Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Establish Transaction Fees for CBOE Range Options on the S&P 500 Index, 55515-55517 [2012-22141]

Download as PDF Federal Register / Vol. 77, No. 175 / Monday, September 10, 2012 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67777; File No. SR–CBOE– 2012–084] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Establish Transaction Fees for CBOE Range Options on the S&P 500 Index September 4, 2012. 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 August 28, 2012, the Chicago Board Options Exchange, Incorporated (‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the selfregulatory organization. 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 Chicago Board Options Exchange, Incorporated (‘‘CBOE’’ or ‘‘Exchange’’) proposes to amend its Fees Schedule to establish fees for transactions in CBOE Range Options on the S&P 500 Index (‘‘SROs’’). The text of the proposed rule change is available on the Exchange’s Web site (https://www.cboe.org/legal), at the Exchange’s Office of the Secretary, and at the Commission. mstockstill on DSK4VPTVN1PROD with NOTICES II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization 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 those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Mar<15>2010 16:57 Sep 07, 2012 Jkt 226001 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange received approval to list and trade cash-settled, Europeanstyle Range Options that overlie any index eligible for options trading on the Exchange.3 Range Options pay an exercise settlement amount if the settlement value of the underlying index at expiration falls within the specified Range Length. As stated in the Range Option approval order: The Commission believes that Range Options would provide investors with a potentially useful investment choice. The Commission notes that investors now can replicate the features and structures of Range Options through the use of currently available options traded on the Exchange.13 [NB: This superscript ‘‘13’’ represents footnote 13 in the Range Option approval order that was published in the Federal Register, which is quoted below in text; it does not represent a footnote in this filing.] The payout structure of a Range Option can be replicated by purchasing four calls or puts with varying strike prices. Range Options will enable investors to obtain the same payout structure by purchasing one option, with the potential of significantly reducing investors’ transaction costs.4 (emphasis added). The Exchange will list Range Options on the S&P 500 Index (Ticker: SRO) beginning on August 28, 2012. The purpose of this filing is to establish transaction fees for SROs. In considering the appropriate and equitable amount of transaction fees for SROs, the Exchange considered the fact that the exposure provided by Range Options is equivalent to four option positions. Consistent with the spirit of the Commission’s observation noted above, the Exchange will not be assess [sic] a transaction fee equal to the transaction fees for four options positions, but rather will, in general, assess a transaction fee equal to the transaction fees for two option positions. The Exchange believes that this transaction cost level strikes the appropriate balance between establishing reasonable fees and the Exchange’s goal of introducing new products to the marketplace that are competitively priced. The amount of transaction fees for SROs 5 will be as follows: 3 See Securities Exchange Act Release No. 57376 (February 25, 2008), 73 FR 11689 (March 4, 2008) (order approving SR–CBOE–2007–104). 4 73 FR at 11692. 5 CBOE is adding ‘‘SRO’’ to the title of the Index Options Rate Table, which will exclude SROs from the fees set forth in that table and adding ‘‘SRO’’ to the Proprietary Index Options Rate Table, which PO 00000 Frm 00065 Fmt 4703 Sfmt 4703 55515 • Customer, Professional Customer and Voluntary Professional Customer: $0.80 per contract for customer, professional customer and voluntary professional customer transactions.6 The Exchange notes that the customer, professional customer and voluntary professional customer fees for standard S&P 500 Index (‘‘SPX’’) options are: (a) $0.44 per contract if the premium is greater than or equal to $1, and (b) $0.35 per contract if the premium is less than $1. For ease of use, the Exchange is proposing to establish a single fee for customer, professional customer and voluntary professional customer transactions in SROs regardless of the premium amount. The Exchange is not proposing to double the amount of either existing standard SPX option fee, but rather used those fees as a measure for setting the proposed $0.80 per contract fee. The Exchange also proposes to layer SROs into the existing Customer Large