Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change as Modified by Amendment No. 1 Thereto Relating to Exchange Fees for Fiscal Year 2008, 5611-5614 [E8-1596]
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Federal Register / Vol. 73, No. 20 / Wednesday, January 30, 2008 / Notices
the protection of investors or the public
interest; (2) does not impose any
significant burden on competition; and
(3) by its terms does not become
operative for 30 days after the date of
this filing, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest, the proposed rule
change has become effective pursuant to
Section 19(b)(3)(A) 15 of the Act and
Rule 19b–4(f)(6) thereunder.16 As
required under Rule 19b–4(f)(6)(iii),17
the Exchange provided the Commission
with written notice of its intent to file
the proposed rule change, along with a
brief description and text of the
proposed rule change, at least five
business days prior to the date of the
filing of the proposed rule change.
A proposed rule change filed under
Rule 19b–4(f)(6) 18 normally may not
become operative prior to 30 days after
the date of filing. However, Rule 19b–
4(f)(6)(iii) 19 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
BSE requests that the Commission
waive the 30-day operative delay, as
specified in Rule 19b–4(f)(6)(iii),20
which would make the rule change
effective and operative upon filing. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest because such waiver
would continue to conform the BOX
rules to BOX’s current practice and
clarify that Directed Orders on BOX are
not anonymous without interruption.21
Accordingly, the Commission
designates the proposed rule change
operative 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
15 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
17 17 CFR 240.19b–4(f)(6)(iii).
18 17 CFR 240.19b–4(f)(6).
19 17 CFR 240.19b–4(f)(6)(iii).
20 Id.
21 For purposes only of waiving the operative
delay for this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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16 17
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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
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–1598 Filed 1–29–08; 8:45 am]
BILLING CODE 8011–01–P
• 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–BSE–2008–04 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–BSE–2008–04. 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, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be
available for inspection and copying at
the principal office of BSE. 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–BSE–2008–04 and should
be submitted on or before February 20,
2008.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57191; File No. SR–CBOE–
2007–150]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change as Modified by
Amendment No. 1 Thereto Relating to
Exchange Fees for Fiscal Year 2008
January 24, 2008.
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 December
20, 2007, 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
substantially prepared by the CBOE. On
January 10, 2008, CBOE filed
Amendment No. 1 to the proposed rule
change. 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
Chicago Board Options Exchange,
Incorporated (‘‘CBOE’’ or ‘‘Exchange’’)
proposes to amend its Fees Schedule to
make various changes for Fiscal Year
2008. The text of the proposed rule
change is available at the CBOE, on the
Exchange’s Web site at https://
www.cboe.org/legal, and in 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,
CBOE included statements concerning
the purpose of, and basis for, the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
115
22 17
PO 00000
CFR 200.30–3(a)(12).
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 73, No. 20 / Wednesday, January 30, 2008 / Notices
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 fee changes were approved by the
Exchange’s Board of Directors pursuant
to CBOE Rule 2.22 and will take effect
on January 1, 2008.
The Exchange proposes to amend the
following fees:
Liquidity Provider Sliding Scale
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In January 2007, the Exchange
adopted a ‘‘Liquidity Provider Sliding
Scale’’ program, which reduces a
Liquidity Provider’s per contract
transaction fee based on the number of
contracts the Liquidity Provider trades
in a month.3 The sliding scale applies to
all Liquidity Providers (CBOE MarketMaker, DPM, e-DPM, LMM and RMM)
for transactions in all products.4
Under the current program, a
Liquidity Provider’s $.20 per contract
transaction fee is reduced if the
Liquidity Provider reaches the volume
thresholds set forth in the sliding scale
in a month. As a Liquidity Provider’s
monthly volume increases, its per
contract transaction fee decreases. The
first 50,000 contracts traded in a month
(first tier) are assessed at $.20 per
contract. The next 950,000 contracts
traded (up to 1 million total contracts
traded—second tier) are assessed at $.18
per contract. The next 1.5 million
contracts traded (up to 2.5 million total
contracts traded—third tier) are assessed
at $.15 per contract and the next 1.5
million contracts traded (up to 4 million
total contracts traded—fourth tier) are
assessed at $.10 per contract. All
contracts above 4 million contracts
traded in a month (fifth tier) are
assessed at $.02 per contract. The
Exchange aggregates the trading activity
of separate Liquidity Provider firms for
purposes of the sliding scale if there is
at least 75% common ownership
3 See
Securities Exchange Act Release No. 55193
(January 30, 2007), 72 FR 5476 (February 6, 2007).
