Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of Proposed Rule Change To Adopt a Revenue Sharing Program for Trades in Tape B Securities, 41063-41064 [E5-3773]
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Federal Register / Vol. 70, No. 135 / Friday, July 15, 2005 / Notices
system, and, in general, to protect
investors and the public interest.
The Commission notes that the
proposal is designed to provide the
Exchange with greater flexibility with
respect to the appointment of members
of the MTS Committee by no longer
mandating the composition of and
election procedures for the MTS
Committee and, instead, utilizing the
process set forth in CBOE Rule 2.1.
In the Commission’s view, because
CBOE Rule 2.1 provides that the Vice
Chairman must consider having, where
appropriate, a cross section of the
membership represented on each
committee; the Board must approve the
Vice Chairman’s committee
appointments, which would now
include appointments to the MTS
Committee; and ultimately, the MTS
Committee is subject to the control and
supervision of the Board, the proposal is
consistent with the requirements of
Section 6(b)(5) of the Act.9
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,10 that the
proposed rule change (SR–CBOE–2005–
29) be, and hereby is, approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.11
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5–3772 Filed 7–14–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52005; File No. SR–CBOE–
2005–17]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing of
Proposed Rule Change To Adopt a
Revenue Sharing Program for Trades
in Tape B Securities
July 11, 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 February
7, 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
9 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(2).
11 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Tape B securities are securities listed on the
American Stock Exchange or the regional national
securities exchanges.
10 15
VerDate jul<14>2003
17:47 Jul 14, 2005
Jkt 205001
III below, which Items have been
prepared by the CBOE. The Commission
is publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Fee Schedule to adopt a Revenue
Sharing Program (‘‘Program’’) for trades
in Tape B securities.3 Under this
Program, the Exchange is proposing to
share with CBOE Designated Primary
Market-Makers (‘‘DPMs’’) and marketmakers who trade Tape B securities a
portion of the revenues that the
Exchange receives under the
Consolidated Tape Association Plan
(‘‘CTA Plan’’) attributable to Tape B
securities.4 The Exchange proposes to
begin the Program upon the launch of
its new stock trading platform.5 The text
of the proposed rule change is available
on the CBOE’s Web site (https://
www.cboe.com), at the CBOE’s principal
office, 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
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
Fee Schedule to adopt a Revenue
Sharing Program for trades in Tape B
securities. Under this Program, the
Exchange is proposing to share with
CBOE DPMs and market-makers who
trade Tape B securities a portion of the
revenues that the Exchange receives
under the CTA Plan attributable to Tape
4 The CTA Plan is a national market system plan
approved by the Commission pursuant to Section
11A of the Act, (15 U.S.C. 78k–1, and Rule 11Aa3–
2 thereunder, 17 CFR 240.11Aa3–2). The CTA Plan
governs, among other things, the collection,
consolidation and dissemination of transaction
reports in certain securities and the distribution of
the revenues derived therefrom among parties to the
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
41063
B securities. The Exchange proposes to
begin the Program upon the launch of
its new stock trading platform.
The purpose of the proposed rule
change is to attract additional business
in Tape B securities traded on the
Exchange. The Program is intended to
encourage DPMs and market-makers
who trade Tape B securities to compete
for increased market share in these
products and help them offset some of
their expenses.
The Program is proposed to operate as
follows: Each quarter, the Exchange will
start its calculation with the Tape B
quarterly revenues actually received by
the Exchange. First, the Exchange will
determine the portion of such quarterly
revenues attributable to the trading of
each Tape B security. Then, the
Exchange will subtract the amounts it
owes under its license agreements for
various Tape B securities (e.g., QQQQ,
SPY, DIA) for the prior quarter. License
fees will be offset by Tape B revenue on
a product specific basis (e.g., QQQQ
tape revenue may only be used to offset
QQQQ license fees). All license fees
owed but not covered in the current
quarter will roll forward into the
subsequent quarter(s).
Tape B revenue, net of license fee
payments, will then be shared between
the Exchange, DPMs and market-makers
in the following order of priority, in
each case to the extent that any residual
Tape B revenue is available: 50% to the
Exchange; 25% to the DPM; and 25%
pro-rata between market-makers with
the remainder going to the DPM.
Revenue generated via trades with no
crowd participation (i.e., customer
crosses), will be distributed as outlined
above.
The application of the Program can be
demonstrated by the following example:
• Assume each ‘‘print’’ creates $1 in
after license fees are deducted.
• Assume there is a DPM and two
market-makers (MMs) eligible for tape
revenue.
• Assume there are 100,000 prints in
the quarter.
