Review Fee wwhite on PROD1PC61 with NOTICES CBOE’s Department of Member Firm Regulation reviews member firm options-related advertisements, educational material and sales literature for compliance with applicable rules of 3 15 U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). 5 See telephone conversation between Jamie Galvan, Senior Attorney, CBOE, and Christopher Chow, Senior Counsel, Commission, on May 24, 2006. 4 17 VerDate Aug<31>2005 19:10 May 31, 2006 Jkt 208001 The Exchange, pursuant to Section 21 of the CBOE Fees Schedule, credits DPMs for transaction fees they incur related to the execution of: (i) Outbound principal acting as agent (‘‘P/A’’) orders; and (ii) outbound Principal orders on behalf of orders that are for the account of a broker-dealer (‘‘P orders’’).8 The purpose of the Program is to 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. The Program is accomplished via a rebate and a credit: (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 Intermarket Options Linkage (‘‘Linkage’’), and when they trade against a broker-dealer order that underlies a P order the DPM sent through the Linkage; and (ii) the Exchange credits DPMs up to an additional $.20 per contract to help offset some of the fees the DPMs incur for submitting such P/A and P orders through the Linkage. In addition, for P orders only, the Exchange credits DPMs up to an additional $.09 per contract on both 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 Options Clearing Corporation (‘‘OCC’’) and clearing firm fees DPMs incur on those transactions.9 The Exchange proposes to amend the Program to provide that the Exchange will credit DPMs to cover completely (to the extent possible) the costs incurred by DPMs in executing such outbound P/ A and P orders. Specifically, the Exchange proposes to amend Section 21 of the Fees Schedule to provide that the Exchange will credit DPMs with an amount per contract to offset the fees incurred by DPMs when they execute P/ A and P orders at other exchanges. The amount of such credit would be a weighted average of the Linkage transaction fees assessed by other exchanges calculated based on outbound Linkage contract volume sent to each of the other exchanges. The references in the Fees Schedule to a $.20 per contract credit would be deleted. In addition, the Exchange proposes to credit DPMs an amount per contract on CBOE transactions against customer and broker-dealer orders underlying P/A and P orders, and on P/A and P order transactions at other exchanges, to offset the OCC and clearing firm fees DPMs incur on those transactions.10The amount of such credit would be comprised of the OCC per contract fee applicable to market-makers and specialists set forth on the OCC Schedule of Fees and an estimated 6 CBOE member firms may seek review of their options-related communications by other SROs of which they are members. 7 See Securities Exchange Act Release No. 50903 (December 21, 2004), 69 FR 78070 (December 29, 2004). below, which Items were prepared by the CBOE. The Exchange has designated this proposal as one establishing or changing a due, fee, or other charge imposed by a self-regulatory organization pursuant to 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. 8 Broker-dealer orders are orders marked with either a ‘‘B’’ or ‘‘F’’ origin code. 9 See Securities Exchange Act Release No. 53372 (February 24, 2006), 71 FR 11003 (March 3, 2006). 10 Currently, the credit to offset OCC and clearing firm fees applies only to P orders. CBOE, the SEC and the Securities Investor Protection Corporation.6 These public communications include, for example, print, television and radio advertisements, and electronic communications such as Web sites. CBOE assesses a fee for this service (‘‘Communication Review Fee’’) as follows: (i) Regular review—for printed material reviewed, $75 per submission, plus $10 for each page reviewed in excess of 10 pages; and for video and audio media reviewed, $75 per submission, plus $10 per minute for each minute of tape reviewed in excess of 10 minutes; (ii) Expedited review— for printed material reviewed, $500 per submission, plus $25 for each page reviewed in excess of 10 pages; and for video and audio media reviewed, $500 per submission, plus $25 per minute for each minute of tape reviewed in excess of 10 minutes. This fee was adopted in December of 2004.7 CBOE proposes to increase the Communication Review Fee as follows: (i) Regular review—for printed material reviewed, $150 per submission, plus $25 for each page reviewed in excess of five pages; and for video and audio media reviewed, $150 per submission, plus $25 per minute for each minute of tape reviewed in excess of five minutes; and (ii) Expedited review—for printed material reviewed, $1,000 per submission, plus $50 for each page reviewed in excess of five pages; and for video and audio media reviewed, $1,000 