Trade Discount regime for other S&P products, which will limit the amount of customer transaction fees to the first 10,000 contracts.7 • CBOE Market-Maker, Designated Primary Market-Maker (‘‘DPM’’), E–DPM and Lead Market-Maker (‘‘LMM’’): $0.40 per contract for CBOE Market-Maker DPM, E–DPM and LMM transactions, which is equal to double the transaction fee equal for a single standard SPX option.8 As with some other S&P products, transactions in SROs will be excluded from the Liquidity Provider Sliding Scale.9 • Clearing Trading Permit Holder Proprietary: $0.50 per contract for Clearing Trading Permit Holder Proprietary transactions, which is equal to double the transaction fee for a single standard SPX option.10 As with some other S&P products, transactions in SROs will be excluded from the Clearing Trading Permit Holder Fee Cap.11 The Exchange also proposes to will set forth the fees for SROs in that table, to the Fees Schedule. See pages 19 [sic] and 20 [sic] to Exhibit 5. 6 See page 20 [sic] to Exhibit 5. 7 See proposed addition of ‘‘SRO’’ to the Customer Large Trade Discount Table to the Fees Schedule. See page 22 [sic] to Exhibit 5. 8 See page 20 [sic] to Exhibit 5. 9 See proposed addition of ‘‘SRO’’ to the Liquidity Provider Sliding Scale Table to the Fees Schedule. See page 20 [sic] to Exhibit 5. As explained in SR– CBOE–2012–008, the Exchange excludes certain proprietary, singly-listed products from the Liquidity Provider Sliding Scale because the Exchange has ‘‘expended considerable resources developing its singly-listed products.’’ See Securities Exchange Act Release No. 66277 (January 30, 2012), 77 FR 5595 (February 3, 2012). 10 See page 20 [sic] to Exhibit 5. 11 See proposed addition of ‘‘SRO’’ to Clearing Trading Permit Holder Fee Cap Table and to E:\FR\FM\10SEN1.SGM Continued 10SEN1 55516 Federal Register / Vol. 77, No. 175 / Monday, September 10, 2012 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES exclude SROs from the CBOE Proprietary Products Sliding Scale.12 Because the CBOE Proprietary Products Sliding Scale is structured on a per contract basis and because SROs provide the exposure of four contracts, the Exchange believes that it is appropriate to exclude SROs. As with other S&P products, firm facilitations for SROs will not be free. To reflect this, the Exchange is adding ‘‘SROs’’ to this provision in the ‘‘Notes’’ section to the Clearing Trading Permit Holder Fee Cap Table.13 Products such as SROs are assessed fees for firm facilitations because they are proprietary and the Exchange has expended considerable resources developing its singly-listed products. • Broker-Dealer and Non-Trading Permit Holder Market-Maker: $0.80 per contract for Broker-Dealer and NonTrading Permit Holder Market-Maker transactions, which is equal to double the transaction fee for a single standard SPX option.14 • Marketing Fee: $0.00 per contract. As with certain other S&P products, the Exchange proposes to add SROs to footnote 6 to the Fees Schedule so that the Exchange’s marketing fee will not apply to SROs.15 • Floor Brokerage Fees: $0.08 for noncrossed orders and $0.04 for crossed orders, which is equal to double the respective Floor Brokerage fees for a single standard SPX option.16 SROs will be excluded from the calculation of the additional monthly fee assessed to any Floor Broker Trading Privilege Holder that executes more than 20,000 standard SPX options during the month.17 • Surcharge Fee (Index License): $0.20 on all non-public customer transactions in SROs.18 The Index footnote 11 to the Fees Schedule. See pages 21 [sic] and 32 [sic] to Exhibit 5. See Securities Exchange Act Release No. 63701 (January 11, 2011), 76 FR 2934 (January 18, 2011) (notice of SR–CBOE–2010– 116 which filing, among other things, established a multiply-listed options fee cap and a CBOE proprietary products sliding scale). 12 See proposed addition of the sentence ‘‘SROs are excluded from the CBOE Proprietary Products Sliding Scale’’ to the CBOE Proprietary Products Sliding Scale Table. See page 21 [sic] to Exhibit 5. 13 See proposed addition of ‘‘SRO’’ to the CBOE Trading Permit Holder Fee Cap Table. See page 21 [sic] to Exhibit 5. 14 See page 20 [sic] to Exhibit 5. 15 See page 31 [sic] to Exhibit 5. 16 See proposed addition of ‘‘SRO’’ and ‘‘SRO Crossed Orders’’ to the Floor Brokerage and PAR Official Fees Table to the Fees Schedule. See page 24 [sic] to Exhibit 5. 17 See proposed addition of the sentence ‘‘For purposes of determining the 20,000 contract per month threshold, SRO executions are excluded for purposes of the calculation of executed SPX contracts during the month’’ to footnote 25 to the Fees Schedule at page 34 [sic] to Exhibit 5. 