[Federal Register Volume 63, Number 209 (Thursday, October 29, 1998)]
[Notices]
[Pages 58078-58079]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-29009]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 40591; File No. SR-BSE-98-9]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Boston Stock Exchange, 
Inc. Relating to its Fees Schedule

October 22, 1998.
    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 October 1, 1998, the Boston Stock Exchange, Inc. (``BSE'' or 
Exchange'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III, below, which Items have been prepared by the Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to amend its fee schedules to: (1) eliminate 
fees for specialist odd lot trades; (2) increase specialist and floor 
broker occupancy fees; (3) revise transaction fee maximums under the 
Competing Specialist Initiative program; (4) increase Members' Dues; 
and (5) implement a revenue sharing program for member firms 
(``firms'').
    The text of the proposed rule change is available at the Office of 
the Secretary, the BSE 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 Exchange 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 Exchange 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 purpose of the proposed rule change is to amend several of the 
Exchange's fee schedules as follows:
Floor Operation Fees
    The Exchange proposes to eliminate specialist odd lot fees.\3\ The 
purpose of this rule change is to support the Exchange's Floor Members' 
efforts in attracting additional odd lot order flow to the Exchange. 
The Exchange also proposes to increase specialist and floor broker 
occupancy fees from $400 per post per month to $500 per post per month. 
The purpose of this increase is to help offset the costs associated 
with operating the trading floor.
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    \3\ Specialist odd lot fees were $.75 per order.
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    Additionally, the Exchange proposes to revise Competing Specialist 
Initiative (CSI) transaction fee maximums to:

------------------------------------------------------------------------
                                                               Monthly
                       CTA trade rank                        transaction
                                                             fee maximum
------------------------------------------------------------------------
1-50.......................................................        $400

[[Page 58079]]

51-100.....................................................         300
101-500....................................................         250
501+.......................................................         * 0
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* Includes Exchange executions only. For all other executions, the
  applicable trade rate will continue to apply.

    The purpose of this revision is to better align the maximum 
transaction fees per CSI issue with the associated value of trading 
each stock.
Membership and Other Fees
    The Exchange proposes to increase Membership Dues from $400 to $600 
per membership per quarter. The purpose of this revision is to better 
reflect the current value of a membership on the Exchange.
Transaction Fees
    The Exchange proposes to implement a revenue sharing program 
(``credit'') with those firms that generate $50,000 in monthly 
automated transaction fees. This credit will be applied toward a firm's 
total monthly transaction fees (the total of Value Charge and Trade 
Recording and Comparison Fees) once a firm generates $50,000 in 
automated fees. However, no firm that receives the credit will pay less 
than $7,000 (compared to the current monthly maximum of $50,000) in 
automated transaction fees.
    The amount of revenue to be shared will be determined by the total 
amount of transaction related revenue (Value Charge fees, Trade 
Recording fees, Specialist Transaction fees, Consolidated Tape Revenue 
and Net ITS fees) the Exchange generates on a monthly basis. Once the 
Exchange generates $1,300,000 in monthly transaction related revenue, 
50% of the revenue above this amount will be shared with those firms 
that have generated $50,000 in monthly automated transaction revenue. 
This amount will be reviewed periodically by the Executive Committee of 
the Board of Governors and adjusted as required to meet the costs of 
operating the trading floor. Each firm that reaches the $50,000 cap 
will receive a pro-rata share of the excess revenue based on the total 
number of Exchange automated executions executed by those firms that 
reach the cap. However, if the Exchange does not attain its monthly 
revenue goal, no revenue will be shared for that month.
    The application of the credit can be demonstrated by the following 
example: Suppose the Exchange generates $1,500,000 in transaction 
related revenue (as defined above) for the month. Additionally, four 
retail/institutional firms each generate $50,000 in automated 
transaction fees. Of the four firms, firm 1 executes 150,000 Exchange 
executions, firm 2--125,000, firm 3--75,000, and firm 4--25,000. Total 
Exchange executions for these four firms would be 375,000. Total 
revenue to be shared with these four firms would be $100,000 
(($1,500,000 minus $1,300,000) multiplied by 50%). The credit would be 
allocated back such that firm 1 would receive a credit of $40,000 
(150,000 divided by 375,000=40%, 40% of $100,000 $40,000), firm 2 would 
receive a credit of $33,333 (125,000 divided by 375,000=33.33%, 33.3% 
of $100,000=$33,333), firm 3 would receive a credit of $20,000 (75,000 
divided by 375,000=20%, 20% of $100,000=$20,000), and firm 4 would 
receive a credit of $6,667 (25,000 divided by 375,000=6.67%, 6.67% of 
$100,000=$6,667).
    The purpose of the above credit is to offer firms additional 
incentives to route order flow to the Exchange. This revision 
represents a continuing effort by the Exchange to provide its 
membership with a cost-effective market center in which to execute 
equity transactions.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \4\ of the Act, in general, and furthers the objectives of 
Section 6(b)(4),\5\ in particular, in that it is designed to provide 
for the equitable allocation of reasonable dues, fees and other charges 
among its members.\6\
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
    \6\ The Commission notes that the filing may raise questions 
concerning payment for order flow. To the extent that it does raise 
such issues, exchange members should consider any associated 
disclosure obligations, namely pursuant to Rules 10b-10 and 11 Acl-3 
under the Act, 17 CFR 240.10b-10 and 17 CFR 240.11 Acl-3, 
respectively.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants, or Others

    The Exchange 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

    The foregoing rule change establishes or changes a due, fee, or 
other charge and, therefore, has become effective pursuant to Section 
19(b)(30(A) and the Act \7\ and subparagraph (e)(2) of Rule 19b-4 
thereunder.\8\
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    \7\ 17 U.S.C. 78s(b)(30(A).
    \8\ 17 CFR 240.19b-4(e)(2).
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    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, 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, N.W., Washington, D.C. 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 
Exchange. All submissions should refer to File No. SR-BSE-98-9 and 
should be submitted by November 19, 1998.
    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. 98-29009 Filed 10-29-98; 8:45 am]
BILLING CODE 8010-01-M