4 Contract volume resulting from dividend,
merger and short stock interest strategies as defined
in Footnote 13 of the Fees Schedule does not apply
towards reaching the sliding scale volume
thresholds.
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between the firms as reflected on each
firm’s Form BD, Schedule A.5
The Exchange proposes to increase
the sliding scale volume thresholds for
fiscal year 2008 due to increased
volume on the Exchange. Specifically,
the Exchange proposes to increase the
first tier threshold from 50,000 contracts
to 75,000 contracts, the second tier
threshold from 950,000 contracts to
1,125,000 contracts (up to 1.2 million
total contracts traded), the third tier
threshold from 1.5 million contracts to
1.8 million contracts (up to 3 million
total contracts traded), the fourth tier
threshold from 1.5 million contracts to
1.8 million contracts (up to 4.8 million
total contracts traded), and the fifth tier
threshold from above 4 million
contracts to above 4.8 million contracts.
The Exchange also proposes to increase
the fifth tier transaction fee rate from
$.02 per contract to $.03 per contract.
Under the current program, the
Exchange provides Liquidity Providers
with two incentives to prepay annual
transaction fees. First, in order to be
eligible to participate in the sliding
scale above 1 million contracts (i.e., at
the $.15 per contract rate and lower), a
Liquidity Provider is required to prepay
their transaction fees for the first two
tiers of the sliding scale for the entire
year (i.e., $2.172 million). Second, if a
Liquidity Provider prepays annual fees
for the first four tiers of the sliding
scale, the Liquidity Provider receives a
$500,000 prepayment discount (total
amount of the prepayment would be
$6.172 million instead of $6.672
million). As a result of increasing the
volume thresholds as described above,
the $2.172 million prepayment amount
would be revised to $2.61 million. The
Exchange proposes to increase the
discount for prepaying the first four
tiers of the sliding scale from $500,000
to $600,000 (total amount of the
prepayment would be $7.41 million
instead of $8.01 million).
Member Firm Proprietary and Firm
Facilitation Fee Cap
Pursuant to Section 20 of the CBOE
Fees Schedule, the Exchange caps
member firm proprietary fees at
$125,000 per month per firm (‘‘Member
Firm Fee Cap’’). The Exchange proposes
to eliminate the Member Firm Fee Cap
program and replace it with a sliding
scale program (‘‘Member Firm
5 A Liquidity Provider’s monthly contract volume
is determined at the firm affiliation level, e.g., if five
Liquidity Provider individuals are affiliated with
member firm ABC as reflected by Exchange records
for the entire month, all of the volume from those
five individual Liquidity Providers count towards
firm ABC’s sliding scale transaction fees for that
month.
PO 00000
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Proprietary Sliding Scale’’) similar in
operation to the Liquidity Provider
Sliding Scale.
The proposed Member Firm
Proprietary Sliding Scale would reduce
the standard member firm proprietary
per contract transaction fee (currently
$.20 per contract) based on the number
of contracts the member firm trades in
a month, based on the following sliding
scale:
Tiers
Contracts per
month
First ..........
Second .....
Third .........
Fourth .......
Fifth ..........
First 400,000 ........
Next 200,000 .......
Next 150,000 .......
Next 100,000 .......
Above 850,000 .....
Rate
(cents)
20
15
10
5
2
The sliding scale would apply to
member firm proprietary orders (‘‘F’’
origin code) in all products, except for
orders of joint back-office (‘‘JBO’’)
participants.6
A member firm’s $.20 per contract
transaction fee would be reduced if the
member firm reaches the volume
thresholds set forth in the sliding scale
in a month. As a member firm’s monthly
volume increases, its per contract
transaction fee would decrease. Under
the proposed sliding scale, the first
400,000 contracts traded in a month
would be assessed at $.20 per contract.
