Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Temporary Membership Status Access Fee, 8729-8731 [E8-2696]
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Federal Register / Vol. 73, No. 31 / Thursday, February 14, 2008 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57293; File No. SR–CBOE–
2008–12]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to the
Temporary Membership Status Access
Fee
February 8, 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 January
31, 2008, the Chicago Board Options
Exchange, Incorporated (‘‘CBOE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared substantially by the Exchange.
CBOE has designated this proposal as
one establishing or changing a due, fee,
or other charge imposed by the
Exchange under section 19(b)(3)(A),3
and Rule 19b–4(f)(2) thereunder,4 which
renders the proposal effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CBOE proposes to adopt a monthly
access fee for persons granted temporary
CBOE membership status pursuant to
Interpretation and Policy .02 under
CBOE Rule 3.19 (‘‘Rule 3.19.02’’). The
text of the proposed rule change is
provided below. Additions are indicated
by italics, and deletions are [bracketed].
*
*
*
*
*
Chicago Board Options Exchange,
Incorporated
rwilkins on PROD1PC63 with NOTICES
Fees Schedule
February 1, 2008 [January 1, 2008]
1.—21. Unchanged.
22. TEMPORARY MEMBERSHIP
STATUS ACCESS FEE $7,354 [4,700]
per month.*
* This access fee is assessed to each
person granted temporary CBOE
membership status under CBOE Rule
3.19.02 [3.19.01]. The access fee is due
and payable for each calendar month on
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(2).
2 17
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the first day of that calendar month. The
first month for which the access fee will
be assessed is February 2008 [September
2007]. The access fee is non-refundable
[except as specified below]. The access
fee and any other applicable monthly
fees will be assessed for a calendar
month unless the person provides
written notice to the Membership
Department [at least five business days]
prior to the start of that month that the
person is relinquishing temporary
membership status effective on a date
prior to the start of that month. The
access fee will be assessed through the
integrated billing system. [The access
fee will terminate when the SEC takes
final action on SR–CBOE–2006–106. All
access fees shall be payable to and held
in an interest-bearing escrow account
maintained by the Exchange until the
SEC takes such final action. The
Exchange will retain such fees if the
SEC approves SR–CBOE–2006–106, and
such fees will be returned to the payor,
with interest, if the SEC disapproves
SR–CBOE–2006–106.]
Remainder of Fee Schedule:
Unchanged.
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
CBOE included statements concerning
the purpose of, and basis for, the
proposed rule change and discussed any
comments it received on the proposal.
The text of these statements may be
examined at the places specified in Item
IV below. CBOE has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Rule 3.19.02 became operative on
January 15, 2008 5 upon the approval by
the Commission of CBOE rule filing SR–
CBOE–2006–106.6 At that time, the
5 Rule 3.19.02 was adopted in CBOE rule filing
SR–CBOE–2007–107. Although SR–CBOE–2007–
107 became effective upon filing pursuant to
Section 19(b)(3)(A)(i) of the Act, 15 U.S.C.
78s(b)(3)(A)(i), on September 10, 2007 when SR–
CBOE–2007–107 was submitted to the Commission,
SR–CBOE–2007–107 provided that it would not
become operative unless and until the Commission
approved CBOE rule filing SR–CBOE–2006–106.
See Securities Exchange Act Release No. 56458
(September 18, 2007), 72 FR 54309 (September 24,
2007) (SR–CBOE–2007–107).
6 In SR–CBOE–2006–106, CBOE proposed an
interpretation of Article Fifth(b) of the CBOE
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8729
temporary CBOE membership status
(‘‘Temporary Membership’’) provided to
certain former exerciser members of
CBOE (‘‘Temporary Members’’)
pursuant to Interpretation and Policy
.01 under CBOE Rule 3.19 (‘‘Rule
3.19.01’’) expired 7 and Rule 3.19.02
granted continued Temporary
Membership status to those persons
under Rule 3.19.02.8
Specifically, Rule 3.19.02 provides
that a Temporary Member shall
continue in the Temporary Membership
status previously granted under Rule
3.19.01 following the Commission’s
approval of SR–CBOE–2006–106 as long
as the person: (i) Did not previously
terminate that Temporary Membership
status and remained in good standing as
of the close of business on the trading
day immediately before the date of
approval of SR–CBOE–2006–106 (i.e.,
January 14, 2008); (ii) thereafter remains
in good standing and continues to pay
all applicable fees, dues, assessments,
and other like charges that are assessed
against CBOE members; and (iii) pays
CBOE a monthly access fee set by CBOE,
which shall be due and payable in
accordance with the provisions of the
CBOE Fee Schedule. Unlike the access
fee under Rule 3.19.01, the proposed
access fee to be charged under Rule
3.19.02 is to be paid directly to the
Exchange and will not be escrowed.