per submission, plus $50 per minute for each minute of tape reviewed in excess of five minutes. Expedited review would be completed within five business days, instead of three business days, not including the date the item is received by the Department of Member Firm Regulation, unless a shorter or longer period is agreed to by the Department of Member Firm Regulation. The Department of Member Firm Regulation may, in its sole discretion, refuse requests for expedited review. b. DPM Linkage Fees Credit PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 E:\FR\FM\01JNN1.SGM 01JNN1 Federal Register / Vol. 71, No. 105 / Thursday, June 1, 2006 / Notices average clearing firm per contract fee. The reference in the Fees Schedule to the $.09 per contract credit would be deleted. Also, the Exchange proposes to credit DPMs an amount per contract on CBOE transactions against customer and broker-dealer orders underlying P/A and P orders, and on P/A and P order transactions at other exchanges, to offset the Sales Value Fee DPMs may incur on those transactions.11 Under the current Program, the Exchange caps the amount of the credits at the amount of total fees received by the Exchange from inbound linkage transaction fees. Because the Exchange proposes to completely cover (to the extent possible) the costs incurred by DPMs in executing such transactions, the Exchange proposes to delete this cap.12 As under the current Program, a DPM would be expected to reimburse the Exchange to the extent that the funds received by the DPM via the Program exceed the DPM’s actual costs incurred in executing Linkage-related transactions.13 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Act 14 in general, and furthers the objectives of Section 6(b)(4) of the Act 15 in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges among CBOE members. B. Self-Regulatory Organization’s Statement on Burden on Competition wwhite on PROD1PC61 with NOTICES The Exchange believes that the proposed rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. 11 The Sales Value Fee is assessed by CBOE to each member for sales of securities on CBOE with respect to which CBOE is obligated to pay a fee to the SEC under Section 31 of the Exchange Act. Other exchanges refer to this fee by different names. See Section 6 of the CBOE Fees Schedule. 12 The Exchange notes that a Linkage Plan amendment has been separately submitted to the Commission to permit an Exchange account, instead of the DPM’s account, to be used by the Exchange to send and respond to P/A orders (‘‘Linkage Account Plan Amendment’’). Pursuant to Section 21 of the Fees Schedule, the DPM Linkage Fee Credit Program with respect to P/A orders will expire upon the earlier of: (i) 30 days after Commission approval of the Linkage Account Plan Amendment; or (ii) July 31, 2006, which is the expiration date of the Linkage fees pilot program. 13 The Exchange intends to monitor on a regular basis to ensure that no DPM receives funds via the Program in amounts that exceed the DPM’s actual costs in executing Linkage-related transactions. 14 15 U.S.C. 78f(b). 15 15 U.S.C. 78f(b)(4). VerDate Aug<31>2005 19:10 May 31, 2006 Jkt 208001 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,16 and paragraph (f)(2) of Rule 19b–4 thereunder17 because it establishes or changes a due, fee, or other charge applicable only to members of the Exchange. 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. 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 rulecomments@sec.gov. Please include File Number SR–CBOE–2006–44 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–2006–44. 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 16 15 17 17 PO 00000 U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). Frm 00098 Fmt 4703 Sfmt 4703 31239 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 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– 2006–44 and should be submitted on or before June 22, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.18 Nancy M. Morris, Secretary. [FR Doc. E6–8476 Filed 5–31–06; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–53869; File No. SR–CBOE– 2006–38] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto Regarding Transfer of Designated Primary Market Maker Appointments May 25, 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 April 17, 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 CBOE. On May 11, 2006, the Exchange filed Amendment No. 1 to the proposed rule change.3 The Commission is publishing this notice to solicit comments on the proposed rule 18 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Amendment No. 1 replaced and superseded the original filing in its entirety. In Amendment No. 1, CBOE corrected a reference in the rule text and elaborated on the purpose of and rationale for the proposed rule change. 1 15 E:\FR\FM\01JNN1.SGM 01JNN1