The next 200,000 contracts traded (up to
600,000 total contracts traded) would be
assessed at $.15 per contract. The next
150,000 contracts traded (up to 750,000
total contracts traded) would be
assessed at $.10 per contract and the
next 100,000 contracts traded (up to
850,000 contracts traded) would be
assessed at $.05 per contract. All
contracts above 850,000 contracts traded
in a month would be assessed at $.02
per contract.
Due to the Exchange’s obligation to
pay license fees on certain products, the
Exchange would assess a $.10 per
contract license fee (a total of 10 cents
per contract less any surcharge fees
already assessed) on all licensed
products when a firm reaches the fifth
tier of the sliding scale.
Surcharge Fees
The Exchange currently charges a $.04
per contract surcharge fee on
transactions of all market participants in
6 A JBO participant is a member or member
organization that maintains a JBO arrangement with
a clearing broker-dealer (‘‘JBO Broker’’) subject to
the requirements of Regulation T Section 220.7 of
the Federal Reserve System. JBO participant orders
are excluded from the sliding scale due to the fact
that the Exchange is unable to differentiate orders
of the JBO participant from orders of its JBO Broker
and so is unable to aggregate the JBO participant’s
orders for purposes of the sliding scale.
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options on the S&P 100 Index (OEX and
XEO), S&P 500 Index (SPX) and options
on volatility indexes (e.g., VIX)
excluding public customer orders and
including linkage orders.7 The Exchange
proposes to increase the surcharge fee to
$.06 per contract in these products. The
surcharge fee is assessed to help the
Exchange recoup license fees the
Exchange pays to index licensors for the
right to list these products for trading.
SPX Customer Transaction Fee
The Exchange currently charges
customers trading SPX options $.44 per
contract if the premium is greater than
or equal to $1 and $.27 per contract if
the premium is less than $1. The
Exchange proposes to increase the
transaction fee rate if the premium is
less than $1 from $.27 per contract to
$.35 per contract.
Membership Application Fees
Membership application fees are set
forth in Section 11 of the CBOE Fees
Schedule as well as in a regulatory
circular (‘‘Membership Fees Circular’’).
These fees have not changed in
approximately four years. The Exchange
proposes several changes to the
membership application fees as
reflected in the Fees Schedule and
Membership Fees Circular included as
Exhibit 5. The proposed changes would
simplify the membership application
fees schedule by consolidating certain
fees. In addition, certain fees are
proposed to be increased, certain fees
are proposed to be eliminated, and one
new fee is proposed to be established
(Seat Transfer Fee).8
The Exchange notes that while the
proposed $4,000 Trading Firm
Application Fee is significantly higher
than the current firm application fee
($275), unlike the current fee the
proposed new fee will encompass
several other fees related to a firm’s
membership application,9 thereby
potentially resulting in an overall fee
reduction for some firm applicants. For
example, under the current membership
fee structure, a firm applicant would
pay the $275 firm application fee, the
$2,200 individual application fee for
each of its nominees applying for
individual membership, the $275 fee for
each of its associated persons (e.g.,
general partners, executive officers, LLC
7 See
CBOE Fees Schedule, Footnote 14.
$500 Seat Transfer Fee is capped at $2000
for a seat transfer request covering multiple seats.
See Amendment No. 1.
9 The Trading Firm Application Fee would
encompass a firm’s membership application, one
Individual Application Fee (Nominee) associated
with the firm’s membership application and
Associated Person Fees for all associated persons
that are part of the firm’s membership application.
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managers, etc.) and the $40 fingerprint
processing fee for each of its associated
persons, which fees when totaled could
potentially equal or exceed $4,000.
Manual Appointment Change Request
Fee
The Exchange provides members with
access to an online appointment system
that allows CBOE market-makers and
remote market-makers to view and
update their market-maker
appointments as often as necessary.
