Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Its Marketing Fee Program, 44062-44064 [E6-12519]
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Federal Register / Vol. 71, No. 149 / Thursday, August 3, 2006 / Notices
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–CBOE–2005–90 and should
be submitted on or before August 24,
2006.
hsrobinson on PROD1PC69 with NOTICES
V. Accelerated Approval of
Amendments No. 1, 2, and 3
The Commission finds good cause to
approve Amendments No. 1, 2, and 3 to
the proposed rule change prior to the
thirtieth day after the amendments are
published for comment in the Federal
Register pursuant to Section 19(b)(2) of
the Act.47 As discussed in detail above,
in Amendment No. 1, CBOE proposed
revisions to the proposed rule change to
address some of the concerns raised by
Citadel and BOX. In addition, CBOE
proposed in Amendment No. 1 to
clarify, among other things, how CBOE
would notify its members with respect
to order eligibility for SAL, when SAL
would not be automatically initiated,
and how orders would be handled upon
early termination of SAL due to a quote
lock or a response matching the
Exchange’s disseminated quote on the
opposite side of the market. In
Amendment No. 2, the Exchange
proposed amendments to clarify that the
Exchange will submit eligible orders for
SAL auctioning and automatically
execute eligible orders even if
disseminated market in the subject
option class is crossed, provided that
the Exchange is at the NBBO for the
relevant side of the market. In
Amendment No. 3, the Exchange
proposed to except members from tradethrough liability in the case of a tradethrough that results from an automatic
execution when the Exchange’s
disseminated market is the NBBO and is
crossed by, or crosses, the disseminated
market of another options exchange.
The Commission believes that the
proposed changes in Amendment No. 1
are necessary for understanding the
operation of SAL, are responsive to
issues raised in the comment letters,
and raise no new issues of regulatory
concern. In addition, the proposed
changes in Amendments No. 2 and 3 are
necessary to the operation of SAL and
are similar to rule changes previously
approved by the Commission for the
Philadelphia Stock Exchange.48
Accordingly, pursuant to Section
19(b)(2) of the Act,49 the Commission
finds good cause exists to approve
Amendments No. 1, 2, and 3 prior to the
47 15
U.S.C. 78s(b)(2).
Securities Exchange Act Release No. 53449
(March 8, 2006), 71 FR 13441 (March 15, 2006) (File
No. SR–Phlx–2005–45).
49 15 U.S.C. 78s(b)(2).
48 See
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15:20 Aug 02, 2006
Jkt 208001
thirtieth day after notice of the
amendments in the Federal Register.
VI. Conclusion
For the foregoing reasons, the
Commission finds that the proposed
rule change, as amended, is consistent
with the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
exchange, and, in particular, with
Section 6(b)(5) of the Act.50
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,51 that the
proposed rule change (SR–CBOE–2005–
90) is approved, and that Amendments
No. 1, 2, and 3 thereto are approved on
an accelerated basis.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.52
J. Lynn Taylor
Assistant Secretary.
[FR Doc. E6–12527 Filed 8–2–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54236; File No. SR–CBOE–
2006–68]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Its Marketing
Fee Program
July 28, 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 July 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 below, which Items have been
prepared by the Exchange. CBOE has
designated this proposal as one
establishing or changing a due, fee, or
other charge imposed by CBOE under
Section 19(b)(3)(A)(ii) of the Act 3 and
50 15 U.S.C. 78f(b)(5). In connection with the
issuance of this approval order, neither the
Commission nor its staff is granting any exemptive
or no-action relief from the requirements of Rule
10b–10 under the Act. 17 CFR 240.10b–10.
Accordingly, a broker-dealer executing a customer
order through the SAL auction or otherwise on the
Exchange will need to comply with all applicable
requirements of that Rule.
51 15 U.S.C. 78s(b)(2).
52 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
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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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CBOE proposes to amend its
marketing fee program. Below is the text
of the proposed rule change. Proposed
new language is in italics; deleted
language is in [brackets].
CHICAGO BOARD OPTIONS
EXCHANGE, INC. FEES SCHEDULE
[JUNE 30]JULY 18, 2006
1. No Change.
2. MARKETING FEE (6)(16)—$.65
3.–4. No Change.
FOOTNOTES:
(1)–(5) No Change.
