Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Relating to Remote Market-Maker Transaction Fees, 32855-32858 [E5-2870]
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Federal Register / Vol. 70, No. 107 / Monday, June 6, 2005 / Notices
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 BSE 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 BSE proposes to amend its
Membership and Other Fees fee
schedule by increasing its Membership
Dues fee from $750 per quarter to $1,000
per quarter. These fees will be used to
fund the ongoing administration of
Membership Services. This change will
also better reflect the current value of a
seat on the Boston Stock Exchange.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,4 in general, and
furthers the objectives of Section 6(b)(4)
of the Act,5 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among its members.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has 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 proposed rule change has become
effective upon filing pursuant to Section
19(b)(3)(A)(ii) of the Act 6 and
subparagraph (f)(2) of Rule 19b–4
thereunder,7 because it establishes or
changes a due, fee, or other charge
imposed by the BSE. At any time within
60 days of the filing of the proposed rule
change, the Commission may summarily
abrogate such rule change if it appears
to the Commission that such action is
necessary or appropriate in the public
4 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
6 15 U.S.C. 78s(b)(3)(A)(ii).
7 17 CFR 240.19b–4(f)(2).
5 15
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14:25 Jun 03, 2005
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.8
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, is consistent with
the Act. Comments may be submitted by
any of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–BSE–2005–13 on the
subject line.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.9
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–2876 Filed 6–3–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51746; File No. SR-CBOE–
2005–32]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change and Amendment No. 1
Relating to Remote Market-Maker
Transaction Fees
May 26, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’)1 and Rule 19b–4 thereunder,2
• Send paper comments in triplicate
notice is hereby given that on April 20,
to Jonathan G. Katz, Secretary,
2005, the Chicago Board Options
Securities and Exchange Commission,
Exchange, Incorporated (‘‘CBOE’’ or
450 Fifth Street, NW., Washington, DC
‘‘Exchange’’) filed with the Securities
20549–0609.
and Exchange Commission
All submissions should refer to File
(‘‘Commission’’) the proposed rule
Number SR–BSE–2005–13. This file
change as described in Items I, II and III
number should be included on the
below, which Items have been prepared
subject line if e-mail is used. To help the by the CBOE. On May 18, 2005, the
Commission process and review your
CBOE submitted Amendment No. 1 to
comments more efficiently, please use
the proposed rule change.3 The CBOE
only one method. The Commission will has designated this proposal as one
post all comments on the Commission’s establishing or changing a due, fee, or
other charge imposed by the CBOE
Internet Web site (https://www.sec.gov/
under Section 19(b)(3)(A)(ii) of the Act,4
rules/sro.shtml). Copies of the
and Rule 19b-4(f)(2) thereunder,5 which
submission, all subsequent
renders the proposal effective upon
amendments, all written statements
filing with the Commission. The
with respect to the proposed rule
Commission is publishing this notice to
change that are filed with the
solicit comments on the proposed rule
Commission, and all written
change from interested parties.
communications relating to the
proposed rule change between the
I. Self-Regulatory Organization’s
Commission and any person, other than Statement of the Terms of Substance of
those that may be withheld from the
the Proposed Rule Change
public in accordance with the
The Exchange proposes to amend its
provisions of 5 U.S.C. 552, will be
Fees Schedule to (i) establish
available for inspection and copying in
transaction fees for Remote Marketthe Commission’s Public Reference
Makers (‘‘RMMs’’), (ii) amend its
Room. Copies of the filing also will be
Designated Primary Market-Maker
available for inspection and copying at
(‘‘DPM’’) and Electronic DPM (‘‘ethe principal offices of the BSE. All
DPM’’) fixed annual fee program to
comments received will be posted
9 17 CFR 200.30–3(a)(12).
without change; the Commission does
1 15 U.S.C. 78s(b)(1).
not edit personal identifying
2 17 CFR 240.19b–4.
information from submissions. You
3 In Amendment No. 1, the Exchange: (1) clarified
should submit only information that
how the fixed annual fee alternative for DPMs and
you wish to make available publicly. All e-DPMs would be applied when an entity that has
elected the fixed annual fee alternative merges or
submissions should refer to File
combines operations with an entity that has not
Number SR–BSE–2005–13 and should
elected the fixed annual fee alternative; and (2)
be submitted on or before June 27, 2005. revised the date of the Fees Schedule.