Certificate of Incorporation (‘‘Article Fifth(b)’’) to
address the impact of the then-proposed acquisition
of The Board of Trade of the City of Chicago, Inc.
(‘‘CBOT’’) by Chicago Mercantile Exchange
Holdings Inc. (‘‘CME/CBOT Transaction’’) on the
eligibility of persons who were members of CBOE
(‘‘exerciser members’’) pursuant to Article Fifth(b).
Under that interpretation, the consummation of the
CME/CBOT Transaction on July 12, 2007 resulted
in no person any longer qualifying as a member of
the CBOT within the meaning of Article Fifth(b)
and therefore resulted in the elimination of any
person’s eligibility thereafter to become or remain
an exerciser member of CBOE. The Commission
approved SR–CBOE–2006–106 on January 15, 2008.
See Securities Exchange Act Release No. 57159
(January 15, 2008), 73 FR 3769 (January 22, 2008)
(SR–CBOE–2006–106).
7 Rule 3.19.01 granted temporary CBOE
membership status to Temporary Members from the
date of the consummation of the CME/CBOT
Transaction on July 12, 2007 until the Commission
took final action on SR–CBOE–2006–106 on January
15, 2008. See Securities Exchange Act Release No.
56016 (July 5, 2007), 72 FR 38106 (July 12, 2007)
(SR–CBOE–2007–77).
8 Rule 3.19.02 extended the Temporary
Membership status provided to each Temporary
Member under Rule 3.19.01 until the earlier of (i)
the voluntary termination of that Temporary
Membership status by the Temporary Member, (ii)
the approval by the Commission of a further
proposed rule change that provides for the
termination of that status and the granting of
trading permits or another form of trading access to
Temporary Members, or (iii) the consummation of
a transaction pursuant to which either CBOE is
converted into a stock corporation or memberships
in CBOE are converted into stock.
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Federal Register / Vol. 73, No. 31 / Thursday, February 14, 2008 / Notices
rwilkins on PROD1PC63 with NOTICES
In CBOE rule filing SR–CBOE–2007–
107,9 which adopted Rule 3.19.02, the
Exchange stated that it was going to
submit a subsequent rule filing pursuant
to section 19(b)(3)(A)(ii) of the Act 10 to
specify the access fee to be charged
under Rule 3.19.02. The Exchange also
indicated in SR–CBOE–2007–107 that
the access fee would be an amount
reasonably related to the current lease
market rate for transferable CBOE
memberships.11 The purpose of this rule
filing is to specify that access fee.
For the reasons described below, the
Exchange proposes to set the access fee
under Rule 3.19.02 at $7,354 per month.
CBOE clearing firms are currently
involved in facilitating most transferable
membership leases by assisting in
bringing together CBOE lessors and
CBOE trading members for whom these
clearing firms provide clearing services.
Most transferable membership leases
currently have floating monthly rates. In
most of these cases, the floating monthly
rate is the rate designated by the
clearing firm for the floating rate leases
that the clearing firm assisted in
facilitating and is based on a percentage
of the average of the last three
transferable membership sale
amounts.12
In light of the foregoing, the Exchange
used the following process to set the
proposed access fee. The Exchange
polled each of the clearing firms that
assists in facilitating at least 10% of the
transferable membership leases and
obtained the Clearing Firm Floating
Monthly Rate designated by each of
these clearing firms for the month of
February, 2008. The Exchange then set
the proposed access fee at an amount
equal to the highest of these Clearing
Firm Floating Monthly Rates. The
Exchange used the highest of these
amounts (instead of, for example, an
average of these amounts) because
otherwise the Exchange would be
undercutting the lease rates of a large
number of transferable membership
leases.