18 See proposed addition of ‘‘SRO’’ to the Surcharge Fee section of the Proprietary Index VerDate Mar<15>2010 16:57 Sep 07, 2012 Jkt 226001 License fee helps the Exchange recoup some of the license fees that the Exchange pays to the reporting authority. • AIM Contract Execution Fee: As with other certain S&P products, applicable standard transaction fees will apply to AIM, SAM, FLEX AIM and FLEX SAM transactions in SROs.19 CBOE notes that SROs are eligible for trading on the Exchange as Flexible Exchange (‘‘FLEX’’) options, although FLEX option trading functionality is currently disabled.20 When FLEX trading is enabled for SROs, CBOE will submit a filing to establish FLEX fees. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (‘‘Act’’),21 in general, and furthers the objectives of Section 6(b)(4) 22 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 Trading Permit Holders and other persons using its facilities. In setting the proposed transaction fees for SROs, the Exchange considered the fact that the exposure provided by Range Options is equivalent to four option positions. Consistent with the spirit of the Commission’s observation in the Range Option approval order (that Range Options may reduce investor transaction costs), the Exchange determined not to propose a transaction fee equal to the fees for four options positions, but rather has proposed, in general, to assess a transaction fee equal to the fees for two option positions. The Exchange believes that this transaction cost level strikes the appropriate balance between establishing reasonable fees and the Exchange’s goal of introducing new products to the marketplace that are competitively prices [sic]. The Exchange believes that the fees are equitable and do not unfairly discriminate because they provide comparable pricing among similar categories of market participants. The Exchange believes that a fee of $0.80 per contract for Customer, Professional Customer, Voluntary Professional Customer, Broker-Dealer and NonOptions Rate Table to the Fees Schedule. See page 20 [sic] to Exhibit 5. 19 See proposed addition of ‘‘SRO’’ to footnote 18 to the Fees Schedule. See page 33 [sic] to Exhibit 5. 20 See CBOE Rule 20.12 (FLEX Trading) and CBOE Regulatory Circular RG12–056 (CFLEX 2.0 Rollout Schedule and Settings) at page 4, issued on April 20, 2012. 21 15 U.S.C. 78f(b). 22 15 U.S.C. 78f(b)(4). PO 00000 Frm 00066 Fmt 4703 Sfmt 4703 Trading Permit Holder Market-Maker transactions is equitable since those market participants will effectively pay half of the transactions costs associated with the exposure of four options. The Exchange believes that a fee of $0.40 per contract for CBOE MarketMake, DPM, E–DPM and LMM transactions is equitable since those market participants provide a valuable market service by adding liquidity to the Exchange and since they are subject to liquidity provider obligations. This standard rate is not subject to the Liquidity Provider Sliding Scale as set forth in Footnote 10 to the Fees Schedule. Excluding SROs from the Liquidity Provider Sliding Scale is equitable and not unfairly discriminatory because all similarlysituated market participants trading in the product will be charged the same fees for such transactions and because the Exchange expended significant resources developing SROs. The Exchange also believes that a fee of $0.50 per contract for Clearing Trading Permit Holders is equitable since they contribute capital to facilitate customer orders, which in turn provides a deeper pool of liquidity that benefits all market participants. Excluding SROs from the CBOE Proprietary Products Sliding Scale is equitable and not unfairly discriminatory because that scale is structured on a per contract basis and because SROs provide the exposure of four contracts. Accordingly, the Exchange believes that it is appropriate to exclude SROs. As with other S&P products, firm facilitations for SROs will not be free. Products such as SROs are assessed fees for firm facilitations because they are proprietary and the Exchange has expended considerable resources developing its singly-listed products. 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 not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others 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 The proposed rule change is designated by the Exchange as E:\FR\FM\10SEN1.SGM 10SEN1 Federal Register / Vol. 77, No. 175 / Monday, September 10, 2012 / Notices establishing or changing a due, fee, or other charge, thereby qualifying for effectiveness on filing pursuant to Section 19(b)(3)(A) of the Act 23 and subparagraph (f)(2) of Rule 19b–424 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend 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: mstockstill on DSK4VPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–CBOE–2012–084 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–CBOE–2012–084. This