Daily Rules, Proposed Rules, and Notices of the Federal Government
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 (
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.
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.
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
CBOE notes that SROs are eligible for trading on the Exchange as Flexible Exchange ("FLEX") options, although FLEX option trading functionality is currently disabled.
The Exchange believes the proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 ("Act"),
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.
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.
No written comments were solicited or received with respect to the proposed rule change.
The proposed rule change is designated by the Exchange as
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:
* Use the Commission's Internet comment form (
* Send an email to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.