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Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule in Connection With the New Linkage Plan

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Start Preamble December 1, 2009.

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 November 23, 2009, 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 by the Exchange. 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

The Exchange proposes to amend its Fees Schedule. The text of the proposed rule change is available on the Exchange's Web site (​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 Exchange 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. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.

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

1. Purpose

All current U.S. options exchanges recently adopted a plan to provide a framework for order protection and locked and crossed market handling called the Options Order Protection and Locked/Crossed Market Plan (the “New Plan”). The Plan replaces the Plan for the Purpose of Creating and Operating an Intermarket Option Linkage (the “Old Plan”). The Old Plan also provided a framework for addressing order protection and locked/crossed markets, but unlike the New Plan, the Old Plan utilized the Options Clearing Corporation as a “hub” for the transmission of “linkage orders” between exchanges. There are three types of linkage orders under the Old Plan, P/A Orders (orders sent on behalf of a non-broker dealer customer), P Orders (orders send for the principal account of an exchange market-maker), and Satisfaction Orders (orders reflecting the terms of an order resting Start Printed Page 64799on an exchange that was traded-through by another market). Although not required by the Old Plan, CBOE sought to access better prices on other exchanges on behalf of non-customer orders received by CBOE by routing P orders to such other exchanges. Section 21 of the CBOE Fees Schedule provides that costs associated with execution of such P orders on other exchanges are passed through to the members submitting the non-customer orders to CBOE.

Under the New Plan, exchanges access each other directly and not through a hub (i.e. through members that can provide “front-door” access). Now that CBOE is migrating away from the Old Plan's use of the hub to access other markets (including using P orders), the Exchange seeks to modify its Fees Schedule to account for the new method of routing non-customer orders pursuant to the New Plan. CBOE will continue to route to other exchanges on behalf of non-customer orders, but it will do so using the same member-provided direct access that is used for customer orders. CBOE does not charge routing or execution fees for customer orders routed to other exchanges. However, for any non-customer order routed to other exchanges, CBOE will assess the following costs to the member that submitted the non-customer order to CBOE: (i) Charge a $0.05 per contract routing fee, (ii) pass through all actual charges assessed by the away exchange(s) (these are calculated on an order-by-order basis since different away exchanges charge different amounts), and (iii) charge CBOE's customary execution fees applicable to the order. The routing fee helps offset costs incurred by the Exchange in connection with using an unaffiliated broker-dealer to access other exchanges. Passing through charges assessed by other exchanges for “linkage” executions and charging for related CBOE executions are appropriate because non-customer order flow can route directly to those exchanges if desired and the Exchange chooses not to absorb those costs at this time.

CBOE notes that not all exchanges route on behalf of non-customer orders, and that this function is an “extra” service provided by CBOE to its members.[3] Members are always free to route directly to other markets or to specify that CBOE not route orders away on their behalf. The new fee will become effective on November 24, 2009. Section 21 of the Fees Schedule will be deleted in the near future (after routing through the hub has ceased).

2. Statutory Basis

The proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (“Act”),[4] in general, and furthers the objectives of Section 6(b)(4) [5] of the Act in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges among CBOE members and other persons using its facilities.

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 establishing or changing a due, fee, or other charge, thereby qualifying for effectiveness on filing pursuant to Section 19(b)(3)(A)(ii) [6] of the Act and subparagraph (f)(2) of Rule 19b-4 [7] 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:

Electronic Comments

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-2009-088. 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 (​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, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing will also 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-2009-088 and should be submitted on or before December 29, 2009.

Start Signature

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8

Florence E. Harmon,

Deputy Secretary.

End Signature End Preamble


[FR Doc. E9-29136 Filed 12-7-09; 8:45 am]