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]

Download as PDF 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). mstockstill on PROD1PC66 with NOTICES 16 17 VerDate Aug<31>2005 18:49 Jan 29, 2008 Jkt 214001 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 (http://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 (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, 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 http:// 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). Frm 00118 Fmt 4703 5611 Sfmt 4703 217 E:\FR\FM\30JAN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 30JAN1 5612 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 mstockstill on PROD1PC66 with NOTICES 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. VerDate Aug<31>2005 18:49 Jan 29, 2008 Jkt 214001 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 Frm 00119 Fmt 4703 Sfmt 4703 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. E:\FR\FM\30JAN1.SGM 30JAN1 Federal Register / Vol. 73, No. 20 / Wednesday, January 30, 2008 / Notices 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. mstockstill on PROD1PC66 with NOTICES 8 The VerDate Aug<31>2005 18:49 Jan 29, 2008 Jkt 214001 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 Frm 00120 Fmt 4703 Sfmt 4703 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 E:\FR\FM\30JAN1.SGM 30JAN1 5614 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 (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, 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 (http://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 VerDate Aug<31>2005 18:49 Jan 29, 2008 Jkt 214001 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 Fmt 4703 Sfmt 4703 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.
---------------------------------------------------------------------------

    \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 http://
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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.''
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \11\ See CBOE Fees Schedule, Section 18.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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-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 (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, 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