Paper Comments
4 15
8 See
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supra note 3.
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U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
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32856
Federal Register / Vol. 70, No. 107 / Monday, June 6, 2005 / Notices
include a fixed fee alternative for RMM
transaction fees, and (iii) explain how
DPM or e-DPM consolidations will
affect the fixed annual fee. Below is the
text of the proposed rule change, as
amended. Proposed new language is
italicized; proposed deletions are in
[brackets].
CHICAGO BOARD OPTIONS EXCHANGE, INC.—FEES SCHEDULE
[MARCH 2] MAY 18, 2005
Per contract
(cents)
1.
OPTIONS TRANSACTION FEES (1)(3)(4)(7):
EQUITY OPTIONS (13):
I. CUSTOMER ....................................................................................................................................................................
II. MARKET-MAKER (MM) (standard rate)(10) ...............................................................................................................
III. MEMBER FIRM PROPRIETARY:(11)
FACILITATION OF CUSTOMER ORDER ...................................................................................................................
NON-FACILITATION ORDER ......................................................................................................................................
IV. BROKER-DEALER ..........................................................................................................................................................
V. NON-MEMBER MARKET MAKER .................................................................................................................................
VI. DESIGNATED PRIMARY MARKET-MAKER (DPM) (10)(14) .....................................................................................
VII. ELECTRONIC DPM (e-DPM) (14) .................................................................................................................................
VIII. LINKAGE ORDERS (8) ................................................................................................................................................
IX. REMOTE MARKET-MAKER (14) ...................................................................................................................................
QQQQ and SPDR OPTIONS:
I. CUSTOMER:
QQQQ ............................................................................................................................................................................
SPDR ..............................................................................................................................................................................
II. MARKET-MAKER (MM) AND DPM (standard rate)(10) ............................................................................................
III. MEMBER FIRM PROPRIETARY: (11).
FACILITATION OF CUSTOMER ORDER ...........................................................................................................................
NON-FACILITATION ORDER .............................................................................................................................................
IV. BROKER-DEALER ........................................................................................................................................................
V. NON-MEMBER MARKET MAKER ..............................................................................................................................
VI. LINKAGE ORDERS (8) ................................................................................................................................................
VII. REMOTE MARKET-MAKER .......................................................................................................................................
INDEX OPTIONS:
I.–VIII. Unchanged.
2. MARKET-MAKER, e-DPM & DPM
MARKETING FEE (in option classes in
which a DPM has been appointed)(6)
Unchanged.
3. FLOOR BROKERAGE FEE (1)(5):
Unchanged.
4. RAES ACCESS FEE (RETAIL
AUTOMATIC EXECUTION SYSTEM)
(1)(4): Unchanged.
Notes: (1)–(13) Unchanged.
(14) [Effective October 1, 2004, DPMs
and e-DPMs may elect to pay a fixed
annual fee of $1.75 million instead of
being assessed transaction fees on a per
contract basis for their DPM and e-DPM
transactions only in all equity option
classes. The fixed fee does not cover any
floor brokerage fees. DPMs electing to
pay the fixed fee will neither be charged
CBOE transaction fees for CBOE
transactions related to such outgoing
P/A orders, nor will they receive the
credit back for such fees as set forth in
Section 21 of this Fee Schedule.
However, pursuant to the second phase
of linkage fee set forth in Section 21 of
this Fee Schedule, all CBOE DPMs,
including those electing the fixed
annual fee, who pay transaction fees at
other exchanges to execute P/A orders
there, will receive a credit of up to 50%
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of CBOE DPM transaction charges for
each such order (currently up to $.06
per contract, with the total of such
credits not to exceed the total amount of
inbound linkage transaction fees
received by CBOE) to help offset the
transaction fees of other exchanges that
CBOE DPMs incur in filling P/A orders
at those exchanges.] Please see Section
23 for details of the Fixed Annual Fee
Alternative for DPMs and e-DPMs.
