[Federal Register Volume 77, Number 23 (Friday, February 3, 2012)]
[Notices]
[Pages 5595-5603]
[FR Doc No: 2012-2409]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66277; File No. SR-CBOE-2012-008]

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

January 30, 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 January 17, 2012, the Chicago Board Options Exchange,
Incorporated (the ``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 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 the Fees Schedule. 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, 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 proposes to make a series of amendments to its Fees
Schedule for 2012. First, the Exchange proposes to eliminate the waiver
for customer fees for transactions in options on the Nasdaq 100 Index
Tracking Stock (``QQQQ''). Such transactions will now be assessed a fee
of $0.18 per contract, equivalent to the fee assessed for customer
transactions in options on other exchange-traded funds (``ETFs''),
exchange-traded notes (``ETNs'') and HOLDRs. The purpose of this
proposed change is to make the fees for QQQQ options transactions
equivalent to the fees for transactions on other ETFs.
    The Exchange also proposes to modify the Liquidity Provider Sliding
Scale to exclude SPX, VIX or other volatility indexes, OEX and XEO.
This scale offers consistently-lowering fees for market participants
who provide increasing liquidity. The Exchange would have preferred to
modify the Liquidity Provider Sliding Scale to include only multiply-
listed products because the Exchange has expended considerable
resources in developing its proprietary, singly-listed products.
However, some CBOE singly-listed products are used to compete with
multi-listed products that are also listed on CBOE (for example, the
singly-listed XSP options compete with the multiply-listed SPY options,
both of which approximate \1/10\ of the S&P 500 Index, and the singly-
listed DJX options compete with the multiply-listed DIA options, both
of which are based on \1/100\ of the value of the Dow Jones Industrial
Average). Including the multiply-listed products for qualification
towards the Liquidity Provider Sliding Scale while excluding their
singly-listed competitors might create a pricing advantage that might
discourage trading in some of the singly-listed products that the
Exchange expended resources to develop. As such, the Exchange now
proposes to include the singly-listed products for qualification
towards the Liquidity Provider Sliding Scale along with their multiply-
listed competitors, and only exclude SPX, VIX or other volatility
indexes, OEX and XEO from the Liquidity Provider Sliding Scale. The
Exchange also proposes lowering the tier levels in the Liquidity
Provider Sliding Scale to reflect the exclusion of SPX, VIX or other
volatility indexes, OEX and XEO. The Exchange also proposes amending
the prepay amounts relating to the Liquidity Provider Sliding Scale
that are listed in Footnote 10 to reflect the changed tier levels.
    The Exchange proposes changing the name of the ``Multiply-Listed
Options Fee Cap'' to the ``Clearing Trading Permit Holder Fee Cap in
All Products Except SPX, VIX or other Volatility Indexes, OEX or XEO.''
In actuality, the Multiply-Listed Options Fee Cap has always applied to
some singly-listed products, and only excluded the products listed
above. As such, the name has been somewhat inaccurate, and the Exchange
hereby proposes to fix this issue in order to clear up any confusion.
    The Exchange also proposes, for competitive reasons, to limit the
Clearing Trading Permit Holder (``CTPH'') Fee Cap in All Products
Except SPX, VIX or other Volatility Indexes, OEX or XEO (the ``Cap'')
to include only orders executed in open outcry or the Exchange's
Automated Improvement Mechanism (``AIM''), or as qualified contingent
cross (``QCC'') or FLEXible Options (``FLEX Options'') transactions.
NASDAQ OMX PHLX LLC (``PHLX'') provides for a similar $75,000 cap which
also applies to firm open outcry business, but does not apply to their
PIXL mechanism, which, like AIM, is a price improvement mechanism, and
does not apply to electronic transactions in select symbols.\3\ The
Exchange also proposes to include fees from QCCs and FLEX Options
transactions towards the Cap to attract such orders to the Exchange.
Limiting the Cap to include only orders executed in open outcry or AIM
or as QCC or FLEX Options transactions allows CBOE to compete with PHLX
while not foregoing collecting the necessary fees to continue to
operate the Exchange.
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    \3\ See PHLX Fee Schedule, Section I, Part C (page 5) and
Section II (page 7).
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    Correspondingly, the Exchange also proposes to cease excluding AIM
Contra Execution Fees from counting towards the Cap. Going forward, AIM
Contra

Execution Fees will be considered in helping a CTPH reach the Cap
(though CTPHs will still continue to pay the AIM Contra Execution Fees
after reaching the Cap). The purpose of this change is to align and
improve the Exchange's competitive position in relation to other
exchanges. PHLX, as previously stated, has a similar $75,000 cap which
also applies to firm open outcry business, but does not apply to their
PIXL mechanism, which, like AIM, is a price improvement mechanism, and
does not apply to electronic transactions in select symbols.\4\ By
including AIM Contra Execution Fees towards the Cap, and at a lower
rate than that which PHLX charges in its PIXL mechanism, the Exchange
is providing a demonstrably advantageous pricing schedule for this
business.\5\ Additionally, as at PHLX, electronic fees in the busiest
options classes are not counted towards the Cap. As such, the Exchange
proposes to include all AIM transaction fees, including the AIM Contra
Execution Fees, towards reaching the Cap (when they apply) to improve
our competitive position. The Exchange would also like to encourage the
use of AIM, which is a price improvement mechanism. Finally, it should
be clarified that while a responder to an AIM auction pays a fee that
is not counted towards the Cap, this is because only Market-Makers can
respond to an AIM auction, and the Cap only applies to CTPHs (and not
Market-Makers). The Cap will remain limited to CTPHs, as they
contribute capital to facilitate execution of customer orders, which in
turn provides a deeper pool of liquidity that benefits all market
participants.
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    \4\ See PHLX Fee Schedule, Section I, Part C (page 5) and
Section II (page 7).
    \5\ See PHLX Fee Schedule, Section IV (page 10).
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    Similarly, PHLX waives its equity options transaction fees for
firms executing facilitation orders when the firms are trading in their
own proprietary accounts.\6\ As such, the Exchange, for competitive
reasons, proposes to waive the transaction fees for CTPH Proprietary
facilitation orders (other than SPX, VIX or other volatility indexes,
OEX or XEO) executed in AIM or open outcry, or as a QCC or FLEX Options
transaction (the ``CTPH Proprietary Facilitation Waiver'') in order to
align our competitive position and even improve upon it (as PHLX does
not waive such a fee for orders executed in its PIXL mechanism, in the
select symbols). The Exchange would have preferred to include only
multiply-listed products in the CTPH Proprietary Facilitation Waiver
because those are the only products in which the Exchange faces
competitive pricing pressures, and the Exchange has expended
considerable resources in developing its proprietary, singly-listed
products. However, some CBOE singly-listed products are used to compete
with multi-listed products that are also listed on CBOE (as explained
above). Including the multiply-listed products in the CTPH Proprietary
Facilitation Waiver while excluding their singly-listed competitors
might create a pricing advantage that might discourage trading in some
of the singly-listed products that the Exchange expended resources to
develop. As such, the Exchange proposes to include the singly-listed
products in the CTPH Proprietary Facilitation Waiver along with their
multiply-listed competitors, and only exclude SPX, VIX or other
volatility indexes, OEX and XEO from the CTPH Proprietary Facilitation
Waiver. The CTPH Proprietary Facilitation Waiver is limited to
executions in AIM or open outcry, or as a QCC or FLEX Options
transaction, because those are the only ways to execute a facilitation
trade on the Exchange.
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    \6\ See PHLX Fee Schedule, Section II (pages 7-8).
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    It should be noted that, for the purposes of the CTPH Proprietary
Facilitation Waiver, the Exchange is defining ``facilitation order'' as
any paired order in which a CTPH (``F'') origin code is contra to any
other origin code, provided the same executing broker and clearing firm
are on both sides of the order. The reason only CTPH orders can qualify
as ``facilitation orders'' is that the Exchange's systems cannot
determine whether or not an order is a facilitation order unless such
order comes in with the ``F'' origin code, and only CTPH orders come in
with the ``F'' origin code. As such, the Exchange's systems would be
unable to determine whether or not an order from any other market
participant is a facilitation order. Further, PHLX only waives fees on
facilitation orders for firms (which are similar to CTPHs).\7\
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    \7\ See PHLX Fee Schedule Section II (pages 7-8).
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    Along with ceasing excluding AIM Contra Execution Fees from
counting towards the Cap, the Exchange also proposes ceasing excluding
contracts executed in AIM that incur the AIM Contra Execution Fee from
counting towards the CBOE Proprietary Products Sliding Scale. Going
forward, contracts executed in AIM that incur the AIM Contra Execution
Fee will count towards helping a CTPH reach a higher tier in the CBOE
Proprietary Products Sliding Scale, and thereby pay lower fees for
executions in CBOE proprietary products. The purpose of this change is
to improve the Exchange's competitive position. The Exchange would also
like to encourage the use of AIM, which is a price improvement
mechanism. The purpose of these changes is to lower fees for CTPHs and
thereby encourage CTPHs to transact more business on the Exchange,
thereby increasing volume and liquidity.
    Currently, the Exchange does not assess the marketing fee on
transactions in a number of securities. The Exchange now proposes to
remove the ETFs EWC, EWT, MNX, MVR, QQQQ, RSP, VPL, VWO and XBI (the
``New Marketing Fee Options'') from the list of securities that are not
assessed the marketing fee, and begin assessing the marketing fee on
qualifying transactions in those securities. Going forward,
transactions in the New Marketing Fee Options will be assessed a
marketing fee of $0.25 per contract, like nearly all other ETFs. The
purpose of this change is to increase volume on the New Marketing Fee
Options. By assessing a marketing fee on the New Marketing Fee Options
transactions, the Exchange will be able to use the money collected to
attract volume, pursuant to the Exchange's marketing fee plan. The
Exchange believes that the demographics of the New Marketing Fee
Options order flow is inclined to seek economic considerations such as
payment for order flow, so a marketing fee for the New Marketing Fee
Options trades is necessary to attract volume and liquidity in the New
Marketing Fee Options.
    CBOE implemented on December 1, 2010,\8\ and extended on April 1,
2011,\9\ July 1, 2011,\10\ and October 1, 2011 \11\ a pilot program
relating to the assessment of the marketing fee in the SPY option
class. Specifically, CBOE previously determined not to assess the
marketing fee on electronic transactions in options on Standard &
Poor's Depositary Receipts (``SPY options'') (a unique and active
class), except that it would continue to assess the marketing fee on
electronic transactions resulting from AIM pursuant to CBOE Rule 6.74A
and transactions in open outcry (the ``SPY Marketing Fee Waiver''). The
SPY Marketing Fee Waiver is intended to