Because the clearing firms that
facilitate at least 10% of the transferable
membership leases facilitate in total
over 80% of the transferable
membership leases and because the
9 See Securities Exchange Act Release No. 56458
(September 18, 2007), 72 FR 54309 (September 24,
2007) (SR–CBOE–2007–107).
10 15 U.S.C. 78s(b)(3)(A)(ii).
11 See Securities Exchange Act Release No. 56458
(September 18, 2007), 72 FR 54309 (September 24,
2007) (SR–CBOE–2007–107).
12 As used herein, the term ‘‘Clearing Firm
Floating Monthly Rate’’ means the floating monthly
rate that a clearing firm designates, in connection
with transferable membership leases that the
clearing firm assisted in facilitating, for leases that
utilize that floating monthly rate.
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16:49 Feb 13, 2008
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proposed access fee is representative of
the lease rate for a significant number of
the transferable membership leases, the
Exchange believes that the proposed
access fee is reasonably related to the
current lease market rate for transferable
memberships consistent with SR–
CBOE–2007–107.13
The first month for which the access
fee will be assessed is February, 2008.
Temporary Members already paid an
access fee under Rule 3.19.01 for the
month of January, 2008 that was held in
escrow pending Commission action on
SR–CBOE–2006–106 and was then
retained by the Exchange upon the
approval of SR–CBOE–2006–106 in
accordance with the provisions of Rule
3.19.01. Because this access fee for the
month of January, 2008 under Rule
3.19.01 is non-refundable, the Exchange
is commencing assessment of the
proposed access fee under Rule 3.19.02
starting with the month of February,
2008 in the interest of fairness so that
Temporary Members are not charged
two access fees for the same month.
The proposed access fee will remain
in effect until such time that the
Exchange submits a further rule filing
pursuant to section 19(b)(3)(A)(ii) of the
Act 14 to modify the access fee or the
Temporary Membership status under
Rule 3.19.02 is terminated. Accordingly,
the Exchange will retain the flexibility
to adjust the proposed access fee in the
future if the Exchange determines that it
would be appropriate to do so taking
into consideration lease rates for
13 As reflected in SR–CBOE–2007–107, the
Exchange believes that the proposed access fee for
Temporary Members under Rule 3.19.02 constitutes
an equitable allocation of reasonable dues, fees, and
other charges among persons using its facilities. The
proposed fee is equivalent to the lease rate paid by
a large percentage of lessees of transferable CBOE
memberships. Accordingly, the proposed access fee
eliminates the previous disparity that existed under
Rule 3.19.01 between the access fee charged by the
Exchange to Temporary Members (which was based
upon a lease rate paid on CBOT by lessees of what
CBOT denominates as a full CBOT membership)
and the lease rates paid on CBOE by lessees of
transferable memberships (which generally were
significantly higher than the previous Temporary
Member access fee). Because Temporary Members’
access to the Exchange is terminable only under
limited circumstances, while the Exchange access
of lessees of transferable memberships is terminable
by lessors, the Exchange believes that it would be
equitable to assess Temporary Members an access
fee higher than the current lease market rate for
transferable memberships. However, at the present
time, the Exchange is only seeking to eliminate the
current disparity, as the Exchange committed to do
in SR–CBOE–2007–107. See Email from Arthur B.
Reinstein, Deputy General Counsel, CBOE, to
Richard Holley III, Senior Special Counsel, Division
of Trading and Markets, Commission, dated
February 8, 2008 (adding the preceding text to
footnote 13).
14 15 U.S.C. 78s(b)(3)(A)(ii).
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transferable CBOE memberships
prevailing at that time.
With two exceptions, the provisions
of the CBOE Fee Schedule related to the
assessment of the proposed access fee
under Rule 3.19.02 are the same as the
provisions related to the assessment of
the access fee under Rule 3.19.01. Thus,
like with the access fee under Rule
3.19.01: (i) The proposed access fee
under Rule 3.19.02 will be due and
payable each calendar month on the
first day of the calendar month; (ii) the
proposed access fee will be nonrefundable; and (iii) the proposed access
fee will be assessed through the
integrated billing system.