• MM1 is on 50% of the eligible
prints and averages 50% of the trade
volume per print they participated.
• MM2 is on 15% of the eligible
prints and average 80% of the trade
volume per print they participated.
CTA Plan, which are known as the Plan
Participants.
5 The CBOE has filed a proposed rule change (SR–
CBOE–2004–21) to adopt a new set of rules to allow
for the trading of non-option securities on
CBOEdirect, the exchange’s screen based trading
system.
E:\FR\FM\15JYN1.SGM
15JYN1
41064
Federal Register / Vol. 70, No. 135 / Friday, July 15, 2005 / Notices
• Assume customer to customer
trades account for 20% of prints for the
quarter.
Rev share
Number of Prints:100,000 ................................................................................................
Exchange ..........................................................................................................................
DPM ..................................................................................................................................
To be allocated (see below) .............................................................................................
Prints %
MM1 ..................................................................................
MM2 ..................................................................................
DPM (balance of volume) .................................................
The Exchange’s proposal is
substantially similar to tape credit or
rebate programs that have been
approved for other self-regulatory
organizations.6 As a result, the
Exchange believes that Commission
approval of this proposal would only be
allowing the Exchange to operate a
revenue sharing program that could
compete on substantially similar footing
with programs of other markets.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6(b) of the
Act,7 in general, and with Section
6(b)(5) of the Act,8 in particular, in that
it is designed to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in regulating securities
transactions, and to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The CBOE does not believe that the
proposed rule change would 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.
6 See e.g., Securities Exchange Act Release Nos.
46911 (November 26, 2002), 67 FR 72251
(December 4, 2002) (SR–BSE–2002–10); 47940 (May
29, 2003), 68 FR 33556 (June 4, 2003) (SR–{PHLX–
2002–77); 49981 (July 7, 2004), 69 FR 42233 (July
14, 2004) (SR–CHX–2004–08).
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(5).
VerDate jul<14>2003
17:47 Jul 14, 2005
Jkt 205001
0.50
0.80
....................
Cust/cust
Total
....................
50%
25%
25%
80,000
40,000
20,000
20,000
20,000
10,000
5,000
5,000
100,000
50,000
25,000
25,000
0.25
0.12
....................
5,000
2,400
....................
1,250
600
....................
6,250
3,000
15,750
Vol.%
0.50
0.15
....................
C–DPM/MM
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–2005–17 on the
subject line.
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room, 100 F Street, NE., Washington,
DC 20549. 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–2005–17 and should
be submitted on or before August 5,
2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.9
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5–3773 Filed 7–14–05; 8:45 am]
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
A. By order approve such proposed
rule change; or
B. Institute proceedings to determine
whether the proposed rule change
should be disapproved.
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:
BILLING CODE 8010–01–P
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–9303.
All submissions should refer to File
Number SR–CBOE–2005–17. 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/
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
9 17
E:\FR\FM\15JYN1.SGM
CFR 200.30–3(a)(12).
15JYN1
]]>Agencies
[Federal Register Volume 70, Number 135 (Friday, July 15, 2005)]
[Notices]
[Pages 41063-41064]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-3773]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52005; File No. SR-CBOE-2005-17]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of Proposed Rule Change To Adopt a
Revenue Sharing Program for Trades in Tape B Securities
July 11, 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 February 7, 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.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Fee Schedule to adopt a Revenue
Sharing Program (``Program'') for trades in Tape B securities.\3\ Under
this Program, the Exchange is proposing to share with CBOE Designated
Primary Market-Makers (``DPMs'') and market-makers who trade Tape B
securities a portion of the revenues that the Exchange receives under
the Consolidated Tape Association Plan (``CTA Plan'') attributable to
Tape B securities.\4\ The Exchange proposes to begin the Program upon
the launch of its new stock trading platform.\5\ The text of the
proposed rule change is available on the CBOE's Web site (https://
www.cboe.com), at the CBOE's principal office, and at the Commission's
Public Reference Room.
---------------------------------------------------------------------------
\3\ Tape B securities are securities listed on the American
Stock Exchange or the regional national securities exchanges.
\4\ The CTA Plan is a national market system plan approved by
the Commission pursuant to Section 11A of the Act, (15 U.S.C. 78k-1,
and Rule 11Aa3-2 thereunder, 17 CFR 240.11Aa3-2). The CTA Plan
governs, among other things, the collection, consolidation and
dissemination of transaction reports in certain securities and the
distribution of the revenues derived therefrom among parties to the
CTA Plan, which are known as the Plan Participants.