file number should be included on the subject line if email 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 Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such 23 15 24 17 U.S.C. 78s(b)(3)(A). C.F.R. 240.19b–4(f)(2). VerDate Mar<15>2010 16:57 Sep 07, 2012 Jkt 226001 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 publicly available. All submissions should refer to File Number SR–CBOE– 2012–084 and should be submitted on or before October 1, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–22141 Filed 9–7–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67778; File No. SR–FINRA– 2012–026] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving a Proposed Rule Change Relating to the Handling of Stop and Stop Limit Orders September 4, 2012. I. Introduction On May 24, 2012, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend FINRA’s rules relating to the handling of stop orders and stop limit orders. The proposed rule change was published for comment in the Federal Register on June 6, 2012.3 The Commission received four comment letters regarding the proposal.4 On July 19, 2012, the Commission designated a longer period to act on the proposed 25 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 67085 (May 31, 2012), 77 FR 33537 (‘‘Notice’’). 4 See Letters to Elizabeth M. Murphy, Secretary, Commission, from Ann L. Vlcek, Managing Director and Associate General Counsel, Securities Industry and Financial Markets Association, dated June 26, 2012 (‘‘SIFMA Letter’’); Gary J. Sjostedt, Director, Order Routing and Sales, TD Ameritrade, Inc., dated June 27, 2012 (‘‘TD Ameritrade Letter’’); and Christopher Nagy, President, KOR Trading LLC, dated July 9, 2012 (‘‘KOR Letter’’); and web comment from Virgil F. Liptak, dated July 3, 2012 (‘‘Liptak Letter’’). The comment letters received by the Commission are available at https://www.sec. gov/comments/sr-finra-2012-026/finra2012026. shtml. 1 15 PO 00000 Frm 00067 Fmt 4703 Sfmt 4703 55517 rule change, until September 4, 2012.5 On August 9, 2012, FINRA submitted a response to the comment letters.6 This order approves the proposed rule change. II. Description of the Proposal FINRA proposes to amend its rules governing the handling of stop orders. FINRA Rule 6140(h) currently provides that a member may, but is not obligated to, accept a stop order or a stop limit order in a designated security.7 A buy stop order becomes a market order when a transaction takes place at or above the stop price, and a sell stop order becomes a market order when a transaction takes place at or below the stop price.8 When a transaction occurs at the stop price, a stop limit order to buy or sell becomes a limit order at the limit price.9 Accordingly, FINRA rules provide that stop orders and stop limit orders are triggered (i.e., become a market or a limit order) by a transaction in a security. FINRA now proposes to also allow members to offer customers stop orders and stop limit orders that would be triggered by a transaction or by an event other than a transaction (e.g., a quotation).10 FINRA has indicated that some firms and their customers prefer alternative triggers for activating stop orders and stop limit orders.11 According to FINRA, some members believe that, for certain securities, quotations may serve as a better indicator of the current price than transactions.12 For example, quotations for thinly traded securities may be continuously updated, whereas there may be limited trading in the securities.13 However, FINRA also states that some members and customers prefer to have transactions trigger stop orders and stop limit orders, and believe that customers could be disadvantaged 5 Securities Exchange Act Release No. 67471, 77 FR 43620 (July 25, 2012). 6 See Letter to Elizabeth M. Murphy, Secretary, Commission, from Racquel L. Russell, Assistant General Counsel, Regulatory Policy and Oversight, FINRA, dated August 9, 2012 (‘‘FINRA Response’’). 7 FINRA Rule 6140(a) defines a ‘‘designated security’’ as any NMS stock as defined in Rule 600(b)(47) of Regulation NMS, 17 CFR 242.600(b)(47). 8 See FINRA Rule 6140(h)(1)(A)–(B). 9 See FINRA Rule 6140(h)(2). 10 FINRA previously proposed to delete in its entirety Rule 6140(h). See Securities Exchange Act Release No. 63256 (November 5, 2010), 75 FR 69503 (November 12, 2010) (SR–FINRA–2010–055). The Commission disapproved that proposed rule change. See Securities Exchange Act Release No. 63885 (February 10, 2011), 76 FR 9062 (February 16, 2011) (Order Disapproving SR–FINRA–2010– 055). 11 See Notice, supra note 3, at 33537. 12 See id. 13 See id. E:\FR\FM\10SEN1.SGM 10SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 175 (Monday, September 10, 2012)]
[Notices]
[Pages 55515-55517]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-22141]