attract more SPY customer volume and allow CBOE market-makers to better
compete for order flow. The Exchange hereby proposes to extend the SPY
Marketing Fee Waiver to also include qualifying transactions in QQQQ
under the same terms as those that now apply to SPY (the ``SPY and QQQQ
Marketing Fee Waiver'') (previously, transactions in QQQQ were not
subject to the marketing fee, but as QQQQ is one of the New Marketing
Fee Options, the Exchange above proposes to make QQQQ transactions
subject to the marketing fee). Designated Primary Market-Makers and
Preferred Market-Makers can utilize the marketing fee funds to attract
orders from payment accepting firms that are executed in AIM and in
open outcry. The marketing fee funds received by payment-accepting
firms may be used to offset transaction and other costs related to the
execution of an order in AIM and in open outcry, including in the SPY
and QQQQ option classes. CBOE believes that the current demographics of
electronic, non-AIM SPY and QQQQ option order flow is more driven by
the displayed best bid or offer (``BBO'') and size than payment for
order flow considerations, and thus assessment of the marketing fee for
those transactions is not a differentiator at this time. Going forward,
the marketing fee will continue to be assessed on open outcry
transactions in SPY and be assessed on open outcry transactions in QQQQ
(as QQQQ is one of the New Marketing Fee Options).
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    \8\ See Securities Exchange Act Release No. 63470 (December 8,
2010), 75 FR 78284 (December 15, 2010) (SR-CBOE-2010-108).
    \9\ See Securities Exchange Act Release No. 64212 (April 6,
2011), 76 FR 20411 (April 12, 2011) (SR-CBOE-2011-033).
    \10\ See Securities Exchange Act Release No. 64818 (July 6,
2011), 76 FR 40978 (July 12, 2011) (SR-CBOE-2011-060).
    \11\ See Securities Exchange Act Release No. 65517 (October 7,
2011), 76 FR 63976 (October 14, 2011) (SR-CBOE-2011-097).
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    This SPY Marketing Fee Waiver pilot program is scheduled to
terminate on December 31, 2011. The Exchange has periodically continued
to extend the SPY Marketing Fee Waiver for successive three-month
periods so that the Exchange could simply allow the SPY Marketing Fee
Waiver to expire should the Exchange desire that the SPY Marketing Fee
Waiver would no longer apply. The Exchange now proposes to cease
extending the SPY Marketing Fee Waiver for three-month periods and
simply leave the SPY and QQQQ Marketing Fee Waiver in the Fees
Schedule. If the Exchange later determines that the SPY and QQQQ
Marketing Fee Waiver should no longer apply, the Exchange would have to
file to remove the SPY and QQQQ Marketing Fee Waiver from the Fees
Schedule, just like any other non-temporary provision in the Fees
Schedule.
    As reflected in Footnote 8 of the Fees Schedule, the Exchange
currently waives the $.18 per contract transaction fee for public
customer (``C'' origin code) orders in SPY and XLF options that are
executed in open outcry or AIM (the ``C Waiver'').\12\ This fee waiver
is due to expire on December 31, 2011. The Exchange has periodically
continued to extend the C Waiver for successive three-month periods so
that the Exchange could simply allow the C Waiver to expire should the
Exchange desire that the C Waiver would no longer apply. The Exchange
now proposes to cease extending the C Waiver for three-month periods
and simply leave the C Waiver in the Fees Schedule. If the Exchange
later determines that the C Waiver should no longer apply, the Exchange
would have to file to remove the C Waiver from the Fees Schedule, just
like any other non-temporary provision in the Fees Schedule.
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    \12\ See Securities Exchange Act Release No. 34-62902 (September
14, 2010), 75 FR 57313 (September 20, 2010), Securities Exchange Act
Release No. 34-63422 (December 3, 2010), 75 FR 76770 (December 9,
2010), Securities Exchange Act Release No. 34-64197 (April 6, 2011),
76 FR 20390 (April 12, 2011), Securities Exchange Act Release No.
34-64817 (July 6, 2011), 76 FR 40948 (July 12, 2011), Securities
Exchange Act Release No. 34-65518 (October 7, 2011), 76 FR 63971
(October 14, 2011) and CBOE Fees Schedule, footnote 8.
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    The Exchange also proposes to extend the C Waiver to all ETF, ETN
and HOLDRs options (the ``C Waiver for Index Options''). The C Waiver
for Index Options is intended to attract more customer volume on the
Exchange in these products. For competitive reasons, the customer base
for open outcry and AIM trading in ETF, ETN and HOLDRs options appears
more sensitive to fees than the customer base for such trading in other
products. Moreover, CBOE proposes the C Waiver to compete with other
exchanges. For example, NYSE Arca, Inc. (``Arca'') does not charge
customer transaction fees for customer transactions in ETF, ETN and
HOLDRs options.\13\ As such, the Exchange desires to waive customer
transaction fees for ETF, ETN and HOLDRs options executed in open
outcry or via AIM in order to better compete (while Arca does not have
a price improvement mechanism comparable to AIM, the Exchange desires
to include AIM in the C Waiver to encourage the use of this price
improvement mechanism). The Exchange also desires to apply the C Waiver
for Index Options to QCC trades because a QCC trade is a paired order,
and the only ways to execute paired orders are via AIM and open outcry,
so QCC trades should then be included in the C Waiver for Index
Options, too. The Exchange also believes that waiving the transaction
fee for such customer trades in ETF, ETN and HOLDRs options will
encourage greater customer trading in these products. The increased
volume and liquidity resulting from greater customer trading in those
products will benefit all market participants trading in these
products. The Exchange also proposes adding trades executed as a FLEX
Options transaction to the C Waiver for Index Options for competitive
reasons. A number of other exchanges do not charge for public customer
FLEX Options transactions in ETF, ETN and HOLDRs options.\14\
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    \13\ See Arca Options Fee Schedule, page 3.
    \14\ See NYSE Amex Options Fee Schedule, page 3, which shows Non
BD Customer Manual transactions (the manner by which FLEX Options
are traded on the NYSE Amex Options market) to be assessed a $0.00
transaction fee.
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    The Exchange proposes raising the Floor Broker Workstation
(``FBW'') fee from $225 per month (per login ID) to $350 per month (per
login ID). The Exchange's vendor that provides the FBW charges the
Exchange more than $225 per month (per login ID) for the FBW (actually,
more than $350 per month (per login ID)), and the Exchange had been
subsidizing those costs for FBW users. However, it is no longer
economically feasible to subsidize those costs to that great an extent.
As such, the Exchange proposes increasing the FBW fee to $350 per month
(per login ID), which still includes a subsidy for FBW users (though
smaller).
    The Exchange also proposes raising the PULSe On-Floor Workstation
(``PULSe'') fee from $225 per month (per login ID) to $350 per month
(per login ID). The Exchange expended significant resources developing
PULSe, and intends to recoup some of those costs. Further, because
PULSe and FBW serve similar functions, the Exchange desires to assess
equivalent fees for each so as not to offer a pricing advantage for one
over the other.
    The Exchange also proposes to reduce Market-Maker Trading Permit
monthly costs from $6,000 per permit to $5,500 per permit. Furthermore,
for those who commit to the Market-Maker Trading Permit Holder Sliding
Scale, which is available for all Market-Maker Trading Permits held by
affiliated Trading Permit Holders and Trading Permit Holder (``TPH'')
organizations that are used for appointments in any options classes
other than SPX, VIX, OEX and XEO, the Exchange proposes to reduce the
monthly cost from $6,000 per permit to $5,500 per permit for the first
10 permits, from $4,800 to $4,000 per permit for permits 11-20, and
from $3,000 to $2,500 per permit for permits 21 and greater. The
purpose of this change is to reduce access costs and thereby encourage
greater Market-Maker access, which thereby brings greater