(15) Unchanged.
5.–21. Unchanged.
22. Reserved.
23. FIXED ANNUAL FEE
ALTERNATIVE FOR DPMs and e-DPMs
Effective October 1, 2004, DPMs and
e-DPMs may elect to pay a fixed annual
fee of $1.75 million instead of being
assessed transaction fees on a per
contract basis for their DPM and e-DPM
transactions only in all equity option
classes. The fixed fee does not cover any
floor brokerage fees. DPMs electing to
pay the fixed fee will neither be charged
CBOE transaction fees for CBOE
transactions related to outgoing P/A
orders, nor will they receive the credit
back for such fees as set forth in Section
21 of this Fee Schedule. However,
pursuant to the second phase of linkage
PO 00000
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.00
.22
.20
.24
.25
.26
.12
.25
.24
.26
.00
.15
.24
.20
.24
.25
.26
.24
.26
fee relief set forth in Section 21 of this
Fee Schedule, all CBOE DPMs,
including those electing the fixed
annual fee, who pay transaction fees at
other exchanges to execute P/A orders
there, will receive a credit of up to 50%
of CBOE DPM transaction charges for
each such order (currently up to $.06
per contract, with the total of such
credits not to exceed the total amount
of inbound linkage transaction fees
received by CBOE) to help offset the
transaction fees of other exchanges that
CBOE DPMs incur in filling P/A orders
at those exchanges. Effective July 1,
2005, DPMs and e-DPMs who elect the
fixed annual fee alternative described
above may elect to pay an RMM fixed
annual fee of $250,000 instead of being
assessed transaction fees on a per
contract basis for their RMM
transactions only in all equity options.
If a DPM or e-DPM who has elected
the fixed annual fee alternative merges
or combines operations with a DPM or
e-DPM who has not elected the fixed
annual fee alternative, then the fixed
annual fee will be increased and
assessed to the surviving DPM/e-DPM
entity. The amount of the increase will
be based on the number of contracts
traded and transaction fees paid during
E:\FR\FM\06JNN1.SGM
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Federal Register / Vol. 70, No. 107 / Monday, June 6, 2005 / Notices
the previous twelve months by the DPM
or e-DPM organization who had not
previously elected the fixed annual fee
alternative. The amount of the increase
will be prorated based on the amount of
time remaining in the then current year
of the fixed annual fee program. If two
DPMs or e-DPMs who elected the fixed
annual fee alternative merge or combine
operations, the fixed fee paid to CBOE
by these two organizations will be
unaffected. No adjustments or refunds
will be made to either entity.
*
*
*
*
*
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
CBOE included statements concerning
the purpose of, and basis for, the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. The CBOE has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Fees Schedule to (i) establish
transaction fees for RMMs, (ii) amend its
DPM and e-DPM fixed annual fee
program to include a fixed fee
alternative for RMM transaction fees,
and (iii) explain how DPM or e-DPM
consolidations will affect the fixed
annual fee.
RMM Transaction Fees
The Commission approved the
Exchange’s RMM program on March 14,
2005.6 An RMM is an individual
member or member organization
registered with the Exchange that makes
transactions as a dealer-specialist from a
location other than the physical trading
station for the subject option class.
The Exchange proposes to set
transaction fees for RMMs in equity,
QQQQ and SPDR options at $.26 per
contract. The Exchange believes the
proposed RMM transaction fee is
appropriately set higher than those of
on-floor market-makers because the
Exchange will incur additional systems
and other logistical costs both initially
and on an ongoing basis in order to
establish and maintain the
6 See
Securities Exchange Act Release No. 51366
(March 14, 2005), 70 FR 13217 (March 18, 2005).
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infrastructure needed to enable market
participation as an RMM.