(6) The Marketing Fee will be
assessed only on transactions of MarketMakers, RMMs, e-DPMs, DPMs, and
LMMs resulting from orders for less
than 1,000 contracts (i) from payment
accepting firms, or (ii) that have
designated a ‘‘Preferred Market-Maker’’
under CBOE Rule 8.13 at the rate of $.65
per contract on all classes of equity
options, options on HOLDRs, options on
SPDRs, options on DIA, options on
NDX, and options on RUT. The fee will
not apply to: Market-Maker-to-MarketMaker transactions including
transactions resulting from orders from
non-member market-makers;
transactions resulting from inbound P/A
orders or a transaction resulting from
the execution of an order against the
DPM’s account if an order directly
related to that order is represented and
executed through the Linkage Plan
using the DPM’s account; transactions
resulting from accommodation
liquidations (cabinet trades); and
transactions resulting from dividend
strategies, merger strategies, and short
stock interest strategies as defined in
footnote 13 of this Fees Schedule. This
fee shall not apply to index options and
options on ETFs (other than options on
SPDRs, options on DIA, options on
NDX, and options on RUT). A Preferred
Market-Maker will only be given access
to the marketing fee funds generated
from a Preferred order if the Preferred
Market-Maker has an appointment in
the class in which the Preferred order is
received and executed.
[DPM/LMM] Rebate/Carryover
Process. If less than 80% of the
marketing fee funds collected in a given
month [are]is paid out by the DPM/
4 17
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CFR 240.19b–4(f)(2).
03AUN1
Federal Register / Vol. 71, No. 149 / Thursday, August 3, 2006 / Notices
LMM or Preferred Market-Maker in a
given month, then the Exchange would
refund such surplus at the end of the
month on a pro rata basis based upon
contributions made by the MarketMakers, RMMs, e-DPMs, DPMs and
LMMs in that month. However, if 80%
or more of the funds collected in a given
month [are]is paid out by the DPM/
LMM or Preferred Market-Maker, there
will not be a rebate for that month and
the excess funds will be included in an
Excess Pool of funds to be used by the
DPM/LMM or Preferred Market-Maker
in subsequent months. The total balance
of the Excess Pool of funds for a DPM/
LMM cannot exceed $25,000, and the
total balance of the Excess Pool of funds
for a Preferred Market-Maker cannot
exceed $80,000. [i]If in any month the
DPM/LMM Excess Pool balance were to
exceed $25,000, or the Preferred MarketMaker Excess Pool balance were to
exceed $80,000, the funds in excess of
$25,000 or $80,000, respectively, would
be refunded on a pro rata basis based
upon contributions made by the MarketMakers, RMMs, DPMs, e-DPMs and
LMMs in that month.
[Preferred Market-Maker Rebate/
Carryover Process. If less than 80% of
the marketing fee funds are paid out by
the Preferred Market-Maker in a given
month, then the Exchange would refund
such surplus at the end of the month on
a pro rata basis based upon
contributions made by the MarketMakers, RMMs, e-DPMs, DPMs and
LMMs in that month. However, if 80%
or more of the accumulated funds in a
given month are paid out by the
Preferred Market-Maker, there will not
be a rebate for that month and the funds
will carry over and will be included in
the pool of funds to be used by the
Preferred Market-Maker the following
month. At the end of each quarter, the
Exchange would then refund any
surplus, if any, on a pro rata basis based
upon contributions made by the MarketMakers, RMMs, DPMs, e-DPMs and
LMMs in the final month of the quarter.]
CBOE’s marketing fee program as
described above will be in effect until
June 2, 2007.
Remainder of Fees Schedule—No
change.
hsrobinson on PROD1PC69 with NOTICES
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
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15:20 Aug 02, 2006
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statements may be examined at the
places specified in Item IV below. CBOE
has prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
CBOE recently amended its marketing
fee to modify the manner in which
marketing fee funds collected during a
calendar quarter are refunded.5
Specifically, with respect to DPMs and
LMMs, CBOE amended the marketing
fee to provide that, if less than 80% of
the marketing fee funds collected in a
given month is paid out by the DPM/
LMM, then CBOE will refund such
surplus at the end of the month on a pro
rata basis based upon contributions
made by the Market-Makers, RMMs, eDPMs, DPMs, and LMMs in that month.
However, if 80% or more of the funds
collected in a given month is paid out
by the DPM/LMM, there will not be a
rebate for that month and the excess
funds will be included in an Excess
Pool of funds to be used by the DPM/
LMM in subsequent months. The total
balance of the Excess Pool of funds
cannot exceed $25,000 and, if in any
month the balance exceeded $25,000,
the funds in excess of $25,000 would be
refunded on a pro rata basis based upon
contributions made by the MarketMakers, RMMs, DPMs, e-DPMs, and
LMMs in that month.