\5\ The CBOE has filed a proposed rule change (SR-CBOE-2004-21)
to adopt a new set of rules to allow for the trading of non-option
securities on CBOEdirect, the exchange's screen based trading
system.
---------------------------------------------------------------------------
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 Fee Schedule to adopt a Revenue
Sharing Program for trades in Tape B securities. Under this Program,
the Exchange is proposing to share with CBOE DPMs and market-makers who
trade Tape B securities a portion of the revenues that the Exchange
receives under the CTA Plan attributable to Tape B securities. The
Exchange proposes to begin the Program upon the launch of its new stock
trading platform.
The purpose of the proposed rule change is to attract additional
business in Tape B securities traded on the Exchange. The Program is
intended to encourage DPMs and market-makers who trade Tape B
securities to compete for increased market share in these products and
help them offset some of their expenses.
The Program is proposed to operate as follows: Each quarter, the
Exchange will start its calculation with the Tape B quarterly revenues
actually received by the Exchange. First, the Exchange will determine
the portion of such quarterly revenues attributable to the trading of
each Tape B security. Then, the Exchange will subtract the amounts it
owes under its license agreements for various Tape B securities (e.g.,
QQQQ, SPY, DIA) for the prior quarter. License fees will be offset by
Tape B revenue on a product specific basis (e.g., QQQQ tape revenue may
only be used to offset QQQQ license fees). All license fees owed but
not covered in the current quarter will roll forward into the
subsequent quarter(s).
Tape B revenue, net of license fee payments, will then be shared
between the Exchange, DPMs and market-makers in the following order of
priority, in each case to the extent that any residual Tape B revenue
is available: 50% to the Exchange; 25% to the DPM; and 25% pro-rata
between market-makers with the remainder going to the DPM. Revenue
generated via trades with no crowd participation (i.e., customer
crosses), will be distributed as outlined above.
The application of the Program can be demonstrated by the following
example:
Assume each ``print'' creates $1 in after license fees are
deducted.
Assume there is a DPM and two market-makers (MMs) eligible
for tape revenue.
Assume there are 100,000 prints in the quarter.
MM1 is on 50% of the eligible prints and averages 50% of
the trade volume per print they participated.
MM2 is on 15% of the eligible prints and average 80% of
the trade volume per print they participated.
[[Page 41064]]
Assume customer to customer trades account for 20% of
prints for the quarter.
----------------------------------------------------------------------------------------------------------------
Rev share C-DPM/MM Cust/cust Total
----------------------------------------------------------------------------------------------------------------
Number of Prints:100,000.................................... ........... 80,000 20,000 100,000
Exchange.................................................... 50% 40,000 10,000 50,000
DPM......................................................... 25% 20,000 5,000 25,000
To be allocated (see below)................................. 25% 20,000 5,000 25,000
Prints % Vol.%
----------------------------------------------------------------------------------------------------------------
MM1............................... 0.50 0.50 0.25 5,000 1,250 6,250
MM2............................... 0.15 0.80 0.12 2,400 600 3,000
DPM (balance of volume)........... ........... ........... ........... ........... ........... 15,750
The Exchange's proposal is substantially similar to tape credit or
rebate programs that have been approved for other self-regulatory
organizations.\6\ As a result, the Exchange believes that Commission
approval of this proposal would only be allowing the Exchange to
operate a revenue sharing program that could compete on substantially
similar footing with programs of other markets.
---------------------------------------------------------------------------
\6\ See e.g., Securities Exchange Act Release Nos. 46911
(November 26, 2002), 67 FR 72251 (December 4, 2002) (SR-BSE-2002-
10); 47940 (May 29, 2003), 68 FR 33556 (June 4, 2003) (SR-{PHLX-
2002-77); 49981 (July 7, 2004), 69 FR 42233 (July 14, 2004) (SR-CHX-
2004-08).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) of the Act,\7\ in general, and with
Section 6(b)(5) of the Act,\8\ in particular, in that it is designed to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating securities
transactions, and to remove impediments to and perfect the mechanism of
a free and open market and a national market system.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The CBOE does not believe that the proposed rule change would
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.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
A. By order approve such proposed rule change; or
B. Institute proceedings to determine whether the proposed rule
change should be disapproved.
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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-CBOE-2005-17 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-9303.
All submissions should refer to File Number SR-CBOE-2005-17. 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, 100 F Street,
NE., Washington, DC 20549. 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-2005-17 and should be
submitted on or before August 5, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
---------------------------------------------------------------------------
\9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3773 Filed 7-14-05; 8:45 am]
BILLING CODE 8010-01-P