The two differences between the
provisions of the CBOE Fee Schedule
related to the assessment of the
proposed access fee under Rule 3.19.02
and the provisions related to the
assessment of the access fee under Rule
3.19.01 are: (i) The provisions related to
the escrowing of the access fees that
were collected under Rule 3.19.01 have
been removed and (ii) the proposed
access fee and any other applicable
monthly fees will now be assessed for
a calendar month unless the Temporary
Member provides written notice to the
Membership Department prior to the
start of that month (instead of five
business days prior to the start of that
month as was previously the case) that
the Temporary Member is relinquishing
Temporary Membership status effective
on a date prior to the start of that month.
With respect to the second change, the
Exchange has found in this context that
it presently does not need the additional
lead time to process these
relinquishments of Temporary
Membership status.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
section 6(b) of the Act,15 in general, and
furthers the objectives of section 6(b)(4)
of the Act,16 in particular, in that it is
designed to provide for the equitable
allocation of reasonable dues, fees, and
other charges among persons using its
facilities.
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 the purposes of the Act.
15 15
16 15
E:\FR\FM\14FEN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
14FEN1
Federal Register / Vol. 73, No. 31 / Thursday, February 14, 2008 / Notices
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 17 and
subparagraph (f)(2) of Rule 19b–4 18
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.
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:
rwilkins on PROD1PC63 with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–CBOE–2008–12 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–2008–12. 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
17 15
18 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
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16:49 Feb 13, 2008
Jkt 214001
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 Exchange. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File No.
SR–CBOE–2008–12 and should be
submitted on or before March 6, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–2696 Filed 2–13–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57295; File No. SR–NYSE–
2008–11]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Rules 13 and 124 To Remove Certain
Manual Order Types
February 8, 2008.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’)1 and Rule 19b–4 thereunder,2
notice is hereby given that on January
31, 2007, New York Stock Exchange
LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared substantially by NYSE.
NYSE filed the proposed rule change as
a ‘‘non-controversial’’ proposed rule
change pursuant to section 19(b)(3)(A)
of the Act 3 and Rule 19b–4(f)(6)
thereunder,4 which renders it effective
upon filing with the Commission. The
Commission is publishing this notice to
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
15
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8731
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NYSE proposes to amend to amend
Rules 13 and 124 to remove certain
manual order types. The text of the
proposed rule change is available at
NYSE, the Commission’s Public
Reference Room, and https://
www.nyse.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NYSE included statements concerning
the purpose of, and basis for, the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. NYSE
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
NYSE seeks to amend Rules 13 and
124 to remove certain manual order
types that are no longer compatible in
today’s electronic market. These order
types are defined in Rule 13 (i.e., the
‘‘Alternative Order—Either/Or Order’’,
‘‘Orders Good Until a Specified Time’’,
‘‘Scale Order’’ and ‘‘Switch Order—
Contingent Order’’) and Rule 124 (i.e.,
the ‘‘Limited Order, With or Without
Sale’’ and ‘‘Basis Price Order’’). The
Exchange also seeks to make conforming
changes to the enumeration of the
Supplementary Material of Rule 124
based on the elimination of the text
related to the Basis Price Order.
Hybrid Market Trading Environment
The Hybrid Market rules were
implemented in a series of phases
beginning with a pilot on December 14,
2005 through February 27, 2007.5
During the implementation process, the
Exchange continually reviewed the
operation of the Hybrid Market and
changes in the behavior of market
participants resulting from the new
rules in order to assess whether the
rules resulted in operations as
envisioned by the Hybrid Market
initiative. As a result of this continual
5 See Securities Exchange Act Release No. 53539
(March 22, 2006), 71 FR 16353 (March 31, 2006)
(SR–NYSE–2004–05) (establishing the Hybrid
Market).
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]]>Agencies
[Federal Register Volume 73, Number 31 (Thursday, February 14, 2008)]
[Notices]
[Pages 8729-8731]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-2696]
[[Page 8729]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57293; File No. SR-CBOE-2008-12]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to the Temporary Membership Status Access Fee
February 8, 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 January 31, 2008, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared
substantially by the Exchange. CBOE has designated this proposal as one
establishing or changing a due, fee, or other charge imposed by the
Exchange under section 19(b)(3)(A),\3\ and Rule 19b-4(f)(2)
thereunder,\4\ which renders the proposal effective upon filing with
the Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CBOE proposes to adopt a monthly access fee for persons granted
temporary CBOE membership status pursuant to Interpretation and Policy
.02 under CBOE Rule 3.19 (``Rule 3.19.02''). The text of the proposed
rule change is provided below. Additions are indicated by italics, and
deletions are [bracketed].