Market-makers are still allowed to
request appointment changes via email,
phone call or in-person visits to the
Exchange. In order to encourage marketmakers to use the online appointments
system, the Exchange proposes to charge
members $50 for each appointment
change request that is not executed
through the online appointment system.
Technology Fee Changes
The Exchange proposes to amend an
existing fee and establish several new
fees related to CBOE’s electronic trading
system (CBOEdirect) and its Hybrid
Trading System. First, the Exchange
provides certain hardware (e.g., servers)
and related maintenance services to
third party vendors that provide
members with quoting software used by
members to trade on the Hybrid Trading
System. Since 2003, the Exchange has
charged these members $100 per month
to help the Exchange recover its costs in
facilitating the members’ receipt of these
third party services. Due to increased
quoting, the Exchange’s costs in
upgrading and otherwise maintaining
this hardware have increased. The
Exchange proposes to increase the
monthly fee from $100 to $150 to help
the Exchange offset these increased
costs.10
Second, the Exchange proposes to
establish three new monthly charges
related to connectivity to CBOEdirect.
The Exchange provides member firms
with server hardware that enable the
firms to connect to CBOE’s two
Application Protocol Interfaces
(‘‘APIs’’): CMI (CBOE Market Interface)
and Financial Information Exchange
(‘‘FIX’’). Currently, members do not pay
for this service. The Exchange proposes
to charge members a $40 per month
‘‘CMI Application Server’’ fee for this
service. In addition, the Exchange
proposes to charge members a $40 per
month ‘‘network access port’’ charge
and a $40 per month ‘‘FIX port’’ charge
for network hardware the Exchange
10 The fee is located in Section 17 of the Fees
Schedule and is currently named ‘‘Actant
Computing User Fee’’. The Exchange proposes to
rename the fee ‘‘Quoting Infrastructure User Fee.’’
PO 00000
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5613
provides to members for access to the
Exchange’s network.
Lastly, the Exchange provides cabinet
space in the CBOE data center for colocating member firm network and
quoting engine hardware, to help
members meet their need for high
performance processing and low
latency. The Exchange proposes to
charge a co-location fee of $10 per ‘‘U’’
of shelf space (which is equal to 1.75
inches).
Customer Large Trade Discount Program
The Exchange proposes to amend 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 CBOE index, ETF
and HOLDRs options.11 Currently,
customer transaction fees are charged
only up to the first 7,500 contracts per
order in SPX options, only up to the
first 5,000 contracts per order in other
index options, and only up to the first
3,000 contracts per order in ETF and
HOLDRs options. The Exchange
proposes to: (i) Increase the SPX options
cap to 10,000 contracts; and (ii) increase
the cap for options on volatility indexes
to 7,500 contracts from 5,000 contracts.
Miscellaneous, Non-substantive
Changes
The Exchange proposes two nonsubstantive clean-up changes to its Fees
Schedule, as reflected in Exhibit 5. The
Exchange proposes to delete a sentence
from Footnote 7 of the Fees Schedule
relating to a cabinet fee as the Exchange
recently eliminated that fee.12 The
Exchange also proposes to delete a
sentence in Footnote 17 of the Fees
Schedule relating to a fee waiver that is
due to expire on December 31, 2007.13
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) 15 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.
11 See
CBOE Fees Schedule, Section 18.
Securities Exchange Act Release No. 56937
(December 10, 2007), 72 FR 71465 (December 17,
2007).
13 See Securities Exchange Act Release No. 56852
(November 28, 2007), 72 FR 68226 (December 4,
2007).
14 15 U.S.C. 78f(b).
15 15 U.S.C. 78f(b)(4).
12 See
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Federal Register / Vol. 73, No. 20 / Wednesday, January 30, 2008 / Notices
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 16 and
subparagraph (f)(2) of Rule 19b–4 17
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.18
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:
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, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be
available for inspection and copying at
the principal office of 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–2007–150 and
should be submitted on or before
February 20, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–1596 Filed 1–29–08; 8:45 am]
BILLING CODE 8011–01–P
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–2007–150 on the
subject line.
mstockstill on PROD1PC66 with NOTICES
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–2007–150. This file
number should be included on the
16 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
18 For purposes of calculating the 60-day
abrogation period, the Commission considers the
proposed rule change to have been filed on January
10, 2008, the date CBOE filed Amendment No. 1.