Agencies

[Federal Register Volume 71, Number 105 (Thursday, June 1, 2006)]
[Notices]
[Pages 31237-31239]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-8476]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53866; File No. SR-CBOE-2006-44]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Amendments to the Communications Review Fee and 
DPM Linkage Fees Credit Program

May 25, 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 May 18, 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

[[Page 31238]]

below, which Items were prepared by the CBOE. The Exchange has 
designated this proposal as one establishing or changing a due, fee, or 
other charge imposed by a self-regulatory organization pursuant to 
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.
---------------------------------------------------------------------------

    \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 Exchange proposes to amend its Fees Schedule to: (i) Increase 
the communication review fee; and (ii) amend the DPM Linkage Fees 
Credit Program (``Program''). The text of the proposed rule change is 
available on the Exchange's Web site (http://www.cboe.com), 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 Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposal. The text of these 
statements may be examined at the places specified in Item IV below. 
The Exchange has prepared summaries, set forth in Sections A, B, and C 
below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fees Schedule to: (i) Increase 
the communication review fee, and (ii) amend the Program. The Exchange 
implemented the proposed Fee changes on May 18, 2006.\5\
---------------------------------------------------------------------------

    \5\ See telephone conversation between Jamie Galvan, Senior 
Attorney, CBOE, and Christopher Chow, Senior Counsel, Commission, on 
May 24, 2006.
---------------------------------------------------------------------------

a. Communication Review Fee
    CBOE's Department of Member Firm Regulation reviews member firm 
options-related advertisements, educational material and sales 
literature for compliance with applicable rules of CBOE, the SEC and 
the Securities Investor Protection Corporation.\6\ These public 
communications include, for example, print, television and radio 
advertisements, and electronic communications such as Web sites.
---------------------------------------------------------------------------

    \6\ CBOE member firms may seek review of their options-related 
communications by other SROs of which they are members.
---------------------------------------------------------------------------

    CBOE assesses a fee for this service (``Communication Review Fee'') 
as follows: (i) Regular review--for printed material reviewed, $75 per 
submission, plus $10 for each page reviewed in excess of 10 pages; and 
for video and audio media reviewed, $75 per submission, plus $10 per 
minute for each minute of tape reviewed in excess of 10 minutes; (ii) 
Expedited review--for printed material reviewed, $500 per submission, 
plus $25 for each page reviewed in excess of 10 pages; and for video 
and audio media reviewed, $500 per submission, plus $25 per minute for 
each minute of tape reviewed in excess of 10 minutes. This fee was 
adopted in December of 2004.\7\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 50903 (December 21, 
2004), 69 FR 78070 (December 29, 2004).
---------------------------------------------------------------------------

    CBOE proposes to increase the Communication Review Fee as follows: 
(i) Regular review--for printed material reviewed, $150 per submission, 
plus $25 for each page reviewed in excess of five pages; and for video 
and audio media reviewed, $150 per submission, plus $25 per minute for 
each minute of tape reviewed in excess of five minutes; and (ii) 
Expedited review--for printed material reviewed, $1,000 per submission, 
plus $50 for each page reviewed in excess of five pages; and for video 
and audio media reviewed, $1,000 per submission, plus $50 per minute 
for each minute of tape reviewed in excess of five minutes.
    Expedited review would be completed within five business days, 
instead of three business days, not including the date the item is 
received by the Department of Member Firm Regulation, unless a shorter 
or longer period is agreed to by the Department of Member Firm 
Regulation. The Department of Member Firm Regulation may, in its sole 
discretion, refuse requests for expedited review.
b. DPM Linkage Fees Credit
    The Exchange, pursuant to Section 21 of the CBOE Fees Schedule, 
credits DPMs for transaction fees they incur related to the execution 
of: (i) Outbound principal acting as agent (``P/A'') orders; and (ii) 
outbound Principal orders on behalf of orders that are for the account 
of a broker-dealer (``P orders'').\8\ The purpose of the Program is to 
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.
---------------------------------------------------------------------------

    \8\ Broker-dealer orders are orders marked with either a ``B'' 
or ``F'' origin code.
---------------------------------------------------------------------------

    The Program is accomplished via a rebate and a credit: (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 Intermarket Options Linkage (``Linkage''), and when they 
trade against a broker-dealer order that underlies a P order the DPM 
sent through the Linkage; and (ii) the Exchange credits DPMs up to an 
additional $.20 per contract to help offset some of the fees the DPMs 
incur for submitting such P/A and P orders through the Linkage. In 
addition, for P orders only, the Exchange credits DPMs up to an 
additional $.09 per contract on both 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 Options Clearing 
Corporation (``OCC'') and clearing firm fees DPMs incur on those 
transactions.\9\
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 53372 (February 24, 
2006), 71 FR 11003 (March 3, 2006).
---------------------------------------------------------------------------