RMM Fixed Fee Alternative
On October 1, 2004, the Exchange
implemented a fixed annual fee program
for DPMs and e-DPMs.7 The program
offers DPMs and e-DPMs the alternative
of choosing a fixed annual fee of $1.75
million instead of being assessed
transaction fees on a per contract basis
for its DPM and e-DPM transactions in
equity options classes.8
The Exchange proposes to amend the
program to permit DPMs and e-DPMs
who elect the fixed annual fee
alternative to pay an additional fixed
annual fee of $250,000 as an alternative
to being assessed transaction fees on a
per contract basis for their RMM
transactions. Like the existing program,
the RMM fixed fee alternative would
apply only to equity options
transactions. Since trading by RMMs
will not commence until sometime in
the second quarter of 2005, the
Exchange proposes to begin the RMM
fixed fee alternative program on July 1,
2005 and prorate the amount of the
fixed annual fee to $125,000 for
calendar year 2005. The amount of the
RMM fixed annual fee and the option to
elect the fixed fee will be reviewed
annually and may change from year to
year. Any changes to the RMM fixed
annual fee would be required to be filed
with the Commission.
The Exchange proposes to create a
new Section 23 in the Fees Schedule
that describes the DPM and e-DPM fixed
annual fee program (by adding to it the
text from Note 14 of the Fees Schedule)
and the RMM fixed annual fee
alternative. Note 14 is revised to delete
the current text and to add a cross
reference to Section 23.
Effect of DPM or e-DPM
Consolidations on the Fixed Annual Fee
The Exchange also proposes to add to
Section 23 of the Fees Schedule an
explanation of how the fixed annual fee
would be affected when a DPM or eDPM organization merges or combines
operations with another DPM or e-DPM.
Specifically, if a DPM or e-DPM who
has elected the fixed annual fee
alternative merges or combines
operations with a DPM or e-DPM who
has not elected the fixed annual fee
alternative, the fixed annual fee will be
increased and assessed to the surviving
DPM/e-DPM entity. The amount of the
increase will be based on the number of
contracts traded and transaction fees
paid during the previous twelve months
7 See Securities Exchange Act Release No. 50058
(July 22, 2004), 69 FR 45861 (July 30, 2004).
8 See CBOE Fees Schedule, Note 14.
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32857
by the DPM or e-DPM organization who
had not previously elected the fixed
annual fee alternative. For example, if in
the previous twelve months a DPM or eDPM organization who had not
previously elected the fixed annual fee
alternative traded 4 million equity
option contracts and paid $500,000 in
transaction fees, the surviving DPM or eDPM entity would be assessed an
increase to their fixed annual fee in the
amount of $500,000.
The amount of the increase will be
prorated based on the amount of time
remaining in the then current year of the
fixed annual fee program. For example,
if the firms in the example above merge
six months into the then current year of
the program, the surviving DPM or eDPM entity would be assessed an
increase to their fixed annual fee in the
amount of $250,000 to cover the
remaining six months of the year. The
Exchange notes that in any subsequent
year of the program, the surviving entity
will pay just one fixed annual fee (i.e.,
the fixed annual fee that is then in
effect).
If two DPMs or e-DPMs who elected
the fixed annual fee alternative merge or
combine operations, the fixed fee paid
to the CBOE by these two organizations
will be unaffected. No adjustments or
refunds will be made to either entity.
2. Statutory Basis
The CBOE believes that the proposed
rule change, as amended, is consistent
with Section 6(b) of the Act,9 in general,
and furthers the objectives of Section
6(b)(4) of the Act,10 in particular, in that
it is designed to provide for the
equitable allocation of reasonable dues,
fees, and other charges among CBOE
members.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The CBOE does not believe that the
proposed rule change, as amended, will
impose any burden on competition that
is 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.
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
10 15
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32858
Federal Register / Vol. 70, No. 107 / Monday, June 6, 2005 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing rule change
establishes or changes a due, fee, or
other charge imposed by the Exchange,
it has become effective pursuant to
Section 19(b)(3)(A) of the Act 11 and
subparagraph (f)(2) of Rule 19b–4
thereunder.12
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.13
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room. Copies of such filing also will be
available for inspection and copying at
the principal office of the CBOE. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–CBOE–2005–32 and should
be submitted on or before June 27, 2005.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, is consistent with
the Act. Comments may be submitted by
any of the following methods:
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.14
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–2870 Filed 6–3–05; 8:45 am]
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–CBOE–2005–32 on the
subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
450 Fifth Street, NW., Washington, DC
20549–0609.
