[Federal Register Volume 59, Number 142 (Tuesday, July 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18132]


[[Page Unknown]]

[Federal Register: July 26, 1994]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34407; File No. SR-CBOE-94-22]

 

Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board Options 
Exchange, Inc., Relating to Block Order Discounts on Transaction Fees

July 19, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 7, 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.
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    \1\15 U.S.C. 78s(b)(1) (1982).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to establish discounts on transaction 
fees that members pay the CBOE on public customer orders of block size. 
Although the rule change became effective as of the July 7, 1994 filing 
date, it is applicable to eligible transactions effected as of July 1, 
1994.
    The text of the proposed rule change 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 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to establish discounts 
on transaction fees that members pay under the CBOE's fee schedule on 
public customer orders of ``block'' size. For purposes of the fee 
discount, a block transaction is a single order consisting of 500 or 
more option contracts relating to the same underlying security. Multi-
part customer orders such as spreads and straddles are eligible for 
discounts as well. On such orders, the total contract size, rather than 
the size per-leg, determines whether the order will be considered of 
block size for discount purposes. To be eligible for the discount, all 
legs of a multi-part order must be executed on the same trading day and 
trade tickets for each leg must contain a common data reference.
    Under the terms of the discount, an eligible order of 500 to 999 
contracts will receive a 15 percent discount from the scheduled CBOE 
transaction fee. An eligible order of 1,000 or more contracts will 
receive a 25 percent discount. Discounts will be computed and credited 
to the applicable account at The Options Clearing Corporation 
automatically if the submitted trade data meet the eligibility 
parameters. Where errors occur in data entry, a discount ordinarily 
would not be generated, and the member that submitted the trade would 
need to make a written request to the Exchange for the applicable 
discount.\2\
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    \2\The member would receive the applicable discount 
automatically upon making such written request. Telephone 
conversation between Michael Meyer, Schiff Hardin & Waite, and 
Thomas McManus, Division of Market Regulation, Commission (July 19, 
1994).
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    Because the CBOE's transaction fees are assessed as per-unit fees 
under the Exchange's fee schedule, fees on public customer orders of 
block size can be sizable in comparison to fees on small orders. The 
sizable CBOE transaction fee on block orders can create a disincentive 
to trade at the CBOE. Accordingly, the discount is intended to enhance 
the attractiveness of the CBOE's markets for customer orders of block 
size and is structured to improve the CBOE's ability to compete for 
such orders with futures markets and over-the-counter markets.
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act in general, and Section 6(b)(4) 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 
members.

(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, and 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 proposed 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 such 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. Copies of such filing also will be available for 
inspection and copying at the principal office of the above-mentioned 
self-regulatory organization. All submissions should refer to File No. 
SR-CBOE-94-22, and should be submitted by August 16, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\3\
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    \3\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-18132 Filed 7-25-94; 8:45 am]
BILLING CODE 8010-01-M