[[Page 55515]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67777; File No. SR-CBOE-2012-084]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Establish Transaction Fees for CBOE Range
Options on the S&P 500 Index

September 4, 2012.
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 August 28, 2012, the Chicago Board Options Exchange,
Incorporated (``Exchange'' or ``CBOE'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change as
described in Items I, II and III below, which Items have been prepared
by the self-regulatory organization. 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.
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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 establish fees for
transactions in CBOE Range Options on the S&P 500 Index (``SROs''). The
text of the proposed rule change is available on the Exchange's Web
site (https://www.cboe.org/legal), at the Exchange's Office of the
Secretary, and at the Commission.

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

In its filing with the Commission, the self-regulatory organization
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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

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

1. Purpose
The Exchange received approval to list and trade cash-settled,
European-style Range Options that overlie any index eligible for
options trading on the Exchange.\3\ Range Options pay an exercise
settlement amount if the settlement value of the underlying index at
expiration falls within the specified Range Length. As stated in the
Range Option approval order:
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\3\ See Securities Exchange Act Release No. 57376 (February 25,
2008), 73 FR 11689 (March 4, 2008) (order approving SR-CBOE-2007-
104).

The Commission believes that Range Options would provide
investors with a potentially useful investment choice. The
Commission notes that investors now can replicate the features and
structures of Range Options through the use of currently available
options traded on the Exchange.\13\ [NB: This superscript ``13''
represents footnote 13 in the Range Option approval order that was
published in the Federal Register, which is quoted below in text; it
does not represent a footnote in this filing.] The payout structure
of a Range Option can be replicated by purchasing four calls or puts
with varying strike prices. Range Options will enable investors to
obtain the same payout structure by purchasing one option, with the
potential of significantly reducing investors' transaction costs.\4\
(emphasis added).
---------------------------------------------------------------------------

\4\ 73 FR at 11692.

The Exchange will list Range Options on the S&P 500 Index (Ticker:
SRO) beginning on August 28, 2012. The purpose of this filing is to
establish transaction fees for SROs. In considering the appropriate and
equitable amount of transaction fees for SROs, the Exchange considered
the fact that the exposure provided by Range Options is equivalent to
four option positions. Consistent with the spirit of the Commission's
observation noted above, the Exchange will not be assess [sic] a
transaction fee equal to the transaction fees for four options
positions, but rather will, in general, assess a transaction fee equal
to the transaction fees for two option positions. The Exchange believes
that this transaction cost level strikes the appropriate balance
between establishing reasonable fees and the Exchange's goal of
introducing new products to the marketplace that are competitively
priced.
The amount of transaction fees for SROs \5\ will be as follows:
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\5\ CBOE is adding ``SRO'' to the title of the Index Options
Rate Table, which will exclude SROs from the fees set forth in that
table and adding ``SRO'' to the Proprietary Index Options Rate
Table, which will set forth the fees for SROs in that table, to the
Fees Schedule. See pages 19 [sic] and 20 [sic] to Exhibit 5.
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Customer, Professional Customer and Voluntary Professional
Customer: $0.80 per contract for customer, professional customer and
voluntary professional customer transactions.\6\ The Exchange notes
that the customer, professional customer and voluntary professional
customer fees for standard S&P 500 Index (``SPX'') options are: (a)
$0.44 per contract if the premium is greater than or equal to $1, and
(b) $0.35 per contract if the premium is less than $1. For ease of use,
the Exchange is proposing to establish a single fee for customer,
professional customer and voluntary professional customer transactions
in SROs regardless of the premium amount. The Exchange is not proposing
to double the amount of either existing standard SPX option fee, but
rather used those fees as a measure for setting the proposed $0.80 per
contract fee. The Exchange also proposes to layer SROs into the
existing Customer Large Trade Discount regime for other S&P products,
which will limit the amount of customer transaction fees to the first
10,000 contracts.\7\
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\6\ See page 20 [sic] to Exhibit 5.
\7\ See proposed addition of ``SRO'' to the Customer Large Trade
Discount Table to the Fees Schedule. See page 22 [sic] to Exhibit 5.
---------------------------------------------------------------------------