CBOE now proposes to amend the
marketing fee as it relates to the rebate
process for Preferred Market-Makers by
making the rebate process identical to
the rebate process for DPMs and LMMs,
with one exception. Specifically, CBOE
proposes to cap the Excess Pool of funds
for Preferred Market-Makers at $80,000,
rather than the $25,000 cap for DPMs/
LMMs. CBOE believes that having a
higher limit on the Excess Pool of funds
for Preferred Market-Makers is
reasonable given that the total amount
of marketing fee funds made available to
and used by Preferred Market-Makers to
pay for order flow on a monthly basis
generally is significantly higher than the
amount of marketing fee funds made
available to and used by DPMs/LMMs to
pay for order flow. Thus, CBOE believes
that it is appropriate to allow a Preferred
Market-Maker to potentially carry over
more funds than a DPM/LMM on a
monthly basis, up to the limit on the
Preferred Market-Maker Excess Pool.
CBOE notes that, like DPMs/LMMs,
Preferred Market-Makers would have to
expend 80% or more of the marketing
fee funds collected in a given month in
order for any excess funds not used to
pay for order flow to be included in an
Excess Pool.
CBOE states that it is not amending its
marketing fee program in any other
respects.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,6 in general, and
furthers the objectives of Section 6(b)(4)
of the Act,7 in particular, in that it is
designed to provide for the equitable
allocation of reasonable dues, fees, and
other charges among CBOE members.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will 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 neither solicited nor
received comments on the proposal.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change
has been designated as a fee change
pursuant to Section 19(b)(3)(A)(ii) of the
Act 8 and Rule 19b–4(f)(2) 9 thereunder,
because it establishes or changes a due,
fee, or other charge imposed by the
Exchange. Accordingly, the proposal
will take effect upon filing with the
Commission. At any time within 60
days of the filing of such proposed rule
change the Commission may summarily
abrogate such rule change if it appears
to the Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
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:
6 15
5 See
Securities Exchange Act Release No. 54153
(July 14, 2006), 71 FR 41485 (July 21, 2006) (SR–
CBOE–2006–63).
PO 00000
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44063
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
8 15 U.S.C. 78s(b)(3)(A)(ii).
9 17 CFR 240.19b–4(f)(2).
7 15
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44064
Federal Register / Vol. 71, No. 149 / Thursday, August 3, 2006 / Notices
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–CBOE–2006–68 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–2006–68. 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 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–2006–68 and should
be submitted on or before August 24,
2006.
hsrobinson on PROD1PC69 with NOTICES
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.10
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6–12519 Filed 8–2–06; 8:45 am]
BILLING CODE 8010–01–P
10 17
CFR 200.30–3(a)(12).
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15:20 Aug 02, 2006
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SECURITIES AND EXCHANGE
COMMISSION
principal office, and in the
Commission’s Public Reference Room.
[Release No. 34–54226; File No. SR–CHX–
2006–23]
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
CHX included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received regarding the
proposal. The text of these statements
may be examined at the places specified
in Item IV below. The CHX has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Notice
of Filing of a Proposed Rule Change
and Amendment No. 1 Thereto
Regarding Amendments to the
Exchange’s Bylaws
July 27, 2006.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 22,
2006, the Chicago Stock Exchange, Inc.
(the ‘‘CHX’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the CHX. On July
20, 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 change, as amended, from
interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Through this filing, the Exchange
proposes to amend its bylaws and rules
to make several governance changes.
This proposal would (1) Require the
Exchange’s Board of Directors to
identify one position in each class of
directors as the ‘‘Subject to Petition
(STP) Participant Director,’’ with
candidates for that position to be subject
to a petition process involving the
Exchange’s participants; (2) change the
composition of the Exchange’s
Nominating & Governance Committee to
include two public directors and two
STP Participant Directors; and (3)
modify the Exchange’s rules to confirm
that each participant firm would need
only one trading permit to conduct
business on the Exchange. The text of
this proposed rule change is available
on the Exchange’s Web site at https://
www.chx.com/rules/
proposed_rules.htm, at the Exchange’s
1 15
U.S.C. 78s(b)(1)
CFR 240.19b–4.
3 See Partial Amendment to Form 19b–4 dated
July 20, 2006 (‘‘Amendment No. 1’’). In Amendment
No. 1, the Exchange incorporated (a) a change to the
proposed text of Article II, Section 3(a) of the
Bylaws, replacing the defined term ‘‘CHX
Participant Director’’ with a reference to
representatives of the holders of Series A Preferred
Stock of CHX Holdings, Inc. (‘‘CHX Holdings’’); and
(b) additional descriptive information about the
rules changes that are part of the filing.