17 17
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18:49 Jan 29, 2008
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57193; File No. SR–DTC–
2007–17]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Revise Fee
Schedule
January 24, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
December 31, 2007, The Depository
Trust Company (‘‘DTC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change described in Items I, II, and III
below, which items have been prepared
19 17
1 15
PO 00000
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
Frm 00121
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primarily by DTC. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested parties.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The purpose of the proposed rule
change is to revise DTC’s fee schedule.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
DTC 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. DTC has prepared
summaries, set forth in sections (A), (B),
and (C) below, of the most significant
aspects of these statements.2
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
The purpose of the proposed rule
change is to revise fees for certain
services provided by DTC.
These changes include: 3
(1) Decreases to Settlement Services
fees to realign fees with costs incurred
in providing the services.
(2) Increases in Securities Processing,
Custody, and Asset Servicing fees to
realign fees with costs scaled to reflect
processing complexity.
(3) Elimination of certain Participant
Output Services fees.
In addition, DTC is implementing
certain disincentive fees to discourage
activities which increase industry
inefficiencies. These disincentive fees
include:
(1) A disincentive fee related to
underwritings of non-conforming
structured securities (i.e., issues with
structural elements that prevent agents
from making timely announcements on
income distributions) as compensation
for the additional costs to DTC in
processing them. The effective date for
this fee will be announced by DTC via
Important Notice upon the
Commission’s approval of proposed rule
change SR–DTC–2007–11.4
2 The Commission has modified the text of the
summaries prepared by DTC.
3 The specific changes to DTC’s fee schedule are
attached as an exhibit to the filing.
4 Notice of filing was published for comment on
November 26, 2007. Securities Exchange Act
Release No. 56795 (November 15, 2007), 72 FR
66009.
E:\FR\FM\30JAN1.SGM
30JAN1
]]>Agencies
[Federal Register Volume 73, Number 20 (Wednesday, January 30, 2008)]
[Notices]
[Pages 5611-5614]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-1596]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57191; File No. SR-CBOE-2007-150]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change as Modified by Amendment No. 1 Thereto Relating to Exchange
Fees for Fiscal Year 2008
January 24, 2008.
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 December 20, 2007, 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 substantially
prepared by the CBOE. On January 10, 2008, CBOE filed Amendment No. 1
to the proposed rule change. The Commission is publishing this notice
to solicit comments on the proposed rule change, as amended, from
interested persons.
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\1\15 U.S.C. 78s(b)(1).
\2\17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Chicago Board Options Exchange, Incorporated (``CBOE'' or
``Exchange'') proposes to amend its Fees Schedule to make various
changes for Fiscal Year 2008. The text of the proposed rule change is
available at the CBOE, on the Exchange's Web site at https://
www.cboe.org/legal, and in 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, CBOE included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified
[[Page 5612]]
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 fee changes were
approved by the Exchange's Board of Directors pursuant to CBOE Rule
2.22 and will take effect on January 1, 2008.
The Exchange proposes to amend the following fees:
Liquidity Provider Sliding Scale
In January 2007, the Exchange adopted a ``Liquidity Provider
Sliding Scale'' program, which reduces a Liquidity Provider's per
contract transaction fee based on the number of contracts the Liquidity
Provider trades in a month.\3\ The sliding scale applies to all
Liquidity Providers (CBOE Market-Maker, DPM, e-DPM, LMM and RMM) for
transactions in all products.\4\
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\3\ See Securities Exchange Act Release No. 55193 (January 30,
2007), 72 FR 5476 (February 6, 2007).
\4\ Contract volume resulting from dividend, merger and short
stock interest strategies as defined in Footnote 13 of the Fees
Schedule does not apply towards reaching the sliding scale volume
thresholds.