* * * * *
Chicago Board Options Exchange, Incorporated
Fees Schedule
February 1, 2008 [January 1, 2008]
1.--21. Unchanged.
22. TEMPORARY MEMBERSHIP STATUS ACCESS FEE $7,354 [4,700] per
month.*
* This access fee is assessed to each person granted temporary CBOE
membership status under CBOE Rule 3.19.02 [3.19.01]. The access fee is
due and payable for each calendar month on the first day of that
calendar month. The first month for which the access fee will be
assessed is February 2008 [September 2007]. The access fee is non-
refundable [except as specified below]. The access fee and any other
applicable monthly fees will be assessed for a calendar month unless
the person provides written notice to the Membership Department [at
least five business days] prior to the start of that month that the
person is relinquishing temporary membership status effective on a date
prior to the start of that month. The access fee will be assessed
through the integrated billing system. [The access fee will terminate
when the SEC takes final action on SR-CBOE-2006-106. All access fees
shall be payable to and held in an interest-bearing escrow account
maintained by the Exchange until the SEC takes such final action. The
Exchange will retain such fees if the SEC approves SR-CBOE-2006-106,
and such fees will be returned to the payor, with interest, if the SEC
disapproves SR-CBOE-2006-106.]
Remainder of Fee Schedule: Unchanged.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, CBOE included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposal. The text of these
statements may be examined at the places specified in Item IV below.
CBOE has prepared summaries, set forth in sections A, B, and C below,
of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Rule 3.19.02 became operative on January 15, 2008 \5\ upon the
approval by the Commission of CBOE rule filing SR-CBOE-2006-106.\6\ At
that time, the temporary CBOE membership status (``Temporary
Membership'') provided to certain former exerciser members of CBOE
(``Temporary Members'') pursuant to Interpretation and Policy .01 under
CBOE Rule 3.19 (``Rule 3.19.01'') expired \7\ and Rule 3.19.02 granted
continued Temporary Membership status to those persons under Rule
3.19.02.\8\
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\5\ Rule 3.19.02 was adopted in CBOE rule filing SR-CBOE-2007-
107. Although SR-CBOE-2007-107 became effective upon filing pursuant
to Section 19(b)(3)(A)(i) of the Act, 15 U.S.C. 78s(b)(3)(A)(i), on
September 10, 2007 when SR-CBOE-2007-107 was submitted to the
Commission, SR-CBOE-2007-107 provided that it would not become
operative unless and until the Commission approved CBOE rule filing
SR-CBOE-2006-106. See Securities Exchange Act Release No. 56458
(September 18, 2007), 72 FR 54309 (September 24, 2007) (SR-CBOE-
2007-107).
\6\ In SR-CBOE-2006-106, CBOE proposed an interpretation of
Article Fifth(b) of the CBOE Certificate of Incorporation (``Article
Fifth(b)'') to address the impact of the then-proposed acquisition
of The Board of Trade of the City of Chicago, Inc. (``CBOT'') by
Chicago Mercantile Exchange Holdings Inc. (``CME/CBOT Transaction'')
on the eligibility of persons who were members of CBOE (``exerciser
members'') pursuant to Article Fifth(b). Under that interpretation,
the consummation of the CME/CBOT Transaction on July 12, 2007
resulted in no person any longer qualifying as a member of the CBOT
within the meaning of Article Fifth(b) and therefore resulted in the
elimination of any person's eligibility thereafter to become or
remain an exerciser member of CBOE. The Commission approved SR-CBOE-
2006-106 on January 15, 2008. See Securities Exchange Act Release
No. 57159 (January 15, 2008), 73 FR 3769 (January 22, 2008) (SR-
CBOE-2006-106).
\7\ Rule 3.19.01 granted temporary CBOE membership status to
Temporary Members from the date of the consummation of the CME/CBOT
Transaction on July 12, 2007 until the Commission took final action
on SR-CBOE-2006-106 on January 15, 2008. See Securities Exchange Act
Release No. 56016 (July 5, 2007), 72 FR 38106 (July 12, 2007) (SR-
CBOE-2007-77).