trading activity, volume and liquidity, benefitting all market
participants.
    The Exchange would also like to amend the date by which a Market-
Maker TPH (``MMTPH'') must commit to the Market-Maker Trading Permit
Sliding Scale. The Market-Maker Trading Permit Holder Sliding Scale was
instituted in SR-CBOE-2011-004, which was filed on January 3, 2011. As
such, the text of the Market-Maker Trading Permit Sliding Scale was
drafted to allow MMTPHs to notify the Registration Services Department
of their commitments to the Market-Maker Trading Permit Sliding Scale
for a year as late as January 25 of that year. However, since the rule
is now in place, and the Exchange notified MMTPHs of this proposed
change on December 8, 2011,\15\ giving them ample time to commit, the
Exchange proposes to amend the language to require that a MMTPH notify
the Registration Services Department of such a commitment by December
25th (or the preceding business day if the 25th is not a business day)
of the year prior to each year in which the MMTPH would like to commit
to the Market-Maker Trading Permit Sliding Scale.
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    \15\ See Exchange Regulatory Circular RG11-158.
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    The Exchange also proposes to raise the VIX Tier Appointment fee
from $1,000 per month to $2,000 per month. ``VIX'' stands for CBOE
Market Volatility Index, and VIX options are a proprietary product
developed by the Exchange. In order for a Market-Maker Trading Permit
to be used to act as a Market-Maker in VIX options, the TPH must obtain
a VIX Tier Appointment for that Market-Maker Trading Permit. Each VIX
Tier Appointment may only be used with one designated Market-Maker
Trading Permit. The VIX Tier Appointment fee is currently assessed to
any Market-Maker Trading Permit Holder that either (a) has a VIX Tier
Appointment at any time during a calendar month; or (b) trades at least
1,000 VIX options contracts in open outcry during a calendar month. VIX
trading volume has increased recently, and due to increased demand, the
Exchange proposes to raise the VIX Tier Appointment fee in order to
recoup costs from developing VIX options, as well as other
administrative costs. In a related change, the Exchange also proposes
to raise the amount of the fee assessed to any Floor Broker Trading
Permit Holder that executes more than 20,000 VIX contracts during a
month from $1,000 to $2,000 in order to remain consistent with the
amount of the VIX Tier Appointment fee assessed to Market-Makers. If
and to the extent that a TPH or TPH organization has more than one
Floor Broker Trading Permit that is utilized to execute VIX options
transactions, the VIX options executions of that TPH or TPH
organization shall be aggregated for purposes of determining this
additional monthly fee and the Trading Permit Holder or TPH
organization shall be charged a single $2,000 fee for the combined VIX
options executions through those Floor Broker Trading Permits if the
executions exceed 20,000 contracts per month.
    Also, the Exchange proposes to remove from the regulatory circular
regarding Trading Permit Holder Application and Other Fees language
that would apply this fee to any Floor Broker Trading Permit Holder
whose aggregate VIX options executed contracts during the month
comprise more than 30% of the Floor Broker Trading Permit Holder's
exchange-wide total executed contracts. This language was to have been
removed in SR-CBOE-2011-073, and indeed was removed from one section of
the regulatory circular, as well as the Fees Schedule, but was
inadvertently left in another section of the regulatory circular.\16\
Removing this language will alleviate any confusion.
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    \16\ See Securities Exchange Act Release No. 65019 (August 3,
2011), 76 FR 48931 (August 9, 2011) (SR-CBOE-2011-073).
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    The Exchange also proposes to amend the qualification for the VIX
Tier Appointment fee to state that a Market-Maker TPH that has a VIX
Tier Appointment during a given month will not be assessed the VIX Tier
Appointment fee unless that Market-Maker TPH trades at least 100 VIX
options contracts electronically while that appointment is active.
Occasionally, a Market-Maker accidentally elects for a VIX Tier
Appointment, or elects for a VIX Tier Appointment and for some reason
does not end up trading VIX options. Under the current language of the
Fees Schedule, such a Market-Maker would still be assessed the VIX Tier
Appointment fee, despite not actually trading in VIX options. The VIX
Tier Appointment fee is intended to be assessed only to those Market-
Makers that actually trade in VIX options. As such, the proposed change
would ensure that only those Market-Makers that actually do trade in
VIX options are assessed the VIX Tier Appointment fee.
    The Exchange proposes to institute a Floor Broker Trading Permit
Sliding Scale, which will be available for all Floor Broker Trading
Permits held by affiliated TPHs and TPH organizations. Most floor
broker firms have, and need, at least two floor brokers: One to answer
the phones and receive trade and order information, and another to
execute trades. However, for floor broker ``firms'' that only have one
floor broker, that broker answers the phones and the Exchange often
ends up executing the trades for the floor broker. As such, in order to
recoup the costs involved for the Exchange, as well as normalize base
business costs across Floor Broker Trading Permit Holder operations to
ensure that the Exchange is not unduly subsidizing one operation over
another, the base rate for Floor Broker Trading Permits will be $9,000
per month. However, the Exchange will also institute a sliding scale
for Floor Broker Trading Permit Holders that commit to a minimum number
of Floor Broker Trading Permits for the calendar year. For those who
do, the TPH's first Floor Broker Trading Permit will cost $9,000 per
month. Permits 2 through 7 will cost $6,000 per month per permit (Tier
1), and any permits above 7 will cost a TPH $3,000 per permit per month
(Tier 2). The purpose of the Floor Broker Trading Permit Sliding Scale
is to encourage floor broker firms to increase their scale and
commitment to the Exchange, thereby bringing more business to the
Exchange, resulting in greater trading volume and liquidity, which
benefits all market participants.
    To qualify for the rates set forth in Tiers 1 and 2 in the Floor
Broker Trading Permit Sliding Scale, the applicable Trading Permit
Holder(s) and/or TPH organization(s) must commit in advance to a
specific tier that includes a minimum number of eligible Floor Broker
Trading Permits for each calendar year. To do so, a Floor Broker
Trading Permit Holder must notify the Exchange's Registration Services
Department by December 25th (or the preceding business day if the 25th
is not a business day) of the year prior to each year in which the
Floor Broker Trading Permit Holder would like to commit to this sliding
scale of the tier of eligible Floor Broker Trading Permits committed to
by that Floor Broker Trading Permit Holder for that year (Floor Brokers
were notified of this on December 8, 2011 \17\). Floor Brokers are not
obligated to commit to either tier. However, the discounts will apply
only to those that do commit to Tier 1 or Tier 2 for the calendar year.
Trading Permit Holders that are not eligible for and/or do not commit
to Tier 1 or Tier 2 will pay the standard rate of $9,000 for each Floor
Broker Trading Permit, regardless of the total number of Floor Broker
Trading Permits used. If a TPH chooses to