All submissions should refer to File
Number SR–CBOE–2005–32. This file
number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://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
11 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
13 See 15 U.S.C. 78s(b)(3)(C). For purposes of
calculating the 60-day period within which the
Commission may summarily abrogate the proposed
rule change under Section 19(b)(3)(C) of the Act, the
Commission considers the period to commence on
May 18, 2005, the date on which the Exchange
submitted Amendment No. 1.
12 17
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BILLING CODE 8010–01–P
[Release No. 34–51754; File No. SR–FICC–
2005–07]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Order
Approving Proposed Rule Change To
Establish a Firm Deadline by which
Members of the Government Securities
Division Must Satisfy Clearing Fund
Deficiencies
May 27, 2005.
I. Introduction
On March 18, 2005, the Fixed Income
Clearing Corporation (‘‘FICC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) proposed
rule change SR–FICC–2005–07 pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’).1 Notice
of the proposal was published in the
Federal Register on April 21, 2005.2 No
comment letters were received. For the
reasons discussed below, the
Commission is approving the proposed
rule change.
II. Description
FICC is establishing a firm deadline
by which members of FICC’s
Government Securities Division
(‘‘GSD’’) must satisfy clearing fund
deficiencies. Currently, GSD’s rules
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 Securities Exchange Act Release No. 51550
(April 15, 2005), 70 FR 20781.
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1 15
Frm 00116
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provide a deadline for a member’s
satisfaction of a clearing fund deficiency
of two hours after GSD has issued a
notice of deficiency to that member.
Under current practice, GSD issues its
clearing fund deficiency notices by
telephone calls typically at 8:30 a.m.
eastern time and by a facsimile
containing (i) a cover letter summarizing
the deficiency status and (ii) a detailed
report reflecting the firm’s current
clearing fund requirement and collateral
on deposit. Therefore, deficiency calls
typically must be satisfied by
approximately 10:30 a.m. eastern time.
Notwithstanding GSD’s issuance of
clearing fund calls, each member has
the ability to access a report each day
detailing its clearing fund balances and
any deficiency thereof generally by
12:30 a.m. eastern time.
Taking into account members’ ready
access to clearing fund deficiency
information, the rule change establishes
a firm deadline of 10:30 a.m. eastern
time to ensure the timely satisfaction of
clearing fund deficiency calls and to
eliminate current provisions which
correlate the timing of the deadline to
the issuance of the notice by FICC.3 As
a result, it will be incumbent upon
members to access directly the
appropriate report detailing their
clearing fund deposit requirements so
they might satisfy any deficiencies.
III. Discussion
Section 17A(b)(3)(F) of the Act
requires that the rules of a clearing
agency be designed to assure the
safeguarding of securities and funds
which are in the custody or control of
the clearing agency for which it is
responsible.4 The Commission finds
that FICC’s proposed rule change is
consistent with this requirement
because it will promote timely
satisfaction of clearing fund deficiency
calls and will reduce the amount of risk
to FICC and its members.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and in
particular Section 17A of the Act and
the rules and regulations thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,5 that the
proposed rule change (File No. SR–
3 Under GSD’s rule, FICC may extend this
deadline if operational or systems difficulties arise
that reasonably prevent members from satisfying
the 10:30 a.m. eastern time deadline.
4 15 U.S.C. 78q-1(b)(3)(F).
5 15 U.S.C. 78s(b)(2).
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]]>Agencies
[Federal Register Volume 70, Number 107 (Monday, June 6, 2005)]
[Notices]
[Pages 32855-32858]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-2870]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51746; File No. SR-CBOE-2005-32]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change and Amendment No. 1 Relating to Remote Market-Maker
Transaction Fees
May 26, 2005.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on April 20, 2005, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II and III below, which Items have been prepared by the CBOE.