2 17
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
As a result of its demutualization in
February 2005, the Exchange became
the wholly-owned subsidiary of CHX
Holdings, a Delaware corporation.4 The
Exchange’s demutualization was driven,
in part, by a desire to generate
opportunities to enter into strategic
alliances by offering stock to interested
entities. On June 21, 2006, CHX
Holdings announced that it had agreed
to the terms of strategic transactions
with four firms that will result in an
investment in CHX Holdings, in
exchange for minority equity stakes in
the company. In connection with these
transactions, CHX has agreed to propose
amendments to its bylaws and rules to
(1) Require the Exchange’s Board of
Directors to identify one position in
each Board class as the STP Participant
Director, with candidates for that
position to be subject to a petition
process involving the Exchange’s
participants; (2) change the composition
of the Exchange’s Nominating &
Governance Committee to include two
public directors and two STP
Participant Directors; and (3) modify the
Exchange’s rules to confirm that each
participant firm would need only one
trading permit to conduct business on
the Exchange.
Changes in Exchange Governance
Contemplated by the Proposed
Transaction
Under the terms of the agreements
reached with potential investors, the
Exchange’s Board of Directors would be
reduced by one director—after the
closing of the transactions, the Board
would consist of the Exchange’s chief
4 See Securities Exchange Act Release No. 51149
(February 8, 2005), 70 FR 7531 (February 14, 2005).
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]]>Agencies
[Federal Register Volume 71, Number 149 (Thursday, August 3, 2006)]
[Notices]
[Pages 44062-44064]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-12519]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54236; File No. SR-CBOE-2006-68]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to Its Marketing Fee Program
July 28, 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 July 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 below, which Items have been prepared by the
Exchange. CBOE has designated this proposal as one establishing or
changing a due, fee, or other charge imposed by CBOE under Section
19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\
which renders the proposal effective upon filing with the Commission.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CBOE proposes to amend its marketing fee program. Below is the text
of the proposed rule change. Proposed new language is in italics;
deleted language is in [brackets].
CHICAGO BOARD OPTIONS EXCHANGE, INC. FEES SCHEDULE [JUNE 30]JULY 18,
2006
1. No Change.
2. MARKETING FEE (6)(16)--$.65
3.-4. No Change.
FOOTNOTES:
(1)-(5) No Change.
(6) The Marketing Fee will be assessed only on transactions of
Market-Makers, RMMs, e-DPMs, DPMs, and LMMs resulting from orders for
less than 1,000 contracts (i) from payment accepting firms, or (ii)
that have designated a ``Preferred Market-Maker'' under CBOE Rule 8.13
at the rate of $.65 per contract on all classes of equity options,
options on HOLDRs, options on SPDRs, options on DIA, options on NDX,
and options on RUT. The fee will not apply to: Market-Maker-to-Market-
Maker transactions including transactions resulting from orders from
non-member market-makers; transactions resulting from inbound P/A
orders or a transaction resulting from the execution of an order
against the DPM's account if an order directly related to that order is
represented and executed through the Linkage Plan using the DPM's
account; transactions resulting from accommodation liquidations
(cabinet trades); and transactions resulting from dividend strategies,
merger strategies, and short stock interest strategies as defined in
footnote 13 of this Fees Schedule. This fee shall not apply to index
options and options on ETFs (other than options on SPDRs, options on
DIA, options on NDX, and options on RUT). A Preferred Market-Maker will
only be given access to the marketing fee funds generated from a
Preferred order if the Preferred Market-Maker has an appointment in the
class in which the Preferred order is received and executed.
[DPM/LMM] Rebate/Carryover Process. If less than 80% of the
marketing fee funds collected in a given month [are]is paid out by the
DPM/
[[Page 44063]]
LMM or Preferred Market-Maker in a given month, then the Exchange would
refund such surplus at the end of the month on a pro rata basis based
upon contributions made by the Market-Makers, RMMs, e-DPMs, DPMs and
LMMs in that month. However, if 80% or more of the funds collected in a
given month [are]is paid out by the DPM/LMM or Preferred Market-Maker,
there will not be a rebate for that month and the excess funds will be
included in an Excess Pool of funds to be used by the DPM/LMM or
Preferred Market-Maker in subsequent months. The total balance of the
Excess Pool of funds for a DPM/LMM cannot exceed $25,000, and the total
balance of the Excess Pool of funds for a Preferred Market-Maker cannot
exceed $80,000. [i]If in any month the DPM/LMM Excess Pool balance were
to exceed $25,000, or the Preferred Market-Maker Excess Pool balance
were to exceed $80,000, the funds in excess of $25,000 or $80,000,
respectively, would be refunded on a pro rata basis based upon
contributions made by the Market-Makers, RMMs, DPMs, e-DPMs and LMMs in
that month.