\8\ Rule 3.19.02 extended the Temporary Membership status
provided to each Temporary Member under Rule 3.19.01 until the
earlier of (i) the voluntary termination of that Temporary
Membership status by the Temporary Member, (ii) the approval by the
Commission of a further proposed rule change that provides for the
termination of that status and the granting of trading permits or
another form of trading access to Temporary Members, or (iii) the
consummation of a transaction pursuant to which either CBOE is
converted into a stock corporation or memberships in CBOE are
converted into stock.
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Specifically, Rule 3.19.02 provides that a Temporary Member shall
continue in the Temporary Membership status previously granted under
Rule 3.19.01 following the Commission's approval of SR-CBOE-2006-106 as
long as the person: (i) Did not previously terminate that Temporary
Membership status and remained in good standing as of the close of
business on the trading day immediately before the date of approval of
SR-CBOE-2006-106 (i.e., January 14, 2008); (ii) thereafter remains in
good standing and continues to pay all applicable fees, dues,
assessments, and other like charges that are assessed against CBOE
members; and (iii) pays CBOE a monthly access fee set by CBOE, which
shall be due and payable in accordance with the provisions of the CBOE
Fee Schedule. Unlike the access fee under Rule 3.19.01, the proposed
access fee to be charged under Rule 3.19.02 is to be paid directly to
the Exchange and will not be escrowed.
[[Page 8730]]
In CBOE rule filing SR-CBOE-2007-107,\9\ which adopted Rule
3.19.02, the Exchange stated that it was going to submit a subsequent
rule filing pursuant to section 19(b)(3)(A)(ii) of the Act \10\ to
specify the access fee to be charged under Rule 3.19.02. The Exchange
also indicated in SR-CBOE-2007-107 that the access fee would be an
amount reasonably related to the current lease market rate for
transferable CBOE memberships.\11\ The purpose of this rule filing is
to specify that access fee.
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\9\ See Securities Exchange Act Release No. 56458 (September 18,
2007), 72 FR 54309 (September 24, 2007) (SR-CBOE-2007-107).
\10\ 15 U.S.C. 78s(b)(3)(A)(ii).
\11\ See Securities Exchange Act Release No. 56458 (September
18, 2007), 72 FR 54309 (September 24, 2007) (SR-CBOE-2007-107).
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For the reasons described below, the Exchange proposes to set the
access fee under Rule 3.19.02 at $7,354 per month.
CBOE clearing firms are currently involved in facilitating most
transferable membership leases by assisting in bringing together CBOE
lessors and CBOE trading members for whom these clearing firms provide
clearing services. Most transferable membership leases currently have
floating monthly rates. In most of these cases, the floating monthly
rate is the rate designated by the clearing firm for the floating rate
leases that the clearing firm assisted in facilitating and is based on
a percentage of the average of the last three transferable membership
sale amounts.\12\
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\12\ As used herein, the term ``Clearing Firm Floating Monthly
Rate'' means the floating monthly rate that a clearing firm
designates, in connection with transferable membership leases that
the clearing firm assisted in facilitating, for leases that utilize
that floating monthly rate.
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In light of the foregoing, the Exchange used the following process
to set the proposed access fee. The Exchange polled each of the
clearing firms that assists in facilitating at least 10% of the
transferable membership leases and obtained the Clearing Firm Floating
Monthly Rate designated by each of these clearing firms for the month
of February, 2008. The Exchange then set the proposed access fee at an
amount equal to the highest of these Clearing Firm Floating Monthly
Rates. The Exchange used the highest of these amounts (instead of, for
example, an average of these amounts) because otherwise the Exchange
would be undercutting the lease rates of a large number of transferable
membership leases.