On May 18, 2005, the CBOE submitted Amendment No. 1 to the proposed
rule change.\3\ The CBOE has designated this proposal as one
establishing or changing a due, fee, or other charge imposed by the
CBOE under Section 19(b)(3)(A)(ii) of the Act,\4\ and Rule 19b-4(f)(2)
thereunder,\5\ which renders the proposal effective upon filing with
the Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested parties.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange: (1) clarified how the
fixed annual fee alternative for DPMs and e-DPMs would be applied
when an entity that has elected the fixed annual fee alternative
merges or combines operations with an entity that has not elected
the fixed annual fee alternative; and (2) revised the date of the
Fees Schedule.
\4\ 15 U.S.C. 78s(b)(3)(A)(ii).
\5\ 17 CFR 240.19b-4(f)(2).
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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 to (i) establish
transaction fees for Remote Market-Makers (``RMMs''), (ii) amend its
Designated Primary Market-Maker (``DPM'') and Electronic DPM (``e-
DPM'') fixed annual fee program to
[[Page 32856]]
include a fixed fee alternative for RMM transaction fees, and (iii)
explain how DPM or e-DPM consolidations will affect the fixed annual
fee. Below is the text of the proposed rule change, as amended.
Proposed new language is italicized; proposed deletions are in
[brackets].
CHICAGO BOARD OPTIONS EXCHANGE, INC.--FEES SCHEDULE
[MARCH 2] MAY 18, 2005
------------------------------------------------------------------------
Per contract
(cents)
------------------------------------------------------------------------
1. OPTIONS TRANSACTION FEES (1)(3)(4)(7):
EQUITY OPTIONS (13):
I. CUSTOMER.................................... .00
II. MARKET-MAKER (MM) (standard rate)(10)...... .22
III. MEMBER FIRM PROPRIETARY:(11)
FACILITATION OF CUSTOMER ORDER............. .20
NON-FACILITATION ORDER..................... .24
IV. BROKER-DEALER.............................. .25
V. NON-MEMBER MARKET MAKER..................... .26
VI. DESIGNATED PRIMARY MARKET-MAKER (DPM) .12
(10)(14)......................................
VII. ELECTRONIC DPM (e-DPM) (14)............... .25
VIII. LINKAGE ORDERS (8)....................... .24
IX. REMOTE MARKET-MAKER (14)................... .26
QQQQ and SPDR OPTIONS:
I. CUSTOMER:
QQQQ....................................... .00
SPDR....................................... .15
II. MARKET-MAKER (MM) AND DPM (standard .24
rate)(10).....................................
III. MEMBER FIRM PROPRIETARY: (11).............
FACILITATION OF CUSTOMER ORDER................. .20
NON-FACILITATION ORDER......................... .24
IV. BROKER-DEALER.............................. .25
V. NON-MEMBER MARKET MAKER..................... .26
VI. LINKAGE ORDERS (8)......................... .24
VII. REMOTE MARKET-MAKER....................... .26
INDEX OPTIONS:
I.-VIII. Unchanged.............................
------------------------------------------------------------------------
2. MARKET-MAKER, e-DPM & DPM MARKETING FEE (in option classes in
which a DPM has been appointed)(6) Unchanged.
3. FLOOR BROKERAGE FEE (1)(5): Unchanged.
4. RAES ACCESS FEE (RETAIL AUTOMATIC EXECUTION SYSTEM) (1)(4):
Unchanged.
Notes: (1)-(13) Unchanged.
(14) [Effective October 1, 2004, DPMs and e-DPMs may elect to pay a
fixed annual fee of $1.75 million instead of being assessed transaction
fees on a per contract basis for their DPM and e-DPM transactions only
in all equity option classes. The fixed fee does not cover any floor
brokerage fees. DPMs electing to pay the fixed fee will neither be
charged CBOE transaction fees for CBOE transactions related to such
outgoing P/A orders, nor will they receive the credit back for such
fees as set forth in Section 21 of this Fee Schedule. However, pursuant
to the second phase of linkage fee set forth in Section 21 of this Fee
Schedule, all CBOE DPMs, including those electing the fixed annual fee,
who pay transaction fees at other exchanges to execute P/A orders
there, will receive a credit of up to 50% of CBOE DPM transaction
charges for each such order (currently up to $.06 per contract, with
the total of such credits not to exceed the total amount of inbound
linkage transaction fees received by CBOE) to help offset the
transaction fees of other exchanges that CBOE DPMs incur in filling P/A
orders at those exchanges.] Please see Section 23 for details of the
Fixed Annual Fee Alternative for DPMs and e-DPMs.