[Preferred Market-Maker Rebate/Carryover Process. If less than 80%
of the marketing fee funds are paid out by the Preferred Market-Maker
in a given month, then the Exchange would refund such surplus at the
end of the month on a pro rata basis based upon contributions made by
the Market-Makers, RMMs, e-DPMs, DPMs and LMMs in that month. However,
if 80% or more of the accumulated funds in a given month are paid out
by the Preferred Market-Maker, there will not be a rebate for that
month and the funds will carry over and will be included in the pool of
funds to be used by the Preferred Market-Maker the following month. At
the end of each quarter, the Exchange would then refund any surplus, if
any, on a pro rata basis based upon contributions made by the Market-
Makers, RMMs, DPMs, e-DPMs and LMMs in the final month of the quarter.]
CBOE's marketing fee program as described above will be in effect until
June 2, 2007.
Remainder of Fees Schedule--No change.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change, and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. CBOE has prepared summaries, set forth in Sections A, B,
and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
CBOE recently amended its marketing fee to modify the manner in
which marketing fee funds collected during a calendar quarter are
refunded.\5\ Specifically, with respect to DPMs and LMMs, CBOE amended
the marketing fee to provide that, if less than 80% of the marketing
fee funds collected in a given month is paid out by the DPM/LMM, then
CBOE will refund such surplus at the end of the month on a pro rata
basis based upon contributions made by the Market-Makers, RMMs, e-DPMs,
DPMs, and LMMs in that month. However, if 80% or more of the funds
collected in a given month is paid out by the DPM/LMM, there will not
be a rebate for that month and the excess funds will be included in an
Excess Pool of funds to be used by the DPM/LMM in subsequent months.
The total balance of the Excess Pool of funds cannot exceed $25,000
and, if in any month the balance exceeded $25,000, the funds in excess
of $25,000 would be refunded on a pro rata basis based upon
contributions made by the Market-Makers, RMMs, DPMs, e-DPMs, and LMMs
in that month.
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\5\ See Securities Exchange Act Release No. 54153 (July 14,
2006), 71 FR 41485 (July 21, 2006) (SR-CBOE-2006-63).
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CBOE now proposes to amend the marketing fee as it relates to the
rebate process for Preferred Market-Makers by making the rebate process
identical to the rebate process for DPMs and LMMs, with one exception.
Specifically, CBOE proposes to cap the Excess Pool of funds for
Preferred Market-Makers at $80,000, rather than the $25,000 cap for
DPMs/LMMs. CBOE believes that having a higher limit on the Excess Pool
of funds for Preferred Market-Makers is reasonable given that the total
amount of marketing fee funds made available to and used by Preferred
Market-Makers to pay for order flow on a monthly basis generally is
significantly higher than the amount of marketing fee funds made
available to and used by DPMs/LMMs to pay for order flow. Thus, CBOE
believes that it is appropriate to allow a Preferred Market-Maker to
potentially carry over more funds than a DPM/LMM on a monthly basis, up
to the limit on the Preferred Market-Maker Excess Pool. CBOE notes
that, like DPMs/LMMs, Preferred Market-Makers would have to expend 80%
or more of the marketing fee funds collected in a given month in order
for any excess funds not used to pay for order flow to be included in
an Excess Pool.
CBOE states that it is not amending its marketing fee program in
any other respects.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\6\ in general, and furthers the
objectives of Section 6(b)(4) of the Act,\7\ in particular, in that it
is designed to provide for the equitable allocation of reasonable dues,
fees, and other charges among CBOE members.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any 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 neither solicited nor received comments on the
proposal.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change has been designated as a fee
change pursuant to Section 19(b)(3)(A)(ii) of the Act \8\ and Rule 19b-
4(f)(2) \9\ thereunder, because it establishes or changes a due, fee,
or other charge imposed by the Exchange. Accordingly, the proposal will
take effect upon filing with the Commission. At any time within 60 days
of the filing of such proposed rule change the Commission may summarily
abrogate such rule change if it appears to the Commission that such
action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the purposes of
the Act.
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\8\ 15 U.S.C. 78s(b)(3)(A)(ii).
\9\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
[[Page 44064]]
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-2006-68 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-2006-68. 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 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-2006-68 and should be submitted on or before August 24, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-12519 Filed 8-2-06; 8:45 am]
BILLING CODE 8010-01-P
