[Federal Register Volume 64, Number 163 (Tuesday, August 24, 1999)]
[Notices]
[Pages 46218-46220]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-21865]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41748; File No. SR-CBOE-99-34]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Chicago Board Options
Exchange, Inc., Making Certain Changes to Its Fee Schedule
August 16, 1999.
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 June 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 CBOE.\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\ The CBOE originally submitted the proposal on June 25, 1999.
On August 12, 1999, the CBOE submitted a letter from Stephanie C.
Mullins, Attorney, CBOE, to Richard Strasser, Assistant Director,
Division of Market Regulation (``Division''), Commission, amending
the filing (``Amendment No. 1''). In Amendment No. 1, the CBOE
proposes (1) to make all fee changes listed in this filing
retroactive as of July 1, 1999, except for the $.35 paper ticket fee
for manual trades by market-makers, (2) to withdraw the $.35 paper
ticket fee, (3) to delete the discussions of the paper ticket fee in
the filing, and (4) to amend the text of CBOE Rule 2.22(b) to
reflect the fee change for registered representatives and registered
options principals. On August 16, 1999, the CBOE subsequently
amended Amendment No. 1 with a phone call from Stephanie C. Mullins,
Attorney, CBOE, to Joseph Corcoran, Attorney, Division, Commission.
In the phone call, the CBOE proposes to reinstate the $.35 paper
ticket fee for manual trades by market-makers and make it effective
as of January 24, 2000, and to amend the discussions of the paper
ticket fee to reflect this change. Because of the substantive nature
of the Amendments, the Commission deems the filing date to be August
16, 1999, the date of the final amendment.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The CBOE proposes to make certain changes to its fee schedule. The
text of the proposed rule change is available at the Office of the
Secretary, the 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 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.
[[Page 46219]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this proposed rule change is to make certain fee
changes and additions; to reinstate and amend the Exchange's
Prospective Fee Reduction Program; and to renew and amend its Customer
``Large'' Trade Discount Program. The foregoing fee changes are being
implemented by the Exchange pursuant to DBOE Rule 2.22 and, unless
otherwise noted, will take effect on July 1, 1999.
The Exchange is amending the following fees. (1) The monthly fee to
rent an SPX phone position will be increased from $300 to $500. (2) The
monthly ABIL Brokerage Billing fee will be changed from .0075% of
billed brokerage to $.005 per contract. The minimum monthly fee will be
increased from $25 to $50 and the maximum monthly fee will be increased
from $100 to $200. (3) The monthly fee for ORS Analysis will be
increased from $50 to $100. (4) The monthly fee for the Floor
Efficiency Project (``FEP'') will be increased from $50 to $100. (5)
The subscriber fee for the Exchange Bulletin will be increased from
$100 per year to $200 per year for each hard copy and from $50 per year
to $100 per year for each electronic copy. Each member receives one
free copy. This fee is charged to members for each additional copy and
to non-member subscribers. (6) The Registered Representative fee will
be increased from $25 to $35 for initial applications; and will be
increased from $20 to $30 for annual and transfer applications.
The ABIL Brokerage fee is being changed from a percentage of billed
brokerage to a fixed rate. This service fee has been a function of the
dollars billed. The ABIL client base is facing increasing competitive
pressures to lower their charges. As they do so, they bill less
brokerage, and the ABIL service fee shrinks accordingly even though the
new discounts require more programming support rather than less. The
proposed new service fee for ABIL processing converts this variable
cost to a fixed rate, whether the agent bills or not. The increase in
the floor and cap levels reflect increased paper and processing
expenses. Additionally, the ORS Analysis and FEP Report costs are being
increased to cover costs of printing paper copies, and to standardize
fees for all monthly reports at $100.
In addition, the CBOE proposes to implement the following new fees.