(15) Unchanged.
5.-21. Unchanged.
22. Reserved.
23. FIXED ANNUAL FEE ALTERNATIVE FOR DPMs and e-DPMs
Effective October 1, 2004, DPMs and e-DPMs may elect to pay a fixed
annual fee of $1.75 million instead of being assessed transaction fees
on a per contract basis for their DPM and e-DPM transactions only in
all equity option classes. The fixed fee does not cover any floor
brokerage fees. DPMs electing to pay the fixed fee will neither be
charged CBOE transaction fees for CBOE transactions related to outgoing
P/A orders, nor will they receive the credit back for such fees as set
forth in Section 21 of this Fee Schedule. However, pursuant to the
second phase of linkage fee relief set forth in Section 21 of this Fee
Schedule, all CBOE DPMs, including those electing the fixed annual fee,
who pay transaction fees at other exchanges to execute P/A orders
there, will receive a credit of up to 50% of CBOE DPM transaction
charges for each such order (currently up to $.06 per contract, with
the total of such credits not to exceed the total amount of inbound
linkage transaction fees received by CBOE) to help offset the
transaction fees of other exchanges that CBOE DPMs incur in filling P/A
orders at those exchanges. Effective July 1, 2005, DPMs and e-DPMs who
elect the fixed annual fee alternative described above may elect to pay
an RMM fixed annual fee of $250,000 instead of being assessed
transaction fees on a per contract basis for their RMM transactions
only in all equity options.
If a DPM or e-DPM who has elected the fixed annual fee alternative
merges or combines operations with a DPM or e-DPM who has not elected
the fixed annual fee alternative, then the fixed annual fee will be
increased and assessed to the surviving DPM/e-DPM entity. The amount of
the increase will be based on the number of contracts traded and
transaction fees paid during
[[Page 32857]]
the previous twelve months by the DPM or e-DPM organization who had not
previously elected the fixed annual fee alternative. The amount of the
increase will be prorated based on the amount of time remaining in the
then current year of the fixed annual fee program. If two DPMs or e-
DPMs who elected the fixed annual fee alternative merge or combine
operations, the fixed fee paid to CBOE by these two organizations will
be unaffected. No adjustments or refunds will be made to either entity.
* * * * *
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 CBOE included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The CBOE has prepared summaries, set forth in Sections
A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fees Schedule to (i) establish
transaction fees for RMMs, (ii) amend its DPM and e-DPM fixed annual
fee program to include a fixed fee alternative for RMM transaction
fees, and (iii) explain how DPM or e-DPM consolidations will affect the
fixed annual fee.
RMM Transaction Fees
The Commission approved the Exchange's RMM program on March 14,
2005.\6\ An RMM is an individual member or member organization
registered with the Exchange that makes transactions as a dealer-
specialist from a location other than the physical trading station for
the subject option class.
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\6\ See Securities Exchange Act Release No. 51366 (March 14,
2005), 70 FR 13217 (March 18, 2005).
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The Exchange proposes to set transaction fees for RMMs in equity,
QQQQ and SPDR options at $.26 per contract. The Exchange believes the
proposed RMM transaction fee is appropriately set higher than those of
on-floor market-makers because the Exchange will incur additional
systems and other logistical costs both initially and on an ongoing
basis in order to establish and maintain the infrastructure needed to
enable market participation as an RMM.
RMM Fixed Fee Alternative
On October 1, 2004, the Exchange implemented a fixed annual fee
program for DPMs and e-DPMs.\7\ The program offers DPMs and e-DPMs the
alternative of choosing a fixed annual fee of $1.75 million instead of
being assessed transaction fees on a per contract basis for its DPM and
e-DPM transactions in equity options classes.\8\
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\7\ See Securities Exchange Act Release No. 50058 (July 22,
2004), 69 FR 45861 (July 30, 2004).
\8\ See CBOE Fees Schedule, Note 14.