CBOE Market-Maker, Designated Primary Market-Maker
(``DPM''), E-DPM and Lead Market-Maker (``LMM''): $0.40 per contract
for CBOE Market-Maker DPM, E-DPM and LMM transactions, which is equal
to double the transaction fee equal for a single standard SPX
option.\8\ As with some other S&P products, transactions in SROs will
be excluded from the Liquidity Provider Sliding Scale.\9\
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\8\ See page 20 [sic] to Exhibit 5.
\9\ See proposed addition of ``SRO'' to the Liquidity Provider
Sliding Scale Table to the Fees Schedule. See page 20 [sic] to
Exhibit 5. As explained in SR-CBOE-2012-008, the Exchange excludes
certain proprietary, singly-listed products from the Liquidity
Provider Sliding Scale because the Exchange has ``expended
considerable resources developing its singly-listed products.'' See
Securities Exchange Act Release No. 66277 (January 30, 2012), 77 FR
5595 (February 3, 2012).
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Clearing Trading Permit Holder Proprietary: $0.50 per
contract for Clearing Trading Permit Holder Proprietary transactions,
which is equal to double the transaction fee for a single standard SPX
option.\10\ As with some other S&P products, transactions in SROs will
be excluded from the Clearing Trading Permit Holder Fee Cap.\11\ The
Exchange also proposes to

[[Page 55516]]

exclude SROs from the CBOE Proprietary Products Sliding Scale.\12\
Because the CBOE Proprietary Products Sliding Scale is structured on a
per contract basis and because SROs provide the exposure of four
contracts, the Exchange believes that it is appropriate to exclude
SROs. As with other S&P products, firm facilitations for SROs will not
be free. To reflect this, the Exchange is adding ``SROs'' to this
provision in the ``Notes'' section to the Clearing Trading Permit
Holder Fee Cap Table.\13\ Products such as SROs are assessed fees for
firm facilitations because they are proprietary and the Exchange has
expended considerable resources developing its singly-listed products.
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\10\ See page 20 [sic] to Exhibit 5.
\11\ See proposed addition of ``SRO'' to Clearing Trading Permit
Holder Fee Cap Table and to footnote 11 to the Fees Schedule. See
pages 21 [sic] and 32 [sic] to Exhibit 5. See Securities Exchange
Act Release No. 63701 (January 11, 2011), 76 FR 2934 (January 18,
2011) (notice of SR-CBOE-2010-116 which filing, among other things,
established a multiply-listed options fee cap and a CBOE proprietary
products sliding scale).
\12\ See proposed addition of the sentence ``SROs are excluded
from the CBOE Proprietary Products Sliding Scale'' to the CBOE
Proprietary Products Sliding Scale Table. See page 21 [sic] to
Exhibit 5.
\13\ See proposed addition of ``SRO'' to the CBOE Trading Permit
Holder Fee Cap Table. See page 21 [sic] to Exhibit 5.
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Broker-Dealer and Non-Trading Permit Holder Market-Maker:
$0.80 per contract for Broker-Dealer and Non-Trading Permit Holder
Market-Maker transactions, which is equal to double the transaction fee
for a single standard SPX option.\14\
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\14\ See page 20 [sic] to Exhibit 5.
---------------------------------------------------------------------------