commit to either Tier 1 or Tier 2, that TPH will be responsible for the
minimum number of permits in the commitment tier for the remainder of
the calendar year. Even if a TPH does not maintain the minimum level of
eligible Trading Permits in the tier, that TPH is still responsible for
the minimum payment for that commitment tier for the remainder of the
calendar year. For example, a TPH that commits to eight eligible
permits per month will be subject to a minimum monthly access fee of
$48,000 (1 at $9,000 plus 6 at $6,000 plus 1 at $3,000 = $48,000) for
that calendar year. Any additional Permits will increase the fee by the
applicable amount.
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    \17\ See Exchange Regulatory Circular RG11-158.
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    A TPH will be able to commit to a higher tier of the sliding scale
for the remainder of a calendar year, during a commitment year, if the
TPH obtains enough eligible Floor Broker Trading Permits and provides
written notification to the Registration Services Department by the
25th day of the month preceding the month in which the higher tier will
be effective (or the preceding business day if the 25th is not a
business day). For example, a TPH may provide written notice to commit
to Tier 1 effective July 1 for the remainder of the calendar year as
long as the TPH obtains enough eligible Trading Permits and provides
written notice by June 25th that the TPH would like to participate in
the sliding scale starting in July for the remainder of that calendar
year. Even if that TPH subsequently falls below the minimum number of
eligible Floor Broker Trading Permits (in the committed calendar year),
for the committed tier, the TPH will remain responsible for paying for
the tier minimum for the remainder of the calendar year.
    TPHs will be responsible to pay for at least the minimum amount of
eligible Floor Broker Trading Permits in the committed tier for the
calendar year on a monthly basis unless the TPH entirely terminates as
a TPH during the year. If a TPH combines, merges, or is acquired during
the course of the calendar year, the surviving TPH will maintain
responsibility for the committed number of eligible Floor Broker
Trading Permits.
    The proposed Floor Broker Trading Permit Sliding Scale is available
to all floor brokers. In essence, CBOE is offering a discounted fee in
return for a commitment for a designated period of time. Trading Permit
Holders are not precluded from providing notice that they wish to
participate in the Floor Broker Trading Permit Sliding Scale throughout
a calendar year as long as such notice is provided by the 25th day of
the preceding month of effectiveness. CBOE is proposing to offer the
Floor Broker Trading Permit Sliding Scale as a benefit to those Trading
Permit Holders that commit in advance. There is no obligation to commit
to either Tier 1 or Tier 2 of the Floor Broker Trading Permit Sliding
Scale.
    The Exchange also proposes to assess an additional monthly fee of
$3,000 per month to any Floor Broker Trading Permit Holder that
executes more than 20,000 SPX contracts during the month. If and to the
extent that a Trading Permit Holder or TPH organization has more than
one Floor Broker Trading Permit that is utilized to execute SPX options
transactions, the SPX executions of that Trading Permit Holder or TPH
organization shall be aggregated for purposes of determining this
additional monthly fee and the Trading Permit Holder or TPH
organization shall be charged a single $3,000 fee for the combined SPX
executions through those Floor Broker Trading Permits if the executions
exceed 20,000 contracts per month. The Exchange already assesses a
similar fee to Floor Broker Trading Permit Holders that execute more
than 20,000 VIX transactions during a month. The purpose of this change
is to reflect the opportunity provided to agents servicing customers in
such a high-volume product. Further, this fee will equalize the
opportunity between Market-Makers and Floor Brokers in SPX options.
Also, the Exchange expended considerable resources developing SPX
options and desires to recoup such expenses and other administrative
costs.
    The Exchange also proposes to lower the fee for the Quoting and
Order Entry Bandwidth Packet (the ``Packet'') from $3,000 per month to
$2,750 per month. The amount of the fee for the Packet has always been
set at half the price of the base rate for a Market-Maker Trading
Permit. Since the Exchange proposes to lower that amount from $6,000 to
$5,500, the Exchange correspondingly proposes to lower the amount of
the fee for the Packet to $2,750.
    The Exchange proposes amending a number of the TPH Application
fees, as listed below:

------------------------------------------------------------------------
                                         Current fee    Proposed new fee
                 Fee                       amount            amount
------------------------------------------------------------------------
Individual..........................            $2,500            $3,000
Non-Trading Permit Holder Customer               2,500             3,000
 Business...........................
Associated Person...................               350               500
TPH Organization Application........             4,000             5,000
Subject to Statutory                             2,750             5,000
 Disqualification...................
Inactive Nominee Status Change
 (Trading Permit Swap)..............
a. Submission before 4pm (day prior                 50                55
 to effective date).................
b. Submission after 4pm (day prior                 100               110
 to effective date).................
c. Submission after effective date..               200               220
TPH Organization Renewal Fee........             2,000             2,500
------------------------------------------------------------------------

As before, application fees related to a TPH organization's structural
change are capped at $10,000 (e.g. change from a limited partnership to
a limited liability corporation). The Trading Permit Transfer Fee is
capped at $2,000 for a Trading Permit transfer request covering
multiple Trading Permits. The costs of processing of these applications
and activities have increased, and the Exchange therefore proposes
increasing the fees in order to recoup such increased costs.
    The Exchange proposes to adopt an Initial Proprietary Registration
fee of $50 and an Annual Proprietary Registration fee of $25. During
2011 CBOE implemented a new proprietary trading registration
requirement (the ``Proprietary Trading Registration Program''),
primarily at the direction of the Commission. The Proprietary Trading
Registration Program, which is operated through WebCRD, caused a
significant workload increase in the Exchange's Registration
Department. Over the course of the year, CBOE processed over 4,000
registrations via Web-CRD under this new requirement, of which about
2,500 required further consideration of a waiver request. The
Proprietary Trading Registration Program involved significant work in

implementing the registrations, examining waiver requests and answering
testing related questions. Due to the Proprietary Trading Registration
Program, the Exchange hired an extra staff member to address this
increased workload, as well as paid a sizable set-up fee to FINRA and
incurred significant testing costs. The Proprietary Trading
Registration Program will continue to require on-going work and testing
and monitoring of the Web-CRD system, as well as consideration of new
applicants and waiver requests. In order to offset these costs, the
Exchange proposes the Initial Proprietary Registration fee and the
Annual Proprietary Registration fee. The Initial Proprietary
Registration fee will be payable by any TPH organization for the
registration of any associated person on WebCRD with the Proprietary
Trader registration. The Annual Proprietary Registration fee will be
payable annually by any TPH organization for each associated person
that the TPH organization maintains registered on WebCRD with the
Proprietary Trader registration.
    The Exchange also proposes to increase the fees charged for access
to a Network Access Port (1 Gigabyte) to $500 per month for regular
access and $1000 per month for Sponsored User access. The Exchange
recently made a sizable investment to upgrade the equipment involved in
the Network Access Port, and thereby proposes to increase the fees in
order to recoup such costs and maintain such equipment in the future.
The Exchange currently charges a different rate for regular access and
Sponsored User access, and merely proposes to increase the rates in
equal proportion. Moreover, this change in Network Access Port fees is
in line with the amounts assessed for similar access at other
exchanges. The International Securities Exchange, Inc. (``ISE'')
assesses a fee of $500 for network access up to and including 1
gigabyte.\18\
---------------------------------------------------------------------------

    \18\ See ISE Schedule of Fees, page 9.
---------------------------------------------------------------------------

    The Exchange also proposes to increase the fees charged for a CMI
Login ID and FIX Login ID to $500 per month for regular access and
$1000 per month for Sponsored User access. Firms may access CBOEdirect
via either a CMI Client Application Server or a FIX Port, depending on
how their systems are configured. As with the Network Access Port, the
Exchange recently made a sizable investment to upgrade the equipment
involved in the CMI Client Application Servers and FIX Ports, and
thereby proposes to increase the fees in order to recoup such costs and
maintain such equipment in the future. Moreover, these changes are in
line with amounts assessed for connectivity at other exchanges. ISE
assesses a FIX fee of $1000 for a minimum of two monthly login IDs (so,
$500 for one).\19\ The NASDAQ Stock Market LLC's Options Market
(``NOM'') assesses a fee of $500 per FIX port per month, as well.\20\
Regarding the Sponsored User fees, the Exchange currently charges a
different rate for regular access and Sponsored User access, and merely
proposes to increase the rates in equal proportion.
---------------------------------------------------------------------------

    \19\ See ISE Schedule of Fees, page 8.
    \20\ See NOM Rule 7053.
---------------------------------------------------------------------------