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The Exchange proposes to amend the program to permit DPMs and e-
DPMs who elect the fixed annual fee alternative to pay an additional
fixed annual fee of $250,000 as an alternative to being assessed
transaction fees on a per contract basis for their RMM transactions.
Like the existing program, the RMM fixed fee alternative would apply
only to equity options transactions. Since trading by RMMs will not
commence until sometime in the second quarter of 2005, the Exchange
proposes to begin the RMM fixed fee alternative program on July 1, 2005
and prorate the amount of the fixed annual fee to $125,000 for calendar
year 2005. The amount of the RMM fixed annual fee and the option to
elect the fixed fee will be reviewed annually and may change from year
to year. Any changes to the RMM fixed annual fee would be required to
be filed with the Commission.
The Exchange proposes to create a new Section 23 in the Fees
Schedule that describes the DPM and e-DPM fixed annual fee program (by
adding to it the text from Note 14 of the Fees Schedule) and the RMM
fixed annual fee alternative. Note 14 is revised to delete the current
text and to add a cross reference to Section 23.
Effect of DPM or e-DPM Consolidations on the Fixed Annual Fee
The Exchange also proposes to add to Section 23 of the Fees
Schedule an explanation of how the fixed annual fee would be affected
when a DPM or e-DPM organization merges or combines operations with
another DPM or e-DPM. Specifically, if a DPM or e-DPM who has elected
the fixed annual fee alternative merges or combines operations with a
DPM or e-DPM who has not elected the fixed annual fee alternative, the
fixed annual fee will be increased and assessed to the surviving DPM/e-
DPM entity. The amount of the increase will be based on the number of
contracts traded and transaction fees paid during the previous twelve
months by the DPM or e-DPM organization who had not previously elected
the fixed annual fee alternative. For example, if in the previous
twelve months a DPM or e-DPM organization who had not previously
elected the fixed annual fee alternative traded 4 million equity option
contracts and paid $500,000 in transaction fees, the surviving DPM or
e-DPM entity would be assessed an increase to their fixed annual fee in
the amount of $500,000.
The amount of the increase will be prorated based on the amount of
time remaining in the then current year of the fixed annual fee
program. For example, if the firms in the example above merge six
months into the then current year of the program, the surviving DPM or
e-DPM entity would be assessed an increase to their fixed annual fee in
the amount of $250,000 to cover the remaining six months of the year.
The Exchange notes that in any subsequent year of the program, the
surviving entity will pay just one fixed annual fee (i.e., the fixed
annual fee that is then in effect).
If two DPMs or e-DPMs who elected the fixed annual fee alternative
merge or combine operations, the fixed fee paid to the CBOE by these
two organizations will be unaffected. No adjustments or refunds will be
made to either entity.
2. Statutory Basis
The CBOE believes that the proposed rule change, as amended, is
consistent with Section 6(b) of the Act,\9\ in general, and furthers
the objectives of Section 6(b)(4) of the Act,\10\ in particular, in
that it is designed to provide for the equitable allocation of
reasonable dues, fees, and other charges among CBOE members.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The CBOE does not believe that the proposed rule change, as
amended, will impose any burden on competition that is 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.
[[Page 32858]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing rule change establishes or changes a due,
fee, or other charge imposed by the Exchange, it has become effective
pursuant to Section 19(b)(3)(A) of the Act \11\ and subparagraph (f)(2)
of Rule 19b-4 thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.\13\
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\13\ See 15 U.S.C. 78s(b)(3)(C). For purposes of calculating the
60-day period within which the Commission may summarily abrogate the
proposed rule change under Section 19(b)(3)(C) of the Act, the
Commission considers the period to commence on May 18, 2005, the
date on which the Exchange submitted Amendment No. 1.
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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, as amended, is consistent with the Act. Comments may be
submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-CBOE-2005-32 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number SR-CBOE-2005-32. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Room. Copies of such
filing also will be available for inspection and copying at the
principal office of the CBOE. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-CBOE-2005-32 and should be submitted on or before June
27, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2870 Filed 6-3-05; 8:45 am]
BILLING CODE 8010-01-P