Because the clearing firms that facilitate at least 10% of the
transferable membership leases facilitate in total over 80% of the
transferable membership leases and because the proposed access fee is
representative of the lease rate for a significant number of the
transferable membership leases, the Exchange believes that the proposed
access fee is reasonably related to the current lease market rate for
transferable memberships consistent with SR-CBOE-2007-107.\13\
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\13\ As reflected in SR-CBOE-2007-107, the Exchange believes
that the proposed access fee for Temporary Members under Rule
3.19.02 constitutes an equitable allocation of reasonable dues,
fees, and other charges among persons using its facilities. The
proposed fee is equivalent to the lease rate paid by a large
percentage of lessees of transferable CBOE memberships. Accordingly,
the proposed access fee eliminates the previous disparity that
existed under Rule 3.19.01 between the access fee charged by the
Exchange to Temporary Members (which was based upon a lease rate
paid on CBOT by lessees of what CBOT denominates as a full CBOT
membership) and the lease rates paid on CBOE by lessees of
transferable memberships (which generally were significantly higher
than the previous Temporary Member access fee). Because Temporary
Members' access to the Exchange is terminable only under limited
circumstances, while the Exchange access of lessees of transferable
memberships is terminable by lessors, the Exchange believes that it
would be equitable to assess Temporary Members an access fee higher
than the current lease market rate for transferable memberships.
However, at the present time, the Exchange is only seeking to
eliminate the current disparity, as the Exchange committed to do in
SR-CBOE-2007-107. See Email from Arthur B. Reinstein, Deputy General
Counsel, CBOE, to Richard Holley III, Senior Special Counsel,
Division of Trading and Markets, Commission, dated February 8, 2008
(adding the preceding text to footnote 13).
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The first month for which the access fee will be assessed is
February, 2008. Temporary Members already paid an access fee under Rule
3.19.01 for the month of January, 2008 that was held in escrow pending
Commission action on SR-CBOE-2006-106 and was then retained by the
Exchange upon the approval of SR-CBOE-2006-106 in accordance with the
provisions of Rule 3.19.01. Because this access fee for the month of
January, 2008 under Rule 3.19.01 is non-refundable, the Exchange is
commencing assessment of the proposed access fee under Rule 3.19.02
starting with the month of February, 2008 in the interest of fairness
so that Temporary Members are not charged two access fees for the same
month.
The proposed access fee will remain in effect until such time that
the Exchange submits a further rule filing pursuant to section
19(b)(3)(A)(ii) of the Act \14\ to modify the access fee or the
Temporary Membership status under Rule 3.19.02 is terminated.
Accordingly, the Exchange will retain the flexibility to adjust the
proposed access fee in the future if the Exchange determines that it
would be appropriate to do so taking into consideration lease rates for
transferable CBOE memberships prevailing at that time.
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\14\ 15 U.S.C. 78s(b)(3)(A)(ii).
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With two exceptions, the provisions of the CBOE Fee Schedule
related to the assessment of the proposed access fee under Rule 3.19.02
are the same as the provisions related to the assessment of the access
fee under Rule 3.19.01. Thus, like with the access fee under Rule
3.19.01: (i) The proposed access fee under Rule 3.19.02 will be due and
payable each calendar month on the first day of the calendar month;
(ii) the proposed access fee will be non-refundable; and (iii) the
proposed access fee will be assessed through the integrated billing
system.
The two differences between the provisions of the CBOE Fee Schedule
related to the assessment of the proposed access fee under Rule 3.19.02
and the provisions related to the assessment of the access fee under
Rule 3.19.01 are: (i) The provisions related to the escrowing of the
access fees that were collected under Rule 3.19.01 have been removed
and (ii) the proposed access fee and any other applicable monthly fees
will now be assessed for a calendar month unless the Temporary Member
provides written notice to the Membership Department prior to the start
of that month (instead of five business days prior to the start of that
month as was previously the case) that the Temporary Member is
relinquishing Temporary Membership status effective on a date prior to
the start of that month. With respect to the second change, the
Exchange has found in this context that it presently does not need the
additional lead time to process these relinquishments of Temporary
Membership status.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\15\ in general, and furthers the
objectives of section 6(b)(4) of the Act,\16\ in particular, in that it
is designed to provide for the equitable allocation of reasonable dues,
fees, and other charges among persons using its facilities.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
[[Page 8731]]
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 \17\ and subparagraph (f)(2)
of Rule 19b-4 \18\ 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.
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-CBOE-2008-12 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-2008-12. 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 Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File No. SR-CBOE-2008-12 and should be
submitted on or before March 6, 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. E8-2696 Filed 2-13-08; 8:45 am]
BILLING CODE 8011-01-P
