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 February 29, 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 substantially prepared by CBOE. CBOE has designated this proposal as one establishing or changing a due, fee, or other charge applicable only to a member under Section 19(b)(3)(A)(ii) of the Act,^[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 amend the Hybrid Agency Liaison (“HAL”) step-up rebate program. The text of the proposed rule change is available on the Exchange's Web site ( http://www.cboe.org/​legal), at the Exchange's Office of the Secretary, and at 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 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

In January 2008, in order to incent market makers to execute orders at CBOE versus routing orders away via the Intermarket Options Linkage (“Linkage”), the Exchange established a program whereby the Exchange provides a rebate to market-makers that “step-up” and trade all or part of certain orders on the HAL system.^[5] Specifically, the Exchange rebates to a market-maker $.20 per contract against transaction fees generated from a transaction on the HAL system in a penny pilot class, provided that at least 80% of the market-maker's quotes in that class (excluding quotes in LEAPS series) in that same month were on one side of the national best bid or offer (“NBBO”) price. Market-makers not meeting this 80% qualifying threshold are not eligible to receive a rebate. The HAL rebate program allows market-makers to compete better for order flow in the penny pilot classes.

The Exchange proposes to amend the program in two respects effective March 1, 2008. First, the Exchange proposes to reduce the qualifying threshold from 80% of a market-maker's quotes in a class to 60%. Second, the Exchange proposes to change the qualifying time period from the same month in which the rebate is given to the calendar month prior to the month in which the rebate is given. Thus, for example, if at least 60% of a market-maker's quotes in a penny pilot class (excluding quotes in LEAPS series) in February 2008 were on one side of the NBBO, the market-maker would be eligible to receive the rebate for all of the market-maker's HAL transactions in that class in March 2008.

The proposed reduction in the qualifying threshold is intended to further incent market-makers to execute orders in penny pilot classes at CBOE instead of routing those orders away via the Linkage. The proposed change in the qualifying period is intended to make the program easier for members to administer because members will know going into a given month whether or not their HAL executions that month will qualify for the rebate.

2. Statutory Basis

The proposed rule change is consistent with Section 6(b) of the Act ^[6] in general and furthers the objectives of Section 6(b)(4) ^[7] 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.

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

The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act ^[8] and subparagraph (f)(2) of Rule 19b-4 ^[9] thereunder because it establishes or changes a due, fee, or other charge applicable only to a member. 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:

Electronic Comments

• Use the Commission's Internet comment form (http://www.sec.gov/​rules/​sro.shtml); or
• Send an e-mail torule-comments@sec.gov. Please include File Number SR-CBOE-2008-23 on the subject line. ( printed page 14515)

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-2008-23. 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 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-2008-23 and should be submitted on or before April 8, 2008.