[Federal Register Volume 63, Number 148 (Monday, August 3, 1998)]
[Notices]
[Pages 41306-41308]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20558]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40264; File No. SR-CBOE-98-31]


Self-Regulatory Organization; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board Options 
Exchange, Inc. Relating to Exchange Fees.

July 24, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 \2\ thereunder notice is hereby given that 
on June 30, 1998, 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. On July 15, 
1998, the Exchange filed a letter amendment to the proposed rule change 
(``Amendment No. 1'').\3\ 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).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 corrected an error in the original filing 
regarding the trade match fee reduction for a threshold volume of 
925,000 contracts and above, and made other clarifying changes. See 
letter from Stephanie C. Mullins, Attorney, CBOE to S. Kevin An, 
Special Counsel, Division of Market Regulation, Commission (July 14, 
1998).
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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 amend and add certain fees, as well as 
renew and amend (i) its Prospective Fee Reduction Program; and (ii) its 
Customer ``Large'' Trade Discount Program. 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 its 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 this proposed rule change its to make certain fee 
changes and additions, and to renew and amend (i) the Exchange's 
Prospective Fee Reduction Program; and (ii) its Customer ``Large'' 
Trade Discount Program. The foregoing fee changes are being implemented 
by the Exchange pursuant to CBOE Rule 2.22 and will take effect on July 
1, 1998.
    The Exchange is amending the following fees: (1) Trade Match Fee 
will be increased to $.05 from $.04 per contract side; (2) Trade Match 
Report Fees will be changed to $.0025 per contract side for all matched 
and unmatched information. Previously the fee was $.0008 for paper 
reports per contract side, per copy, for matched and unmatched 
information; $.0003 for data transmission per contract side, per pass; 
and $.0003 for unmatched report transmission per contract, per pass; 
(3) CBOE Market-Maker Handheld Terminals Fee will be increased to $.08 
per record from $.05 per record; (4) DPM Regulatory Fee will be changed 
to $.40 per $1,000 of gross revenue from a flat fee of $150 per 
quarter; (5) Dow Jones Booth Fee will be changed to a flat $300 per 
month, which previously was $300 per month for OCC firms and $625 per 
month for Non-OCC firms (the fee also formerly included a variable fee 
for insufficient fee credits for both OCC and Non-OCC firms). The 
Exchange is proposing to add the following fees: (1) Technology Fee of 
$200 per month; and (2) Book Manual Entry Fee of $1 per order.
    The Exchange's Fee Reduction Program for Market-Maker Transaction 
Fees, Floor Broker Fees, and Member Dues currently provides that if at 
the end of any quarter of the Exchange's fiscal year, the Exchange's 
average contract volume per day on a fiscal year-

[[Page 41307]]

to-date basis exceeds one of certain predetermined volume thresholds, 
the Exchange's market-maker transaction fees, floor broker fees, and 
member dues will be reduced in the following fiscal quarter in 
accordance with a fee reduction schedule. The program is scheduled to 
terminate on June 30, 1998 at the end of the Exchange's 1998 fiscal 
year. The program is proposed to be amended to replace the market-maker 
transaction fee and floor broker fee reduction with a trade match fee 
reduction, and to continue the program during the Exchange's 1999 
fiscal year, terminating June 30, 1999. The program also is proposed to 
be amended to increase the volume thresholds at which the discount 
commences.
    The Exchange has decided to amend the name of the program and the 
fees associated with it because market-maker transaction fees and floor 
broker fees are not being increased, and the Exchange feels that it is 
not in the best interest of the financial welfare of the Exchange to 
give any further discount on those fees. However, the Exchange is 
increasing trade match fees, and the Exchange feels that to compensate 
for that increase, during high volume quarters, the trade match fee 
will be discounted. Additionally, the trade match fee discount is an 
across-the-board discount, applying fairly to both market-makers and 
floor brokers.
    Specifically, the threshold volume at which the $.005 trade match 
fee reduction applies will be 800,000 contracts. Currently, a $.005 fee 
reduction only applies to floor broker fees when the volume threshold 
is between 725,000 and 775,000 contracts. The threshold volume at which 
the $.01 trade match fee reduction applies will be 825,000 contracts. 
Currently the $.01 fee reduction only applies to market-maker 
transaction fees when the threshold volume is between 700,000 and 
775,000 contracts. Also, there will be a $.015 trade match fee 
reduction for a threshold volume of 925,000 contracts and above. 
Currently, there is no $.015 fee reduction in the program.
    Finally, the member dues fee reduction, which currently ranges from 
25% to 75% for volumes ranging from 675,000 to 775,000 contracts, as 
amended will range from 25% to 100% for volumes ranging from 800,000 to 
900,000. The 25% discount will commence at 800,000 contracts, the 50% 
discount will commence at 850,000 contract, the 75% discount will 
commence at 875,000 contract, and the 100% discount will commence at 
900,000 contract.
    The Exchange's Customer ``Large'' Trade Discount Program currently 
provides for discounts on the transaction fees that CBOE members pay 
with respect to public customer orders for 500 or more contracts. 
Specifically, for any month the Exchange's average contract volume per 
day exceeds one of certain predetermined volume thresholds, the 
transaction fees that are assessed by the Exchange in that month with 
respect to public customer orders for 500 or more contracts are subject 
to a discount in accordance with a discount schedule. The program is 
scheduled to terminate on June 30, 1998 at the end of the Exchange's 
1998 fiscal year. The program is proposed to be amended to provide that 
the program will continue in effect during the Exchange's 1999 fiscal 
year and will terminate on June 30, 1999. In addition to renewing the 
current fee discount percentages under the program, the program is also 
proposed to be amended to increase by 50,000 contracts all the 
threshold levels to which the discount rates apply, increasing the 
minimum threshold level from 600,000 to 650,000, contracts at which the 
30% discount rate applies. Additionally, the Exchange proposes to 
discontinue its Dow Jones Large Trade Discount Program as of June 30, 
1998. Dow Jones customer orders will now be included in the CBOE's 
Customer Large Trade Discount Program. In all other respect the program 
remains unchanged.
    The proposed amendments are the product of the Exchange's annual 
budget review. The amendments are structured to fairly allocate the 
costs of operating the Exchange in the event that the Exchange 
experiences higher volume. In addition, although the proposed rule 
change provides that the Exchange's Fee Reduction Program for Trade 
Match Fees and Member Dues, and the Exchange's Customer ``Large'' Trade 
Discount Program will terminate at the end of the Exchange's 1999 
fiscal year, the Exchange intends to evaluate these programs prior to 
the beginning of the 2000 fiscal year and may renew these programs in 
the same or modified form for the 2000 fiscal year.
    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) \5\ 
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.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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 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 CBOE has neither solicited nor received written comments on 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)(ii) of the Act \6\ and subparagraph 
(e)(2) of Rule 19b-4 thereunder.\7\ 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.\8\
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    \6\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \7\ 17 CFR 240.19b-4(e)(2).
    \8\ In receiving this proposal, the Commission considered its 
impact on efficiency, competition and capital formation. 15 U.S.C. 
78c(f).
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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 is consistent with the Act. 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 at 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 submission should refer to File No. SR-CBOE-98-31 and should 
be submitted by August 24, 1998.

[[Page 41308]]

    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-20558 Filed 7-31-98; 8:45 am]
BILLING CODE 8010-01-M