    These proposed changes to the Fees Schedule took effect on January
1, 2012, per SR-CBOE-2011-121, which was withdrawn on January 17, 2012,
the same day that this rule filing is being submitted.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the
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 Exchange
facilities. Amending the fee for customer QQQQ transactions is
reasonable because the amount of the fee is equivalent for customer
transactions on all other ETF options, and is equitable and not
unfairly discriminatory because the same fee will be assessed for all
customer transactions in QQQQ options. The amount being charged to
customers, less than that assessed to other market participants for
similar transactions, recognizes a historical preference towards
encouraging customer transactions. Further, offering lower transaction
fees for customer transactions incentivizes customers to execute trades
on the Exchange, and this increased customer activity provides greater
market volume and liquidity, which benefit all market participants.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    Excluding SPX, VIX or other volatility indexes, OEX or XEO from the
Liquidity Provider Sliding Scale is reasonable because market
participants trading in those products will simply pay the normal
execution fees for trading in such products, fees which have been and
currently are accepted fee levels. Excluding SPX, VIX or other
volatility indexes, OEX or XEO from the Liquidity Provider Sliding
Scale is equitable and not unfairly discriminatory because all
similarly-situated market participants trading in those products will
be charged the same fees for such transactions, and because the
Exchange expended significant resources in developing those products.
The Exchange would have preferred to modify the Liquidity Provider
Sliding Scale to include only multiply-listed products. However, some
CBOE singly-listed products are used to compete with multi-listed
products that are also listed on CBOE (as explained above). Therefore,
the Exchange proposes to include the singly-listed products for
qualification towards the Liquidity Provider Sliding Scale along with
their multiply-listed competitors, and only exclude SPX, VIX or other
volatility indexes, OEX and XEO from the Liquidity Provider Sliding
Scale. Finally, lowering the tier levels in the Liquidity Provider
Sliding Scale is reasonable because these lowered amounts reflect the
subtraction of trades in the products that are being excluded, and
because this will allow market participants to more easily reach those
tiers and pay lower fees, and is equitable and not unfairly
discriminatory because the same tier amounts are applicable to all
market participants that qualify for the Liquidity Provider Sliding
Scale.
    Limiting the Cap to include only orders executed in open outcry and
AIM or as a QCC or FLEX Options transaction, and thereby excluding
regular non-AIM electronic orders, is reasonable because the execution
of regular non-AIM electronic orders will merely continue to incur the
same transaction fees they normally would; the only change is that they
will no longer be cut off at the amount of the Cap. Further, other
exchanges also limit similar firm fee caps in a similar, and even less-
inclusive, manner.\23\ Limiting the Cap in this fashion is equitable
and not unfairly discriminatory because AIM and open outcry, as auction
mechanisms, are used by CTPHs to bring liquidity to the Exchange, which
benefits all market participants, while regular electronic transactions
are used by CTPHs to take liquidity (since only Market-Makers can send
quotes through the regular electronic system, while CTPHs can only send
orders, which take liquidity) (QCC transactions can only be executed
via AIM, and FLEX Options transactions can only be executed via the
auction mechanisms of open outcry

and CFLEX (which is a FLEX Options auction platform similar to AIM)).
Moreover, limiting the Cap in this fashion is equitable and not
unfairly discriminatory because other exchanges also limit similar firm
fee caps in a similar, and even less-inclusive, manner,\24\ and because
these limits apply to all CTPHs equally. Further, while a responder to
an AIM auction pays a transaction fee that is not counted towards the
Cap, this is equitable and not unfairly discriminatory because only
Market-Makers can respond to an AIM auction, and the Cap only applies
to CTPHs, and not Market-Makers. This situation is the same for open
outcry. The Cap is limited to CTPHs because they contribute capital to
facilitate execution of customer orders, which in turn provides a
deeper pool of liquidity that benefits all market participants.
---------------------------------------------------------------------------

    \23\ See PHLX Fee Schedule, Section I, Part C (page 5) and
Section II (page 7), provides for a similar $75,000 cap which also
applies to firm open outcry business, but does not apply to their
PIXL mechanism, which, like AIM, is a price improvement mechanism,
and does not apply to electronic transactions in select symbols.
    \24\ See PHLX Fee Schedule, Section I, Part C (page 5) and
Section II (page 7), provides for a similar $75,000 cap which also
applies to firm open outcry business, but does not apply to their
PIXL mechanism, which, like AIM, is a price improvement mechanism,
and does not apply to electronic transactions in select symbols.
---------------------------------------------------------------------------

    Assessing no transaction fees for CTPH Proprietary facilitation
orders (other than SPX, VIX or other volatility indexes, OEX or XEO)
executed in open outcry or AIM or as a QCC or FLEX Options transaction
is reasonable because other exchanges also waive equity options
transaction fees for firms executing facilitation orders when the firms
are trading in their own proprietary account.\25\ This change is
equitable and not unfairly discriminatory because it will encourage
CTPHs to transact more business on the Exchange, thereby increasing
volume and liquidity, which will benefit all market participants, and
also because it will apply to all firms equally. The CTPH Proprietary
Facilitation Waiver is limited to executions in AIM or open outcry, or
as a QCC or FLEX Options transaction, because those are the only ways
to execute a facilitation trade on the Exchange.
---------------------------------------------------------------------------

    \25\ See PHLX Fee Schedule, Section II (pages 7-8).
---------------------------------------------------------------------------

    Excluding SPX, VIX or other volatility indexes, OEX or XEO from the
CTPH Proprietary Facilitation Waiver is equitable and not unfairly
discriminatory because all similarly-situated market participants
trading in those products will be charged the same fees for such
transactions, and because the Exchange expended significant resources
in developing those products. The Exchange would have preferred to
modify the CTPH Proprietary Facilitation Waiver to include only
multiply-listed products. However, some CBOE singly-listed products are
used to compete with multi-listed products that are also listed on CBOE
(as described above). Therefore, the Exchange proposes to include the
singly-listed products for qualification towards the CTPH Proprietary
Facilitation Waiver along with their multiply-listed competitors, and
only exclude SPX, VIX or other volatility indexes, OEX and XEO from the
CTPH Proprietary Facilitation Waiver. Limiting the CTPH Proprietary
Facilitation Waiver to orders executed via AIM or open outcry or as a
QCC or FLEX Options transaction is equitable and not unfairly
discriminatory because these limits apply to all CTPHs equally, and
because these are the only manners in which facilitation trades can be
effected.
    Ceasing excluding AIM Contra Execution Fees from counting towards
the Cap as well as ceasing excluding contracts executed in AIM that
incur the AIM Contra Execution Fee from counting towards the CBOE
Proprietary Products Sliding Scale is reasonable because it will allow
for CTPHs to pay lower regular transaction fees than they currently do
(though the AIM Contra Execution Fee will still be assessed). These
changes are equitable and not unfairly discriminatory because they
apply equally to all CTPHs, just as the Cap and the CBOE Proprietary
Products Sliding Scale had prior to these changes. Additionally, these
changes will encourage CTPHs to transact more business on the Exchange,
thereby increasing volume and liquidity, which will benefit all market
participants.
    Removing the New Marketing Fee Options from the list of securities
that are not assessed the marketing fee, and beginning to assess a
$0.25 per contract marketing fee on qualifying transactions in those
securities, is reasonable because it is the same amount as is charged
for transactions in other ETFs. This proposed change is equitable and
not unfairly discriminatory because it is designed and intended to
attract additional order flow in the New Marketing Fee Options to the
Exchange, which would increase liquidity and benefit all market
participants, and because the same fee is assessed similar [sic]
transactions in nearly all other the [sic] New Marketing Fee Options.
    The SPY and QQQQ Marketing Fee Waiver is designed to provide for
the equitable allocation of reasonable dues, fees, and other charges
among Trading Permit Holders in that it is intended to attract more
customer volume on the Exchange in SPY and QQQQ options. The SPY and
QQQQ options classes are among the most active and liquid classes and
trade with significant electronic trading volume. Because of their
current trading profiles, CBOE believes it might be better able to
attract electronic liquidity by not assessing the marketing fee on
electronic SPY and QQQQ transactions and therefore proposes to make
permanent the current waiver. However, CBOE believes that continuing to
collect the marketing fee on open outcry transactions, as well as
electronic orders submitted to AIM for price improvement, from Market-
Makers that trade with customer orders from payment accepting firms
would continue to attract liquidity in SPY and QQQQ to the floor and
AIM mechanism, respectively. Brokers take payment for order flow (the
payments received from the collection of the marketing fee) into their
decision-making equations regarding AIM and open outcry when deciding
where to send orders in SPY and QQQQ. Accordingly, CBOE believes making
permanent the waiver is equitable and not unfairly discriminatory
because it reflects the trading profiles of SPY and QQQQ and is
designed and intended to attract additional order flow in SPY and QQQQ
to the Exchange, which would benefit all market participants.
    The Exchange believes the proposed extension of the C Waiver for
Index Options is equitable and not unfairly discriminatory because it
would apply uniformly to all public customers trading ETF, ETN and
HOLDRs options in open outcry and AIM, and because waiving the
transaction fee for such customer trades is designed to attract new
order flow to the Exchange. The resulting increased volume and
liquidity will benefit all market participants trading in these
products. The Exchange believes the proposed extension of the C Waiver
for Index Options is reasonable because it would continue to provide
cost savings during the extended waiver period for public customers
trading SPY and XLF options and begin to provide such savings to public
customers trading all other ETF, ETN and HOLDRs. Further, the Exchange
believes the proposed C Waiver for Index Options is consistent with
other fees assessed by the Exchange. Specifically, the Exchange
assesses manually executed broker-dealer orders a different rate ($.25
per contract) as compared to electronically executed broker-dealer
orders ($.45 per contract).\26\ Other exchange fee schedules also
distinguish between electronically and non-electronically

executed orders.\27\ Finally, Arca does not charge customer transaction
fees for customer transactions in ETF, ETN and HOLDRs options.\28\
Adding FLEX Options to the C Waiver for Index Options is reasonable
because it will allow customer FLEX Options transactions in ETF, ETN
and HOLDRs options to no longer be assessed a fee, thereby saving such
customers money. This addition is equitable and not unfairly
discriminatory because waiving the fee for such trades is designed to
attract new order flow to the Exchange. The resulting increased volume
and liquidity will benefit all market participants trading in these
products. Moreover, other exchanges do not charge for public customer
FLEX Options transactions in ETF, ETN and HOLDRs options.\29\ The C
Waiver for Index Options is limited to AIM and open outcry executions
in order to encourage use of these price improvement mechanisms, and
QCC trades are included in the C Waiver for Index Options as well
because QCC trades can only be executed via AIM and open outcry.
---------------------------------------------------------------------------