    The Exchange proposes to amend the Program to provide that the 
Exchange will credit DPMs to cover completely (to the extent possible) 
the costs incurred by DPMs in executing such outbound P/A and P orders. 
Specifically, the Exchange proposes to amend Section 21 of the Fees 
Schedule to provide that the Exchange will credit DPMs with an amount 
per contract to offset the fees incurred by DPMs when they execute P/A 
and P orders at other exchanges. The amount of such credit would be a 
weighted average of the Linkage transaction fees assessed by other 
exchanges calculated based on outbound Linkage contract volume sent to 
each of the other exchanges. The references in the Fees Schedule to a 
$.20 per contract credit would be deleted.
    In addition, the Exchange proposes to credit DPMs an amount per 
contract on CBOE transactions against customer and broker-dealer orders 
underlying P/A and P orders, and on P/A and P order transactions at 
other exchanges, to offset the OCC and clearing firm fees DPMs incur on 
those transactions.\10\The amount of such credit would be comprised of 
the OCC per contract fee applicable to market-makers and specialists 
set forth on the OCC Schedule of Fees and an estimated

[[Page 31239]]

average clearing firm per contract fee. The reference in the Fees 
Schedule to the $.09 per contract credit would be deleted.
---------------------------------------------------------------------------

    \10\ Currently, the credit to offset OCC and clearing firm fees 
applies only to P orders.
---------------------------------------------------------------------------

    Also, the Exchange proposes to credit DPMs an amount per contract 
on CBOE transactions against customer and broker-dealer orders 
underlying P/A and P orders, and on P/A and P order transactions at 
other exchanges, to offset the Sales Value Fee DPMs may incur on those 
transactions.\11\
---------------------------------------------------------------------------

    \11\ The Sales Value Fee is assessed by CBOE to each member for 
sales of securities on CBOE with respect to which CBOE is obligated 
to pay a fee to the SEC under Section 31 of the Exchange Act. Other 
exchanges refer to this fee by different names. See Section 6 of the 
CBOE Fees Schedule.
---------------------------------------------------------------------------

    Under the current Program, the Exchange caps the amount of the 
credits at the amount of total fees received by the Exchange from 
inbound linkage transaction fees. Because the Exchange proposes to 
completely cover (to the extent possible) the costs incurred by DPMs in 
executing such transactions, the Exchange proposes to delete this 
cap.\12\
---------------------------------------------------------------------------

    \12\ The Exchange notes that a Linkage Plan amendment has been 
separately submitted to the Commission to permit an Exchange 
account, instead of the DPM's account, to be used by the Exchange to 
send and respond to P/A orders (``Linkage Account Plan Amendment''). 
Pursuant to Section 21 of the Fees Schedule, the DPM Linkage Fee 
Credit Program with respect to P/A orders will expire upon the 
earlier of: (i) 30 days after Commission approval of the Linkage 
Account Plan Amendment; or (ii) July 31, 2006, which is the 
expiration date of the Linkage fees pilot program.
---------------------------------------------------------------------------

    As under the current Program, a DPM would be expected to reimburse 
the Exchange to the extent that the funds received by the DPM via the 
Program exceed the DPM's actual costs incurred in executing Linkage-
related transactions.\13\
---------------------------------------------------------------------------

    \13\ The Exchange intends to monitor on a regular basis to 
ensure that no DPM receives funds via the Program in amounts that 
exceed the DPM's actual costs in executing Linkage-related 
transactions.
---------------------------------------------------------------------------

2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
\14\ in general, and furthers the objectives of Section 6(b)(4) of the 
Act \15\ in particular, in that it is designed to provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
CBOE members.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will not impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A)(ii) of the Act,\16\ and paragraph (f)(2) of Rule 
19b-4 thereunder\17\ because it establishes or changes a due, fee, or 
other charge applicable only to members of the Exchange. 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.
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    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \17\ 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 rule-comments@sec.gov. Please include 
File Number SR-CBOE-2006-44 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-2006-44. 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 inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at 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-2006-44 and should be submitted on or before June 22, 2006.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
Nancy M. Morris,
Secretary.
 [FR Doc. E6-8476 Filed 5-31-06; 8:45 am]
BILLING CODE 8010-01-P