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Under the current program, a Liquidity Provider's $.20 per contract
transaction fee is reduced if the Liquidity Provider reaches the volume
thresholds set forth in the sliding scale in a month. As a Liquidity
Provider's monthly volume increases, its per contract transaction fee
decreases. The first 50,000 contracts traded in a month (first tier)
are assessed at $.20 per contract. The next 950,000 contracts traded
(up to 1 million total contracts traded--second tier) are assessed at
$.18 per contract. The next 1.5 million contracts traded (up to 2.5
million total contracts traded--third tier) are assessed at $.15 per
contract and the next 1.5 million contracts traded (up to 4 million
total contracts traded--fourth tier) are assessed at $.10 per contract.
All contracts above 4 million contracts traded in a month (fifth tier)
are assessed at $.02 per contract. The Exchange aggregates the trading
activity of separate Liquidity Provider firms for purposes of the
sliding scale if there is at least 75% common ownership between the
firms as reflected on each firm's Form BD, Schedule A.\5\
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\5\ A Liquidity Provider's monthly contract volume is determined
at the firm affiliation level, e.g., if five Liquidity Provider
individuals are affiliated with member firm ABC as reflected by
Exchange records for the entire month, all of the volume from those
five individual Liquidity Providers count towards firm ABC's sliding
scale transaction fees for that month.
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The Exchange proposes to increase the sliding scale volume
thresholds for fiscal year 2008 due to increased volume on the
Exchange. Specifically, the Exchange proposes to increase the first
tier threshold from 50,000 contracts to 75,000 contracts, the second
tier threshold from 950,000 contracts to 1,125,000 contracts (up to 1.2
million total contracts traded), the third tier threshold from 1.5
million contracts to 1.8 million contracts (up to 3 million total
contracts traded), the fourth tier threshold from 1.5 million contracts
to 1.8 million contracts (up to 4.8 million total contracts traded),
and the fifth tier threshold from above 4 million contracts to above
4.8 million contracts. The Exchange also proposes to increase the fifth
tier transaction fee rate from $.02 per contract to $.03 per contract.
Under the current program, the Exchange provides Liquidity
Providers with two incentives to prepay annual transaction fees. First,
in order to be eligible to participate in the sliding scale above 1
million contracts (i.e., at the $.15 per contract rate and lower), a
Liquidity Provider is required to prepay their transaction fees for the
first two tiers of the sliding scale for the entire year (i.e., $2.172
million). Second, if a Liquidity Provider prepays annual fees for the
first four tiers of the sliding scale, the Liquidity Provider receives
a $500,000 prepayment discount (total amount of the prepayment would be
$6.172 million instead of $6.672 million). As a result of increasing
the volume thresholds as described above, the $2.172 million prepayment
amount would be revised to $2.61 million. The Exchange proposes to
increase the discount for prepaying the first four tiers of the sliding
scale from $500,000 to $600,000 (total amount of the prepayment would
be $7.41 million instead of $8.01 million).
Member Firm Proprietary and Firm Facilitation Fee Cap
Pursuant to Section 20 of the CBOE Fees Schedule, the Exchange caps
member firm proprietary fees at $125,000 per month per firm (``Member
Firm Fee Cap''). The Exchange proposes to eliminate the Member Firm Fee
Cap program and replace it with a sliding scale program (``Member Firm
Proprietary Sliding Scale'') similar in operation to the Liquidity
Provider Sliding Scale.
The proposed Member Firm Proprietary Sliding Scale would reduce the
standard member firm proprietary per contract transaction fee
(currently $.20 per contract) based on the number of contracts the
member firm trades in a month, based on the following sliding scale:
------------------------------------------------------------------------
Rate
Tiers Contracts per month (cents)
------------------------------------------------------------------------
First............................... First 400,000......... 20
Second.............................. Next 200,000.......... 15
Third............................... Next 150,000.......... 10
Fourth.............................. Next 100,000.......... 5
Fifth............................... Above 850,000......... 2
------------------------------------------------------------------------
The sliding scale would apply to member firm proprietary orders
(``F'' origin code) in all products, except for orders of joint back-
office (``JBO'') participants.\6\
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\6\ A JBO participant is a member or member organization that
maintains a JBO arrangement with a clearing broker-dealer (``JBO
Broker'') subject to the requirements of Regulation T Section 220.7
of the Federal Reserve System. JBO participant orders are excluded
from the sliding scale due to the fact that the Exchange is unable
to differentiate orders of the JBO participant from orders of its
JBO Broker and so is unable to aggregate the JBO participant's
orders for purposes of the sliding scale.
