[Federal Register Volume 59, Number 87 (Friday, May 6, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10888]
[[Page Unknown]]
[Federal Register: May 6, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33983; File No. SR-CBOE-94-13]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Chicago Board Options
Exchange, Inc. Relating to Modifications of Exchange Fees
April 29, 1994.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on April 1,
1994, the Chicago Board Options Exchange, Inc. (``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.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CBOE proposes to establish the following fees: (1) A $350
monthly fee for CBOE members who install ILX/WDN personal computer
(``PC'') terminals in their floor booth(s); and (2) a $150 quarterly
fee for non-clearing Designated Primary Market Makers (``DPMMs'') for
the Exchange's work in reviewing their SEC Form X-17A-5 reports and
conducting annual financial audits to ensure their compliance with the
Commission's net capital rule, as amended, effective April 1, 1994.\1\
In addition, the Exchange proposes to expand its customer box spread
fee rebate program, which is currently limited to positions in Standard
& Poor's 500 (``SPX'') index options, to make the rebate available on a
member's request for qualifying public customer positions in any and
all European-style index options.\2\
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\1\See Securities Exchange Act Release No. 32737 (August 11,
1993), 58 FR 43555 (File No. S7-27-88).
\2\The current box spread rebate program provides a 50% rebate
on transaction and trade match fees for box trades by public
customers in SPX options, provided the box trade totals 500 or more
contracts for the four sides of the trade. See Securities Exchange
Act Release No. 31386 (February 8, 1993), 58 FR 8639 (File No. SR-
CBOE-93-06) (``Fee Rebate Approval Order'').
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The text of the proposed fee changes is available at the office of
the Secretary, CBOE and at the Commission.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the 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 the
Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to establish two new
fees and to extend the CBOE's current fee rebate program for SPX
options to additional classes of European-style options. The first new
fee is a $350 monthly fee to CBOE members who install ILX/WDN PC
terminals in their floor booth(s). These terminals, which will replace
booth-installed Quotron terminals, will use Windows-based software and
will include and ILX window for display of market data as well as a
CBOE WDN window for internal CBOE displays and functions.
The second new fee is a $150 quarterly fee to be paid by non-
clearing DPMMs for the Exchange's work in reviewing their reports on
SEC Form X-17A-5 and conducting annual financial audits of such DPMMs
to ensure compliance with the Commission's net capital rule, as
amended, effective April 1, 1994.\3\ In the past, because non-clearing
market makers were exempt from the net capital rule, the CBOE'S
financial oversight of non-clearing DPMMs was less extensive, as were
the CBOE'S costs therefor. Beginning on April 1, 1994, however, non-
clearing DPMMs will be required to meet portions of the Commission's
net capital rule, and the Exchange's oversight costs will increase
accordingly. The CBOE believes that the $150 quarterly fee will recover
a substantial portion of the new oversight costs which the Exchange
estimates it will incur.
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\3\See Securities Exchange Act Release No. 32737, supra note 1.
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In addition to the two new fees described above, the CBOE proposes
to expand the customer box spread fee rebate program, which is
currently limited to positions in SPX options.\4\ The expansion will
make the rebate available on a member's request for qualifying public
customer positions in any and all European-style index options. The
existing rebate program, which was approved permanently in February
1993,\5\ enables members to reduce certain transaction and trade match
fees which they pay to the Exchange.
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\4\See Fee Rebate Approval Order, supra note 2.
\5\Id.
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The terms of the fee rebate and the rebate procedures proposed for
all European-style index options will be identical to the rebate terms
and procedures applicable to SPX options. Under the current rebate
program, as under the proposal, CBOE members may request a rebate of
50% of their transaction and trade match fees\6\ assessed an options
transactions that meet the following parameters: (1) The options
transaction(s) are executed for a customer account; and (2) the
transactions are box spreads\7\ on a European-style index that total
500 or more contracts for the four sides of the spread (i.e., 125
contracts per side).
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\6\The rebate is $.22 per contract ($.20 transaction fee, plus
$.02 trade match fee) on contracts with a premium greater than or
equal to $1 and $.12 per contract ($.10 transaction fee, plus $.02
trade match fee) on contracts with a premium less than $1.
\7\For purposes of the rebate, a box spread is a four-sided
option spread on a given European-style index that is composed of
(i) a long call and a short put at one strike price and (ii) a short
call and long put at a different strike price. All four sides must
expire in the same month.
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Members seeking a fee rebate must submit a rebate request together
with supporting documentation to the Exchange's Accounting Department.
At a minimum, the supporting documentation must include the trade date,
the executing broker acronym, and the contract class, series, premium,
and quality.
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act, in general, and furthers the objectives
of section 6(b)(4), in particular, in that it provides for the
equitable allocation of reasonable dues, fees, and other charges among
CBOE members and other persons using the CBOE's facilities.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The CBOE 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
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
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 and subparagraph (e) of Rule
19b-4 thereunder. At any time within 60 days of the filing of the
proposed rule change, the Commission may summarily abrogate such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.
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 Section, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such filing will also be available for
inspection and copying at the principal office of the CBOE. All
submissions should refer to the file number in the caption above and
should be submitted by May 27, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 94-10888 Filed 5-5-94; 8:45 am]
BILLING CODE 8010-01-M