    \26\ See CBOE Fees Schedule, Section 1.
    \27\ PHLX categorizes its equity options transaction fees for
Specialists, ROTs, SQTs, RSQTs and Broker-Dealers as either
electronic or non-electronic. See PHLX Fees Schedule, Equity Options
Fees. NYSE Amex, Inc. categorizes its options transaction fees for
Non-NYSE Amex Options Market Makers, Broker-Dealers, Professional
Customers, Non BD Customers and Firms as either electronic or
manual. See NYSE Amex Options Fees Schedule, Trade Related Charges.
Arca categorizes its options transaction fees for Customers, Firms
and Broker-Dealers as either electronic or manual. See Arca Options
Fees Schedule, Trade Related Charges.
    \28\ See Arca Options Fee Schedule, page 3.
    \29\ See NYSE Amex Options Fee Schedule, page 3, which shows Non
BD Customer Manual transactions (the manner by which FLEX Options
are traded on the NYSE Amex Options market) to be assessed a $0.00
transaction fee.
---------------------------------------------------------------------------

    Increasing the FBW fee from $225 per month (per login ID) to $350
per month (per login ID) is reasonable because the Exchange is charged
by the vendor that provides the FBW more than $225 per month (per login
ID) (actually, more than $350 per month (per login ID)) and simply
wants to reduce the extent to which the Exchange subsidizes such costs.
This change is equitable and not unfairly discriminatory because all
market participants who desire to use the FBW will be assessed the same
fee.
    Increasing the PULSe fee from $225 per month (per login ID) to $350
per month (per login ID) is reasonable because the Exchange expended
significant resources developing PULSe and desires to recoup some of
those costs. Moreover, the Exchange will be assessing the same amount
for the FBW, which is a similar product. This change is equitable and
not unfairly discriminatory because all market participants who desire
to use PULSe will be assessed the same fee, and because the same amount
is being assessed for use of a similar product, the FBW.
    The lowered costs for Market-Maker Trading Permits is reasonable
because the fees will be lower than previously, and are equitable and
not unfairly discriminatory because, as before, the tiers are available
to all TPHs. Lower Market-Maker Trading Permit fees encourage more
Market-Makers to access the Exchange, and more Market-Makers gives
market participants more trading options and increased trading
activity, volume and liquidity, which benefit all market participants.
Amending the date by which MMTPHs must commit to the Market-Maker
Trading Permit Holder Sliding Scale is reasonable because a commitment
by December 25th of the preceding year still gives MMTPHs plenty of
time to determine whether or not to commit to the Market-Maker Trading
Permit Holder Sliding Scale, and is equitable and not unfairly
discriminatory because all MMTPHs will be subject to that same
deadline.
    Amending the qualification for the VIX Tier Appointment fee to
state that a Market-Maker TPH that has a VIX Tier Appointment during a
given month will not be assessed the VIX Tier Appointment fee unless
said Market-Maker TPH trades at least 100 VIX contracts electronically
while that appointment is active is reasonable because the change will
prevent those that do not at least somewhat regularly trade in VIX from
being assessed the VIX Tier Appointment fee. This change is equitable
and not unfairly discriminatory because it ensures that the VIX Tier
Appointment fee is not assessed to those Market-Makers who are not
trading in VIX. The 100-contract threshold achieves this purpose
because it is a sufficiently small number of contracts and yet leaves
some small room for an accidental or minor VIX trade.
    Increasing the VIX Tier Appointment fee is reasonable because the
amount, $2,000, is within the range of other tier appointment fees
assessed by the Exchange (for example, the SPX Tier Appointment fee is
$3,000) \30\, and because market demand will sustain such a fee. This
proposed change is also equitable and not unfairly discriminatory
because it will be assessed to all MMTPHs that either (a) have a VIX
Tier Appointment at any time during a calendar month and trade at least
100 VIX contracts electronically while that appointment is active; or
(b) trade at least 1,000 VIX options contracts in open outcry during a
calendar month. Increasing the monthly fee for a Floor Broker Trading
Permit Holder that executes more than 20,000 VIX contracts in a month
is reasonable because this amount is equal to the amount of the VIX
Tier Appointment fee (as they were equal prior to these changes), and
is equitable and not unfairly discriminatory because the fee will be
assessed to any and all Floor Broker Trading Permit Holders that
qualify for the fee.
---------------------------------------------------------------------------

    \30\ See Exchange Fees Schedule, Section 10(A)(ii).
---------------------------------------------------------------------------

    The proposed increase in the fee assessed for one Floor Broker
Trading Permit is reasonable because lone floor brokers almost always
require the Exchange to do extra work for the floor broker, while floor
brokers with two or more trading permits never do, and the Exchange
must recoup related costs. This increase is equitable and not unfairly
discriminatory because the same amount will be assessed to all lone
floor brokers. The Floor Broker Trading Permit Sliding Scale is
reasonable because the amounts for Tier 1 are the same on a per permit
basis as they currently are, and the amounts for Tier 2 are lower than
the current amounts. The Floor Broker Trading Permit Sliding scale is
equitable and not unfairly discriminatory because offering lower costs
to TPHs that get more permits will encourage floor broker firms to
bring more floor brokers to the Exchange, thereby bringing more
business to the Exchange, resulting in greater trading volume and
liquidity, which benefits all market participants.
    The proposed monthly fee of $3,000 per month to any Floor Broker
Trading Permit Holder that executes more than 20,000 SPX contracts
during the month is reasonable because the same amount is assessed to
Market-Makers for an SPX tier appointment. This fee is equitable and
not unfairly discriminatory because it will equalize opportunity
between Market-Makers and Floor Brokers trading in SPX options, because
it reflects the opportunity provided to agents servicing customers in
such a high-volume product, and because the Exchange expended
considerable resources in developing SPX and desires to recoup such
expenses and other administrative costs.
    The lowered fee for the Packet is reasonable because the fee will
be lower than previously, and is equitable and not unfairly
discriminatory because, as before, the fee will be applied to all
parties who desire the Packet. Lower Packet fees encourage more Market-

Makers to access the Exchange, and more Market-Makers gives market
participants more trading options and increased trading activity,
volume and liquidity, which benefit all market participants.
    The proposed increases in TPH Application fees are reasonable
because such increases are necessary to cover the increased costs of
processing such applications and activities. The proposed increases in
TPH Application fees are equitable and not unfairly discriminatory
because they apply equally to all qualifying market participants.
    The proposed adoption of the Initial Proprietary Registration fee
and the Annual Proprietary Registration fee is reasonable because both
fees are necessary to offset the costs of the Proprietary Trading
Registration Program, and because the amount of the fees are minimal.
The adoption of these fees is equitable and not unfairly discriminatory
because they will be assessed equally to all market participants that
qualify for the fees.
    The proposed change to increase the Network Access Port fees is
reasonable because the fees are within the same range as those assessed
on other exchanges,\31\ and because such increase will assist in
recouping expenditures recently made by the Exchange to upgrade the
CBOEdirect connectivity equipment. This proposed change is equitable
and not unfairly discriminatory because the fees, as before, will be
assessed to all market participants. The proposed changes to increase
the fees assessed for CMI Login IDs and FIX Login IDs are also
reasonable because such fees are within the same range as those
assessed on other exchanges \32\, and because such increases will
assist in recouping expenditures recently made by the Exchange to
upgrade the CBOEdirect connectivity equipment. This proposed change is
equitable and not unfairly discriminatory because the fees, as before,
will be assessed to all market participants. Assessing higher fees for
Sponsored Users is equitable and not unfairly discriminatory because
Sponsored Users are able to access the Exchange and use the equipment
provided without purchasing a trading permit. As such, Trading Permit
Holders who have purchased a trading permit will have a higher level of
commitment to transacting business on the Exchange and using Exchange
facilities than Sponsored Users. Finally, these increases maintain the
same proportionate amounts that are paid by regular users relative to
Sponsored Users.
---------------------------------------------------------------------------