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A member firm's $.20 per contract transaction fee would be reduced
if the member firm reaches the volume thresholds set forth in the
sliding scale in a month. As a member firm's monthly volume increases,
its per contract transaction fee would decrease. Under the proposed
sliding scale, the first 400,000 contracts traded in a month would be
assessed at $.20 per contract. The next 200,000 contracts traded (up to
600,000 total contracts traded) would be assessed at $.15 per contract.
The next 150,000 contracts traded (up to 750,000 total contracts
traded) would be assessed at $.10 per contract and the next 100,000
contracts traded (up to 850,000 contracts traded) would be assessed at
$.05 per contract. All contracts above 850,000 contracts traded in a
month would be assessed at $.02 per contract.
Due to the Exchange's obligation to pay license fees on certain
products, the Exchange would assess a $.10 per contract license fee (a
total of 10 cents per contract less any surcharge fees already
assessed) on all licensed products when a firm reaches the fifth tier
of the sliding scale.
Surcharge Fees
The Exchange currently charges a $.04 per contract surcharge fee on
transactions of all market participants in
[[Page 5613]]
options on the S&P 100 Index (OEX and XEO), S&P 500 Index (SPX) and
options on volatility indexes (e.g., VIX) excluding public customer
orders and including linkage orders.\7\ The Exchange proposes to
increase the surcharge fee to $.06 per contract in these products. The
surcharge fee is assessed to help the Exchange recoup license fees the
Exchange pays to index licensors for the right to list these products
for trading.
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\7\ See CBOE Fees Schedule, Footnote 14.
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SPX Customer Transaction Fee
The Exchange currently charges customers trading SPX options $.44
per contract if the premium is greater than or equal to $1 and $.27 per
contract if the premium is less than $1. The Exchange proposes to
increase the transaction fee rate if the premium is less than $1 from
$.27 per contract to $.35 per contract.
Membership Application Fees
Membership application fees are set forth in Section 11 of the CBOE
Fees Schedule as well as in a regulatory circular (``Membership Fees
Circular''). These fees have not changed in approximately four years.
The Exchange proposes several changes to the membership application
fees as reflected in the Fees Schedule and Membership Fees Circular
included as Exhibit 5. The proposed changes would simplify the
membership application fees schedule by consolidating certain fees. In
addition, certain fees are proposed to be increased, certain fees are
proposed to be eliminated, and one new fee is proposed to be
established (Seat Transfer Fee).\8\
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\8\ The $500 Seat Transfer Fee is capped at $2000 for a seat
transfer request covering multiple seats. See Amendment No. 1.
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The Exchange notes that while the proposed $4,000 Trading Firm
Application Fee is significantly higher than the current firm
application fee ($275), unlike the current fee the proposed new fee
will encompass several other fees related to a firm's membership
application,\9\ thereby potentially resulting in an overall fee
reduction for some firm applicants. For example, under the current
membership fee structure, a firm applicant would pay the $275 firm
application fee, the $2,200 individual application fee for each of its
nominees applying for individual membership, the $275 fee for each of
its associated persons (e.g., general partners, executive officers, LLC
managers, etc.) and the $40 fingerprint processing fee for each of its
associated persons, which fees when totaled could potentially equal or
exceed $4,000.
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\9\ The Trading Firm Application Fee would encompass a firm's
membership application, one Individual Application Fee (Nominee)
associated with the firm's membership application and Associated
Person Fees for all associated persons that are part of the firm's
membership application.
