[Federal Register Volume 64, Number 75 (Tuesday, April 20, 1999)]
[Notices]
[Pages 19395-19396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-9816]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41270; File No. SR-CBOE-99-08]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 to the 
Proposed Rule Change by the Chicago Board Options Exchange, Inc. 
Relating to Exchange Fees

April 9, 1999.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
\1\ (``Act''), and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on February 25, 1999, 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 
Exchange. On March 26, 1999, the Exchange filed Amendment No. 1 to the 
proposed rule change.\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\ Letter from Debora E. Barnes, Senior Attorney, CBOE, to 
David Sieradzki, Special Counsel, Division of Market Regulation 
(``Division''), Commission, dated March 25, 1999 (``Amendment No. 
1''). Amendment No. 1 is a technical amendment to add the Exchange's 
statement on burden on competition, which was inadvertently omitted.
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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 certain fees,\4\ and to amend 
its Prospective Fee Reduction Program and 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.
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    \4\ The Exchange represents that, although some of the fees in 
this filing are referred to as customer fees, they are charged to 
members. As a result, the Commission notes that, as this filing 
relates exclusively to member fees, this proposed rule change is 
properly filed under section 19(b)(3)(A)(ii) of the Act. 15 U.S.C. 
78s(b)(3)(A)(ii). Telephone conversation between Timothy Thompson, 
Director, Regulatory Affairs, CBOE, and Joseph P. Morra, Attorney, 
Division, Commission, on March 3, 1999.
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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

    The purpose of this proposed rule change is to make certain fee 
changes and to amend the Exchange's Prospective Fee Reduction Program 
and Customer ``Large'' Trade Discount Program. The foregoing fee 
changes are being implemented by the Exchange pursuant to CBOE Rule 
2.22 and took effect on March 1, 1999.
    The Exchange is amending the following fees: (1) Equity Customer 
Transaction Fees are reduced from $.15/.30 to a flat $.09 per contract 
side,\5\ Trade Match and Floor Brokerage Fees will remain at $.05 and 
$.03, respectively; (2) Marketable Equity Customer orders of thirty 
contracts or less will not be billed the reduced customer transaction 
fee noted above if those orders reach CBOE's trading posts through the 
automated Order Routing System (``ORS''); (3) Equity Order Book 
Official (``OBO'') Execution Fees are reduced from $.45 per contract 
with free execution at the opening, to $.20 for all contracts, 
regardless of when they are executed; (4) Equity Market Maker Fees are 
increased to $.19 per contract side from $.05 per contract side; (5) 
OEX Market Maker Fees are increased to $.15 per contract side from $.05 
per contract side; (6) SPX Market Maker Fees are increased to $.15 per 
contract side from $.07 per contract side; (7) Equity Member Firm 
Proprietary Fees are increased from $.06 to $.19 per contract side to 
match market maker rates; (8) OEX Member Firm Proprietary Fees are 
increased from $.06 to $.15 per contract side to match Index market 
maker rates; and (9) Member Firm Proprietary Fees for SPX, DJX and all 
other Indexes are increased from $.10 to $.15 per contract side to 
match Index market maker rates. Trade Match fees remain at $.05 per 
contract side. Member Firm proprietary rates remain unchanged when the 
firm is facilitating its own customer order. Index Customer Transaction 
Fees are unchanged.
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    \5\ A rate differential will no longer exist based on the dollar 
amount of the premium paid.
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    Previously, it has been CBOE's policy to assign the customer rate 
to option orders from broker-dealers. Under the revised fee schedule, 
broker-dealer marketable equity option orders of thirty contracts or 
less that are routed through ORS will not be assessed any transaction 
fee. However, non-marketable broker-dealer equity option orders for 
more than thirty contracts will be charged the new higher market maker/
firm rate of $.19 instead of the new lower customer rate of $.09.
    The Exchange's Prospective Fee Reduction Program for Trade Match 
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-to-date basis exceeds one of certain 
predetermined volume thresholds, the Exchange's Trade Match Fees and 
Member Dues will be reduced in the following fiscal quarter in 
accordance with a fee reduction schedule. Effective March 1, 1999 the 
Program proposed to be is suspended for the remainder of Fiscal Year 
1999 (``FY99'').\6\
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    \6\ CBOE's FY99 terminates on June 30, 1999.
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    The Exchange's Customer ``Large'' Trade Discount Program currently 
provides for discounts on the transaction fees that CBOE customers are 
assessed with respect to public customer orders for 500 or more 
contracts. Specifically, for any month during which 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 proposed to be suspended for equity 
option orders only for the remainder of FY99, effective March 1, 1999.

[[Page 19396]]

    The proposed amendments are the result of a recommendation made by 
the Exchange's Financial Planning Committee to the Board of Directors. 
The amendments are structured to fairly allocate the costs of operating 
the Exchange in light of competitive concerns.
    The proposed rule change is consistent with section 6(b) of the 
Act,\7\ in general, and furthers the objectives of section 6(b)(4) of 
the Act \8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    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 
\9\ pursuant to section 19(b)(3)(A) of the Act \10\ and subparagraph(f) 
of Rule 19b-4 thereunder.\11\ 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.
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    \9\ In reviewing this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(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 proposal 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 20549-0609. 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 an copying in the Commission's 
Public Reference Room. Copies of such filing will also be available for 
inspection and copying at the principal office of the CBOE. All 
submissions should refer to file number SR-CBOE-99-08, and should be 
submitted by May 11, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 99-9816 Filed 4-19-99; 8:45 am]
BILLING CODE 8010-01-M