[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]
=======================================================================
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\1\15 U.S.C. 78s(b)(1) (1982).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\3\17 CFR 200.30-3(a)(12) (1993).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-18132 Filed 7-25-94; 8:45 am]
BILLING CODE 8010-01-M