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Manual Appointment Change Request Fee
The Exchange provides members with access to an online appointment
system that allows CBOE market-makers and remote market-makers to view
and update their market-maker appointments as often as necessary.
Market-makers are still allowed to request appointment changes via
email, phone call or in-person visits to the Exchange. In order to
encourage market-makers to use the online appointments system, the
Exchange proposes to charge members $50 for each appointment change
request that is not executed through the online appointment system.
Technology Fee Changes
The Exchange proposes to amend an existing fee and establish
several new fees related to CBOE's electronic trading system
(CBOEdirect) and its Hybrid Trading System. First, the Exchange
provides certain hardware (e.g., servers) and related maintenance
services to third party vendors that provide members with quoting
software used by members to trade on the Hybrid Trading System. Since
2003, the Exchange has charged these members $100 per month to help the
Exchange recover its costs in facilitating the members' receipt of
these third party services. Due to increased quoting, the Exchange's
costs in upgrading and otherwise maintaining this hardware have
increased. The Exchange proposes to increase the monthly fee from $100
to $150 to help the Exchange offset these increased costs.\10\
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\10\ The fee is located in Section 17 of the Fees Schedule and
is currently named ``Actant Computing User Fee''. The Exchange
proposes to rename the fee ``Quoting Infrastructure User Fee.''
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Second, the Exchange proposes to establish three new monthly
charges related to connectivity to CBOEdirect. The Exchange provides
member firms with server hardware that enable the firms to connect to
CBOE's two Application Protocol Interfaces (``APIs''): CMI (CBOE Market
Interface) and Financial Information Exchange (``FIX''). Currently,
members do not pay for this service. The Exchange proposes to charge
members a $40 per month ``CMI Application Server'' fee for this
service. In addition, the Exchange proposes to charge members a $40 per
month ``network access port'' charge and a $40 per month ``FIX port''
charge for network hardware the Exchange provides to members for access
to the Exchange's network.
Lastly, the Exchange provides cabinet space in the CBOE data center
for co-locating member firm network and quoting engine hardware, to
help members meet their need for high performance processing and low
latency. The Exchange proposes to charge a co-location fee of $10 per
``U'' of shelf space (which is equal to 1.75 inches).
Customer Large Trade Discount Program
The Exchange proposes to amend 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 CBOE index, ETF and HOLDRs options.\11\
Currently, customer transaction fees are charged only up to the first
7,500 contracts per order in SPX options, only up to the first 5,000
contracts per order in other index options, and only up to the first
3,000 contracts per order in ETF and HOLDRs options. The Exchange
proposes to: (i) Increase the SPX options cap to 10,000 contracts; and
(ii) increase the cap for options on volatility indexes to 7,500
contracts from 5,000 contracts.
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\11\ See CBOE Fees Schedule, Section 18.
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Miscellaneous, Non-substantive Changes
The Exchange proposes two non-substantive clean-up changes to its
Fees Schedule, as reflected in Exhibit 5. The Exchange proposes to
delete a sentence from Footnote 7 of the Fees Schedule relating to a
cabinet fee as the Exchange recently eliminated that fee.\12\ The
Exchange also proposes to delete a sentence in Footnote 17 of the Fees
Schedule relating to a fee waiver that is due to expire on December 31,
2007.\13\
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\12\ See Securities Exchange Act Release No. 56937 (December 10,
2007), 72 FR 71465 (December 17, 2007).
\13\ See Securities Exchange Act Release No. 56852 (November 28,
2007), 72 FR 68226 (December 4, 2007).
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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)
\15\ 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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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(4).
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[[Page 5614]]
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 \16\ and subparagraph (f)(2)
of Rule 19b-4 \17\ 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.\18\
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(2).
\18\ For purposes of calculating the 60-day abrogation period,
the Commission considers the proposed rule change to have been filed
on January 10, 2008, the date CBOE filed Amendment No. 1.
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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-2007-150 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-2007-150. 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, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of 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-2007-150 and should be
submitted on or before February 20, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-1596 Filed 1-29-08; 8:45 am]
BILLING CODE 8011-01-P