    \31\ See ISE Schedule of Fees, page 9.
    \32\ See ISE Schedule of Fees, page 8 and NOM Rule 7053.
---------------------------------------------------------------------------

    Changing the name of the Cap to more accurately reflect its nature
furthers the objectives of Section 6(b)(5) \33\ of the Act in
particular in that it is designed to clear up any potential confusion,
which serves 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.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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)
of the Act \34\ and subparagraph (f)(2) of Rule 19b-4 \35\ thereunder.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78s(b)(3)(A).
    \35\ 17 C.F.R. 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-CBOE-2012-008 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-2012-008. 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
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-2012-008 and should be
submitted on or before February 24, 2012.
---------------------------------------------------------------------------

    \36\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-2409 Filed 2-2-12; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 84, Number 189 (Monday, September 30, 2019)]
[Rules and Regulations]
[Pages 51402-51405]
[FR Doc No: 2019-20627]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

33 CFR Part 100

[Docket Number USCG-2019-0150]
RIN 1625-AA08

Special Local Regulation; Kailua Bay, Ironman World Championship,
Kailua-Kona, Hawaii

AGENCY: Coast Guard, DHS.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Coast Guard is establishing a recurring special local
regulation for certain waters of Kailua Bay, Hawaii. This action is
necessary to provide for the safety of life on these navigable waters
located at Kailua-Kona, HI, during the swim portion of the Ironman
World Championship Triathlon and practice swim held on consecutive
weekends annually in October. On both days, the swim events are held
from 3:45 a.m. to 11 a.m. This rulemaking prohibits persons and vessels
from being in the regulated area each day of the event unless
authorized by the Captain of the Port Honolulu.

DATES: This rule is effective September 30, 2019.

ADDRESSES: To view documents mentioned in this preamble as being
available in the docket, go to https://www.regulations.gov, type USCG-
2019-0150 in the ``SEARCH'' box and click ``SEARCH.'' Click on Open
Docket Folder on the line associated with this rule.

FOR FURTHER INFORMATION CONTACT: If you have questions on this rule,
call or email Chief Jason Olney, Waterways Management Division, U.S.
Coast Guard Sector Honolulu; telephone<PHONE_NUMBER>, email
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Table of Abbreviations

CFR Code of Federal Regulations
DHS Department of Homeland Security
FR Federal Register
NPRM Notice of proposed rulemaking
Sec.  Section
SLR Special Local Regulation
U.S.C. United States Code

II. Background Information and Regulatory History

    On April 18, 2019, the Coast Guard published a Notice of Proposed
Rulemaking (NPRM) in the Federal Register (84 FR 16223) entitled
``Special Local Regulation; Kailua Bay, Ironman World Championship,
Kailua-Kona, Hawaii.'' In the NPRM we stated why we issued the NPRM,
and invited comments on our proposed regulatory action related to this
swim event. During the comment period that ended May 18, 2019, we
received four comments.
    This annual event consists of a practice swim and then a race swim
held on two consecutive weekends in October. This event is a world
famous triathlon with participants coming from around the world to
compete. The event occurs within the ocean waters of Kailua Bay, HI.
Each swim event consists of 2,500 participants swimming a 2.4 mile
(4,224 yard) marked race course located in navigable shallow ocean
waters. Because of increased spectator pleasure craft drawn to support
and view the Ironman swim event, spectator vessel traffic poses a
significant safety hazard due to the limited maneuverability of swim
participants and vessels navigating in close proximity to the
designated area.
    Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause
exists for making this rule effective less than 30 days after
publication in the Federal Register. Due to the comments received and
evaluation of those comments, the Coast Guard is unable to publish this
final rule in time to meet the 30 day

requirement. Delaying the effective date would be contrary to the
rule's objectives of protecting safety of life on the navigable waters
in the vicinity of the large swim event.

III. Legal Authority and Need for Rule

    The COTP Honolulu is establishing a recurring special local
regulation to be enforced from 3:45 a.m. to 11 a.m., on consecutive
weekends in October annually. For both the race itself and the practice
swim event, six hours are required for all participants to complete the
swim course. The regulated area would cover all navigable waters of
Kailua Bay within 100 yards adjacent to the 2.4 mile (4,224 yards) swim
course, starting at the shoreline northeast of Kailua Pier at
19[deg]38.341' N, 155[deg]59.782' W; thence southeast to 19[deg]37.416'
N, 155[deg]59.444' W; thence southwest to 19[deg]37.397' N,
155[deg]59.500' W; thence northwest to 19[deg]38.150' N,
155[deg]59.760' W, thence north and back to Kailua Pier at
19[deg]38.398' N, 155[deg]59.816' W, and returning along the pier to
the originating point on the shoreline at to 19[deg]38.341' N,
155[deg]59.782' W. The statutory basis for this rulemaking is 46 U.S.C.
70041, which gives the coast Guard, under a delegation from the
Secretary of the Department of Homeland Security regulatory authority
to enforce the Ports and Waterways Safety Act.
    The COTP has determined that potential safety hazards exist
necessitating the movement restriction of all vessels and persons,
including event participants, in the regulated area. The purpose of
this rule is to ensure safety of vessels and navigable waters in the
special local regulation before, during, and after the event.

IV. Discussion of Comments, Changes, and the Rule

    As noted above, we received four comments on our NPRM published
April 18, 2019.
    The Coast Guard received three comments in support of the proposed
rule, noting that additional Federal safety and security measures not
only provides another layer of protection to swimmers in the water but
promotes safety to all mariners in the race vicinity.
    The Coast Guard received one comment regarding an adjustment to the
proposed start time in the NPRM of 5:00 a.m. for both race days in
October, noting that during past races, participants would encounter
unfavorable swim conditions. The commenter suggested moving the 5:00
a.m. start time to 3:45 a.m., to allow waters to calm and adjust race
times if necessary. Additionally, the Coast Guard would have ample time
to ensure the race course is clear of vessels and other non-
participants.
    We agree, and the final rule includes language stating the start
time for both races in October.
    The Coast Guard received one notification from event sponsor that
race days are subject to change from Saturdays to Sundays depending on
Cruise ship operations. Cruise Ship Operations occurring in the Kailua-
Kona Security Zone, 33 CFR 165.30 prohibit persons or vessels from
entering without express permission of the Captain of the Port
Honolulu.
    We agree, and the proposed final rule includes a change in language
from ``consecutive Saturdays'' to ``consecutive weekends'' to
accommodate race day changes.

V. Regulatory Analyses

    We developed this rule after considering numerous statutes and
Executive orders related to rulemaking. Below we summarize our analyses
based on a number of these statutes and Executive orders, and we
discuss First Amendment rights of protestors.

A. Regulatory Planning and Review

    Executive Orders 12866 and 13563 direct agencies to assess the
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits. Executive Order 13771 directs agencies to control
regulatory costs through a budgeting process. This rule has not been
designated a ``significant regulatory action,'' under Executive Order
12866. Accordingly, this rule has not been reviewed by the Office of
Management and Budget (OMB), and pursuant to OMB guidance it is exempt
from the requirements of Executive Order 13771.
    This regulatory action determination is based on the size,
location, duration, event history, time of day, and time of year of the
regulated area which would impact a small designated area of Kailua
Bay. Vessel traffic will be able to safely transit around the event.
Moreover, the Coast Guard will issue a Broadcast Notice to Mariners via
VHF-FM marine channel 16 about the regulation and will promulgate a
Notice of Enforcement and issue a Local Notice to Mariners each year.
Finally, the rule would allow vessels to seek permission to enter the
regulated area, transit around the race area, and vessel traffic would
be able to safely transit the regulated area once the COTP of
Honolulu's PATCOM deems it safe to do so.

B. Impact on Small Entities

    The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as
amended, requires Federal agencies to consider the potential impact of
regulations on small entities during rulemaking. The term ``small
entities'' comprises small businesses, not-for-profit organizations
that are independently owned and operated and are not dominant in their
fields, and governmental jurisdictions with populations of less than
50,000. The Coast Guard received no comments from the Small Business
Administration on this rulemaking. The Coast Guard certifies under 5
U.S.C. 605(b) that this rule will not have a significant economic
impact on a substantial number of small entities.
    While some owners or operators of vessels intending to transit the
safety zone may be small entities, for the reasons stated in section
V.A above, this rule will not have a significant economic impact on any
vessel owner or operator.
    Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996 (Pub. L. 104-121), we want to assist small
entities in understanding this rule. If the rule would affect your
small business, organization, or governmental jurisdiction and you have
questions concerning its provisions or options for compliance, please
call or email the person listed in the FOR FURTHER INFORMATION CONTACT
section.
    Small businesses may send comments on the actions of Federal
employees who enforce, or otherwise determine compliance with, Federal
regulations to the Small Business and Agriculture Regulatory
Enforcement Ombudsman and the Regional Small Business Regulatory
Fairness Boards. The Ombudsman evaluates these actions annually and
rates each agency's responsiveness to small business. If you wish to
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR
(1-888-734-3247). The Coast Guard will not retaliate against small
entities that question or complain about this rule or any policy or
action of the Coast Guard.