Marketing Fee: $0.00 per contract. As with certain other
S&P products, the Exchange proposes to add SROs to footnote 6 to the
Fees Schedule so that the Exchange's marketing fee will not apply to
SROs.\15\
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\15\ See page 31 [sic] to Exhibit 5.
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Floor Brokerage Fees: $0.08 for non-crossed orders and
$0.04 for crossed orders, which is equal to double the respective Floor
Brokerage fees for a single standard SPX option.\16\ SROs will be
excluded from the calculation of the additional monthly fee assessed to
any Floor Broker Trading Privilege Holder that executes more than
20,000 standard SPX options during the month.\17\
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\16\ See proposed addition of ``SRO'' and ``SRO Crossed Orders''
to the Floor Brokerage and PAR Official Fees Table to the Fees
Schedule. See page 24 [sic] to Exhibit 5.
\17\ See proposed addition of the sentence ``For purposes of
determining the 20,000 contract per month threshold, SRO executions
are excluded for purposes of the calculation of executed SPX
contracts during the month'' to footnote 25 to the Fees Schedule at
page 34 [sic] to Exhibit 5.
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Surcharge Fee (Index License): $0.20 on all non-public
customer transactions in SROs.\18\ The Index License fee helps the
Exchange recoup some of the license fees that the Exchange pays to the
reporting authority.
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\18\ See proposed addition of ``SRO'' to the Surcharge Fee
section of the Proprietary Index Options Rate Table to the Fees
Schedule. See page 20 [sic] to Exhibit 5.
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AIM Contract Execution Fee: As with other certain S&P
products, applicable standard transaction fees will apply to AIM, SAM,
FLEX AIM and FLEX SAM transactions in SROs.\19\
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\19\ See proposed addition of ``SRO'' to footnote 18 to the Fees
Schedule. See page 33 [sic] to Exhibit 5.
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CBOE notes that SROs are eligible for trading on the Exchange as
Flexible Exchange (``FLEX'') options, although FLEX option trading
functionality is currently disabled.\20\ When FLEX trading is enabled
for SROs, CBOE will submit a filing to establish FLEX fees.
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\20\ See CBOE Rule 20.12 (FLEX Trading) and CBOE Regulatory
Circular RG12-056 (CFLEX 2.0 Rollout Schedule and Settings) at page
4, issued on April 20, 2012.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Securities Exchange Act of 1934 (``Act''),\21\ in
general, and furthers the objectives of Section 6(b)(4) \22\ 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
Trading Permit Holders and other persons using its facilities.
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\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(4).
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In setting the proposed transaction fees for SROs, the Exchange
considered the fact that the exposure provided by Range Options is
equivalent to four option positions. Consistent with the spirit of the
Commission's observation in the Range Option approval order (that Range
Options may reduce investor transaction costs), the Exchange determined
not to propose a transaction fee equal to the fees for four options
positions, but rather has proposed, in general, to assess a transaction
fee equal to the fees for two option positions. The Exchange believes
that this transaction cost level strikes the appropriate balance
between establishing reasonable fees and the Exchange's goal of
introducing new products to the marketplace that are competitively
prices [sic].
The Exchange believes that the fees are equitable and do not
unfairly discriminate because they provide comparable pricing among
similar categories of market participants. The Exchange believes that a
fee of $0.80 per contract for Customer, Professional Customer,
Voluntary Professional Customer, Broker-Dealer and Non-Trading Permit
Holder Market-Maker transactions is equitable since those market
participants will effectively pay half of the transactions costs
associated with the exposure of four options.
The Exchange believes that a fee of $0.40 per contract for CBOE
Market-Make, DPM, E-DPM and LMM transactions is equitable since those
market participants provide a valuable market service by adding
liquidity to the Exchange and since they are subject to liquidity
provider obligations. This standard rate is not subject to the
Liquidity Provider Sliding Scale as set forth in Footnote 10 to the
Fees Schedule. Excluding SROs from the Liquidity Provider Sliding Scale
is equitable and not unfairly discriminatory because all similarly-
situated market participants trading in the product will be charged the
same fees for such transactions and because the Exchange expended
significant resources developing SROs.
The Exchange also believes that a fee of $0.50 per contract for
Clearing Trading Permit Holders is equitable since they contribute
capital to facilitate customer orders, which in turn provides a deeper
pool of liquidity that benefits all market participants. Excluding SROs
from the CBOE Proprietary Products Sliding Scale is equitable and not
unfairly discriminatory because that scale is structured on a per
contract basis and because SROs provide the exposure of four contracts.
Accordingly, the Exchange believes that it is appropriate to exclude
SROs. As with other S&P products, firm facilitations for SROs will not
be free. Products such as SROs are assessed fees for firm facilitations
because they are proprietary and the Exchange has expended considerable
resources developing its singly-listed products.

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 not necessary or appropriate in furtherance of
the purposes of the Act.

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

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

The proposed rule change is designated by the Exchange as

[[Page 55517]]

establishing or changing a due, fee, or other charge, thereby
qualifying for effectiveness on filing pursuant to Section 19(b)(3)(A)
of the Act \23\ and subparagraph (f)(2) of Rule 19b-4\24\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend 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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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 17 C.F.R. 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 email to rule-comments@sec.gov. Please include
File Number SR-CBOE-2012-084 on the subject line.

Paper Comments

Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2012-084. This file
number should be included on the subject line if email 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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 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 publicly available. All
submissions should refer to File Number SR-CBOE-2012-084 and should be
submitted on or before October 1, 2012.
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\25\ 17 CFR 200.30-3(a)(12).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-22141 Filed 9-7-12; 8:45 am]
BILLING CODE 8011-01-P

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