(1) The fee to replace an I.D. Badge will be $15; the fee to replace an
Acronym badge will be $15; and the fee for a temporary access badge for
members will be $10 (this fee will only apply for the fourth temporary
access badge issued in a calendar year; the first three badges are free
of charge). The cost for clerks and floor managers currently is $10 for
the fourth temporary access badge issued in a calendar year. (2) The
following fee will be effective as of January 24, 2000. The Exchange
proposes to assess a paper ticket fee of $.35 on all market-maker
transactions for a market-maker whose manual trades exceed 15% of the
total amount of trades done by the market-maker in any given month. The
purpose of this new fee is to encourage market-makers to utilized hand-
held terminals for entering orders as opposed to paper tickets, while
not penalizing members when occasional system outages occur. (3) The
Exchange proposes to institute a program whereby members who fail to
change their appointments on a timely basis or meet their in-person
trading requirements would be assessed a fee of $250 for any quarter. A
letter of warning will be issued first followed by a $250 fee for those
that fail to comply. The Exchange believes this will affect fewer than
15 people per calendar quarter.
The Exchange proposes to reinstate and amend its Prospective Fee
Reduction Program, subject to the Exchange having a minimum of $10
million in working capital. The program was suspended on March 1, 1999,
and the Exchange now proposes to reinstate and renew the program with
amendments. The program 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 marker-maker transaction fees will be
reduced in the following fiscal quarter in accordance with a fee
reduction schedule. Trading Volume in the fourth quarter of fiscal year
1999 will be used to determine the discount applied in the first
quarter of fiscal year 2000. The CBOE proposes that the Program begin
on July 1, 1999 at the beginning of the Exchange's 2000 fiscal year,
and continue through the end of the Exchange's 2000 fiscal year,
terminating June 30, 2000.
Specifically, the CBOE proposes the following: the threshold volume
at which a $.01 fee reduction applies will be 850,000 contracts; the
threshold volume at which the $.02 fee reduction applies will be
900,000 contracts; the threshold volume at which a $.03 fee reduction
applies will be 950,000 contracts; and the threshold volume at which a
$.04 fee reduction applies will be 1,000,000 contracts and above.
The Exchange's Index Customer ``Larger'' Trade Discount Program
currently provides for discounts on the transaction fees that CBOE
members pay with respect to non-equity 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 non-equity 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, 1999 at the
end of the Exchange's 1999 fiscal year. The CBOE proposes to amend the
Program to provide that the Program will continue during the Exchange's
2000 fiscal year and will terminate on June 30, 2000. In addition to
renewing the current fee discount percentages under the Program, CBOE
proposes to amend the Program to increase by 100,000 contracts all the
threshold levels to which the discount rates apply. For example, the
threshold level is being increased from 650,000 to 750,000 contracts at
which the 30% discount rate applies.
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 and the
Exchange's Index Customer ``Large'' Trade Discount Program will
terminate at the end of the Exchange's 2000 fiscal year, the Exchange
intends to evaluate these Programs prior to the beginning of the 2001
fiscal year and may renew these Programs in the same or modified form
for the 2001 fiscal year.
2. Statutory Basis
The CBOE believes that 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) of the Act,\5\ in particular, in that it is designed to
provide for the equitable allocation of reasonable dues, fees, and
other changes 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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[[Page 46220]]
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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
pursuant to Section 19(b)(3)(A)(ii) of the Act \6\ and subparagraph
(f)(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 proposes of
the Act.
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\6\ 15 U.S.C. 78s(b)(3)(A)(ii).
\7\ 17 CFR 240.19b-4(f)(2).
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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.\8\ 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 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 submissions should refer to File No.
SR-CBOE-99-34 and should be submitted by September 14, 1999.
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\8\ In reviewing this proposal, the Commission has considered
its potential impact on efficiency, competition and capital
formation. 15 U.S.C. 78c(f).
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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[FR Doc. 99-21865 Filed 8-23-99; 8:45 am]
BILLING CODE 8010-01-M