C. Collection of Information

    This rule will not call for a new collection of information under
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

D. Federalism and Indian Tribal Governments

    A rule has implications for federalism under Executive Order 13132,
Federalism, if it has a substantial direct

effect on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. We have
analyzed this rule under that Order and have determined that it is
consistent with the fundamental federalism principles and preemption
requirements described in Executive Order 13132.
    Also, this rule does not have tribal implications under Executive
Order 13175, Consultation and Coordination with Indian Tribal
Governments, because it does not have a substantial direct effect on
one or more Indian tribes, on the relationship between the Federal
Government and Indian tribes, or on the distribution of power and
responsibilities between the Federal Government and Indian tribes. If
you believe this rule has implications for federalism or Indian tribes,
please call or email the person listed in the FOR FURTHER INFORMATION
CONTACT section.

E. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
requires Federal agencies to assess the effects of their discretionary
regulatory actions. In particular, the Act addresses actions that may
result in the expenditure by a State, local, or tribal government, in
the aggregate, or by the private sector of $100,000,000 (adjusted for
inflation) or more in any one year. Though this rule will not result in
such an expenditure, we do discuss the effects of this rule elsewhere
in this preamble.

F. Environment

    We have analyzed this rule under Department of Homeland Security
Directive 023-01 and Environmental Planning COMDTINST 5090.1 (series),
which guide the Coast Guard in complying with the National
Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have
determined that this action is one of a category of actions that do not
individually or cumulatively have a significant effect on the human
environment. This rule involves implementation of regulations within 33
CFR 100 applicable to organized marine events on the navigable waters
of the United States that could negatively impact the safety of
waterway users. It is categorically excluded from further review under
paragraph L61 in Table 3-1 of U.S. Coast Guard Environmental Planning
Implementing Procedures. A Record of Environmental Consideration
supporting this determination is available in the docket where
indicated under ADDRESSES.

G. Protest Activities

    The Coast Guard respects the First Amendment rights of protesters.
Protesters are asked to call or email the person listed in the FOR
FURTHER INFORMATION CONTACT section to coordinate protest activities so
that your message can be received without jeopardizing the safety or
security of people, places, or vessels.

List of Subjects in 33 CFR Part 100

    Marine safety, Navigation (water), Reporting and recordkeeping
requirements, Waterways.

    For the reasons discussed in the preamble, the Coast Guard amends
33 CFR part 100 as follows:

PART 100--SAFETY OF LIFE ON NAVIGABLE WATERS

0
1. The authority citation for part 100 continues to read as follows:

    Authority:  46 U.S.C. 70041; 33 CFR 1.05-1.

0
2. Add Sec.  100.1402 to read as follows:

Sec.  100.1402  Special Local Regulation; Kailua Bay, Ironman World
Championship, Kailua-Kona, Hawaii.

    (a) Definitions. As used in this section:
    Buffer area is a neutral 100-yard area that surrounds the perimeter
of the course area's navigable waters as described by this section. The
purpose of a buffer area is to minimize potential collision conflicts
with marine event participants and spectator vessels or nearby
transiting vessels. This area provides separation between a course area
and spectator viewing areas.
    Captain of the Port (COTP) Honolulu means the Commander, U.S. Coast
Guard Sector Honolulu or any Coast Guard commissioned, warrant or petty
officer who has been authorized by the COTP to act on his behalf.
    Coast Guard Patrol Commander (PATCOM) means a commissioned,
warrant, or petty officer of the U.S. Coast Guard who has been
designated as PATCOM by the Commander, Coast Guard Sector Honolulu.
    Course area is an area described by a line bound by coordinates
provided in latitude and longitude that outlines the boundary of the
event swim area within the overall regulated area defined by this
section.
    Enforcement vessels are designated vessels authorized by the COTP
Honolulu, the event PATCOM, or COTP Honolulu's designated
representatives to support the safety and security of the marine event.
    Official Patrol means any vessel assigned or approved by Commander,
Coast Guard Sector Honolulu with a commissioned, warrant, or petty
officer on board.
    Participant means any persons registered with the event sponsor as
participating in the Ironman Triathlon or practice swim.
    Regulated area is the combined course area and buffer area.
    Spectators are all persons and vessels not registered with the
sponsor as participants, support vessels, or enforcement vessels.
    (b) Location. All coordinates reference Datum NAD 1983.
    (1) Regulated area. All navigable waters within Kailua Bay and
encompasses the course area and surrounding 100-yard buffer area. This
course area and 100-yard buffer area extends from the surface of the
water to the ocean floor.
    (2) Course area. The 2.24 mile (4,224 yards) swim course is a
temporary marked swim course within the regulated area located in
Kailua Bay.
    (3) Buffer area. All navigable waters 100 yards outside of the
perimeter of the course area, described in paragraph (c)(4) of this
section.
    (c) Special local regulations. (1) The COTP Honolulu or PATCOM may
forbid and control the movement of all vessels and persons, including
event participants, in the regulated area. When hailed or signaled by
an official patrol, a vessel or person in the regulated area shall
immediately comply with the directions given by the patrol. Failure to
do so may result in the Coast Guard expelling the person or vessel from
the area, issuing a citation for failure to comply, or both. The COTP
Honolulu or PATCOM may terminate the event at any time the COTP
Honolulu or PATCOM believes it necessary to do so for the protection of
life.
    (2) Except for participants and safety support vessels, a person or
vessel within the regulated area at the start of enforcement of this
section must immediately depart the regulated area.
    (3) Support and enforcement vessels consist of any local law
enforcement and sponsor provided vessels assigned or approved by the
COTP Honolulu, the event PATCOM, or COTP Honolulu designated
representatives, to patrol the regulated area.
    (4) The regulated area consists of all navigable waters starting at
the shoreline northeast of Kailua Pier at 19[deg]38.341' N,
155[deg]59.782' W; thence southeast to 19[deg]37.416' N,
155[deg]59.444' W; thence southwest to 19[deg]37.397' N,
155[deg]59.500' W; thence northwest to 19[deg]38.150' N,
155[deg]59.760' W, thence north and back to Kailua Pier at

19[deg]38.398' N, 155[deg]59.816' W, and returning along the pier to
the originating point on the shoreline at to 19[deg]38.341' N,
155[deg]59.782' W.
    (5) Spectators shall not enter into, anchor, block, loiter, or
impede the transit of participants or support/enforcement vessels in
the regulated area during the enforcement of this section, unless
cleared for entry by the COTP Honolulu, the event PATCOM, or the COTP's
designated representatives.
    (6) Persons desiring to transit the regulated area identified may
contact the COTP Honolulu in advance at the Sector Honolulu Command
Center telephone number<PHONE_NUMBER> and<PHONE_NUMBER> or
immediately prior to or during the event to the COTP Honolulu's PATCOM
or designated representative on VHF-FM marine channel 16 (156.8 Mhz) to
seek permission to transit or remain in the area. If permission is
granted, all persons and vessels must comply with the instructions of
the COTP Honolulu, the event PATCOM, or the COTP's designated
representative and proceed at the minimum speed necessary to maintain a
safe course while in the area.
    (7) If enforcement of the regulated area is no longer necessary,
the COTP Honolulu, event Patrol Commander, or COTP designated
representative will inform the public through radio broadcasts that the
regulated area is no longer being enforced.
    (d) Enforcement officials. The Coast Guard may be assisted with
event patrol and enforcement of the regulated area by other Federal,
State, and local agencies.
    (e) Enforcement period. The marine event and special local
regulation in this section will be enforced from 3:45 a.m. to 11 a.m.
on the first two weekends in October annually. The Coast Guard will
publish a notice in the Fourteenth Coast Guard District Local Notice to
Mariners, a Notice of the Enforcement in the Federal Register, and
issue a marine information broadcast on VHF-FM marine band radio on
channel 16 announcing specific event date and times.

    Dated: September 18, 2019.
A.B. Avanni,
Captain, U.S. Coast Guard, Captain of the Port Honolulu.
[FR Doc. 2019-20627 Filed 9-27-19; 8:45 am]
 BILLING CODE 9110-04-P