
[Federal Register Volume 78, Number 118 (Wednesday, June 19, 2013)]
[Notices]
[Pages 36805-36807]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-14609]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69760; File No. SR-CBOE-2013-058]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend the Fees Schedule

June 13, 2013.
    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 June 6, 2013, Chicago Board Options Exchange, Incorporated (the 
``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``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.
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    \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

    The Exchange proposes to amend its Fees Schedule. The text of the 
proposed rule change is available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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, 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
    The Exchange proposes to amend its Fees Schedule. In 2002, the 
Exchange added to its Fees Schedule a rebate for duplicate fees related 
to manual data entry (``keypunch'') errors.\3\ This change was made due 
to the possibility that an options trade could be matched and cleared 
inappropriately as a result of a keypunch error. Indeed, the example 
given in SR-CBOE-2002-013 describes a situation involving a member's 
clerk, or other similar personnel, inputting the wrong clearing firm 
code into the appropriate form or program. As a result, the trade is 
cleared through the wrong clearing firm and, in order to correct the 
situation, corrective transactions are entered to reverse the error 
trades and then new trades are submitted to reflect the original 
intentions of the parties. Without the keypunch error rebate program, 
the clearing firm whose code was erroneously entered would have to pay 
Exchange transaction fees for any transactions necessary to reverse the 
initial trade (despite not having been a party to such trade).
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    \3\ See Securities Exchange Act Release No. 45675 (March 29, 
2002), 67 FR 16480 (April 5, 2002) (SR-CBOE-2002-013). The Section 
of the Fees Schedule describing the keypunch error rebate program 
currently states:
    On occasion, options transactions are matched and cleared as a 
result of certain keypunch errors and Trading Permit Holders are 
forced to execute subsequent transactions to achieve the originally 
intended results. A qualifying error is any error that is 
inadvertent and creates a duplicate fee or fees to be charged in the 
matching and clearing of corrective options trades. Only those 
transactions that require a minimum of 500 contracts to correct the 
error or errors shall be eligible for this rebate. The CBOE shall 
have the discretion to rebate any duplicate transaction fees 
incurred in the course of correcting such errors. A written request 
with all supporting documentation (trade date, options class, 
executing firm and broker, opposite firm and broker, premium, and 
quantity) and a summary of the reasons for the error must be 
submitted within 60 days after the last day of the month in which 
the error occurred.
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    In a recent overall review of the Fees Schedule, the Exchange 
reviewed the ``Keypunch Error'' rebate program and has determined to 
modify the rebate. The term ``keypunch'' is open to interpretation and 
could be read to include a variety of types of errors that involve the 
erroneous entry of any type of trade information (beyond just the wrong 
clearing firm). As such, the Exchange proposes to delete the current 
language associated with the keypunch error rebate program, re-title it 
``Clearing Trading Permit Holder Position Re-Assignment'' and add the 
following language: CBOE will rebate assessed transaction fees to a 
Clearing Trading Permit Holder who, as a result of a trade adjustment 
on any business day following the original trade, re-assigns a position 
established by the initial trade to a different Clearing Trading Permit 
Holder. In such a circumstance, the Exchange will rebate, for the party 
for whom the position is being re-assigned, that party's transaction 
fees from the original transaction as well as the transaction in which 
the position is re-assigned. In all other circumstances, including 
corrective transactions, in which a transaction is adjusted on any day 
after the original trade date, regular Exchange fees will be assessed.
    If a market participant makes an error that requires a corrective 
transaction, the Exchange believes that the market participant should 
be responsible for the fees involved in correcting that transaction (as 
the Exchange must expend resources in order to process such 
transactions). However, when a Clearing Trading Permit Holder is 
required to re-assign a position, that Clearing Trading Permit Holder 
may have been assigned that position by another market participant and 
therefore the Exchange does not wish to assess fees for such re-
assignment to the Clearing Trading Permit Holder. The reason that the 
rebate is limited to a business day following the original trade is 
because if an error is discovered on the day it occurs, it can be 
corrected prior to clearing and accurate fees will be assessed. The 
Exchange determined to eliminate the stipulation that, in order to 
qualify for the rebate, a transaction be of a minimum of 500 contracts 
because the Exchange believes that any transaction, regardless of size, 
should be eligible for the rebate, and a de minimis requirement is not 
necessary.
    Because the Exchange may not always be able to automatically 
identify these situations, in order to receive a rebate, a written 
request with all supporting documentation (trade detail regarding both 
the original and re-assigning

[[Page 36806]]

trades) \4\ and a summary of the reasons for the re-assignment must be 
submitted within 60 days after the last day of the month in which the 
original transaction occurred.
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    \4\ Such detail would include the trade date, options class, 
trade symbol, executing firm and broker, opposite firm and broker, 
premium, and quantity.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\5\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \6\ requirements that the rules of 
an exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitation transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest. 
Modifying exactly what qualifies for the rebate prevents confusion, 
thereby removing impediments to and perfecting the mechanism of a free 
and open market and a national market system, and, in general, 
protecting investors and the public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Exchange also believes the proposed rule change is consistent 
with Section 6(b)(4) of the Act,\7\ which requires that Exchange rules 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its Trading Permit Holders and other persons using 
its facilities. The Exchange believes that removing the ``keypunch 
error'' language and replacing it with the proposed new language is 
reasonable because the term ``keypunch error'' is too vague and could 
be defined in many ways, whereas the new language is clearer about what 
qualifies for the rebate. Further, it is reasonable to offer a rebate 
when a Clearing Trading Permit Holder re-assigns a position, as the 
Clearing Trading Permit Holder may not have elected to take that 
position in the first place (and may just have been erroneously listed 
as a party to the transaction). The Exchange believes that this change 
is equitable and not unfairly discriminatory for the same reason; it is 
equitable to rebate fees to a Clearing Trading Permit Holder that was 
assessed fees for taking a position from a transaction to which that 
Clearing Trading Permit Holder was not a party. Otherwise, the Exchange 
believes it is equitable for a party that made an error reporting a 
transaction to be responsible for paying the fees associated with 
making that error. Further, the proposed changes will apply equally to 
all market participants.
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    \7\ 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. CBOE does not believe that the 
proposed rule change will impose any burden on intramarket competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act because the situation in which a Clearing Trading Permit Holder 
is reported as being party to a trade to which it is not a party and 
thereby forced to take a position only applies to Clearing Trading 
Permit Holders. Further, the proposed change will apply to all Clearing 
Trading Permit Holders. CBOE does not believe that the proposed rule 
change will impose any burden on intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act 
because the proposed change applies to trading on CBOE only. Further, 
to the extent that the proposed change may make CBOE a more attractive 
market for market participants on other exchanges, such market 
participants may determine to become CBOE market participants.

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

    The Exchange neither solicited nor received comments on 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 paragraph (f) of Rule 19b-4 \9\ 
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. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f).
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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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2013-058 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-2013-058. 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 (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 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-

[[Page 36807]]

2013-058 and should be submitted on or before July 10, 2013].

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-14609 Filed 6-18-13; 8:45 am]
BILLING CODE 8011-01-P


