[Federal Register Volume 65, Number 160 (Thursday, August 17, 2000)]
[Notices]
[Pages 50258-50260]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-20955]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43144; File No. SR-CBOE-00-24]


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

August 10, 2000.
    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 22, 2000, the Chicago Board Options Exchange, Inc. (``CBOE '' 
or ``Exchange'') filed with the Securities and Exchange Commission

[[Page 50259]]

(``Commission'') the proposed rule change as described in Items I, II, 
and II 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(1).
    \2\ 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 CBOE proposes to (i) make certain fee changes and (ii) renew 
and amend the Exchange's Fee Reduction Program and Index Customer 
Larger Trade Discount Program. The text of the proposed rule change is 
available at the CBOE and the Commission.

II. Self-Regulatory Organization's Statement of the Terms of 
Substance of 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

1. Purpose
    The Exchange proposes (i) to make certain fee changes and (ii) to 
renew and amend the Exchange's Prospective Fee Reduction Program and 
Index Customer Large Trade Discount Program. The fee changes are being 
implemented by the Exchange pursuant to CBOE Rule 2.22 and are 
effective as of July 1, 2000.
    The Exchange is increasing the following fees. First, the index 
option market-maker transaction fee will be increased from $.15 per 
contract to $.19 per contract, to equal the rate charged to equity 
market-makers. Second, the index option non-facilitation order fee will 
be increased from $.15 per contract to $.19 per contract, to equal 
market-maker rates. Third, the S&P 100 (``OEX'') facilitation fee will 
be increased from $.06 per contract to $.10 per contract, to equal the 
facilitation rates of all other indexes. fourth, the equity option 
facilitation fee will be increased from $.06 per contract to $.10 per 
contract, to equal the index facilitation rates. Fifth, the ILX trading 
floor booth terminal rental fee will be increase from $350 per month to 
$400 per month. Sixth, the Access fees will be increased form $100 to 
$110 for floor Managers, and from $50 to $55 for Clerks. Seventh, the 
monthly fee for certain booths that may be used to flash signals to the 
OEX pit will be increased from $150 to $500, equaling the rate charged 
for S&P 500 and Nasdaq-100 phone positions. The booths subject to this 
increased monthly fee are a subset of the perimeter booths category on 
the Exchange's fee schedule. Eighth, the Dow Jones monthly booth fee 
will be increased from $300 to $500. Finally, registration fees will be 
increased from $35 to $45 for initial applications; and will be 
increased from $30 to $40 for annual and transfer applications. 
Registration maintenance fees will be increased from $30 to $40 for 
registered representatives, registered options principals, and 
financial/operations principals. The Exchange proposes to amend Rule 
2.22(b) to reflect the increase in the registration fees.
    The Exchange also proposes to implement two new fees. First, the 
Exchange proposes to implement a Firm FOCUS Minimum Monthly Fee to 
supplement its existing Firm Designated Examining Authority (``DEA'') 
Fee, which is current $.40 per $1,000 of gross revenue. This new 
minimum fee will be $1,000 for clearing member firms and $250 for non-
clearing member firms.\3\ The purpose of this fee is to help the 
Exchange more closely cover the costs of regulating certain member 
firms that previously were assessed little or no fees in this area. 
Second, the Exchange proposes to establish a monthly Designated Primary 
Market Maker Facilities Fee that would be either $300, $600 or $900 
depending on the size of the trading station utilized. This fee is 
similar to facilities usage fees charged to specialists on other 
exchanges.
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    \3\ The Firm FOCUS Minimum Monthly Fee will apply to those 
clearing member firms and non-clearing member firms whose DEA Fee 
would not otherwise exceed the thresholds of $1,000 and $250, 
respectively. Telephone conversation between Jamie Galvan, Attorney, 
CBOE, and Geoffrey Pemble, Attorney, Division of Market Regulation, 
Commission (July 20, 2000).
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    In addition to implementing the two fees described above, the 
Exchange proposes to reinstate its transaction fee of $.19 per contract 
for broker-dealer marketable orders of 30 contracts or less routed via 
the Exchange's Order Routing System, which the Exchange had previously 
waived. The Exchange is also proposing to reinstate transaction fees 
for FLEX equity options (``E-FLEX''), by applying the Exchange's listed 
equity options fee schedule to E-FLEX options. These fees had also been 
waived by the Exchange. There will continue to be no transaction fee 
for customer E-FLEX options orders. The Exchange believes that 
reinstating these fees is necessary to make the Exchange's options 
transaction charges more consistent with those of other options 
exchanges.
    The Exchange also proposes to renew its Prospective Fee Reduction 
Program. The program 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-year basis exceeds certain 
predetermined volume thresholds, the Exchange's market-maker 
transaction fees will be reduced in the following fiscal quarter in 
accordance with a fee reduction schedule. The Exchange proposes to 
raise the volume thresholds and renew the Program for one year, 
beginning July 1, 2000 and ending June 30, 2001. Trading volume in the 
fourth quarter of fiscal year 2000 will be used to determine the 
discount applied in the first quarter of fiscal year 200.1
    Specifically, the CBOE proposes to raise the volume thresholds as 
follows: (i) the threshold volume at which a $.01 fee reduction applies 
will be raised from 850,000 to 1,050,000 contracts; (ii) the threshold 
volume at which the $.02 fee reduction applies will be raised from 
900,000 to 1,100,000 contracts; (iii) the threshold volume at which a 
$.03 fee reduction applies will be raised form 950,000 to 1,200,000 
contracts; and (iv) the threshold volume at which a $.04 fee reduction 
applies will be raised from 1,000,000 to 1,300,000 contracts. The 
Exchange is also proposing to establish two new thresholds for further 
fee reductions as follows: (i) a $.05 fee reduction for 1,400,000 to 
1,499,999 contacts; and (ii) a $.06 fee reduction applies for 1,500,000 
contracts and above.
    The Exchange also proposes to renew and modify its Index Customer 
Large Trade Discount Program. This Program provides discounts on the 
transaction fees that CBOE members pay with respect to customer index 
orders for 500 or more contracts. Currently, for any month that the 
Exchange's average contract volume per day exceeds certain 
predetermined volume thresholds, the transaction fees that are assessed 
by the Exchange in that month with respect to customer index 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, 
2000 at the end of the Exchange's 2000 fiscal year. The Exchange 
proposes to renew the Program for one year, beginning on July 1, 2000 
and ending on June 30, 2001. The Exchange is also proposing to 
eliminate the volume thresholds and to provide that for trades of 500 
contracts

[[Page 50260]]

and above, regardless of monthly volume, transaction fees will be 
reduced by 30% in all index products.
    In addition, the Exchange proposes to eliminate all booth variable 
fees. These fees have significantly declined in recent years, mostly 
due to firm consolidations and increased volume.
    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 2001 fiscal year, the Exchange intends to 
evaluate these Programs prior to the beginning of the 2002 fiscal year 
and may renew these Programs in the same modified form for the 2002 
fiscal year.\4\
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    \4\ The Commission notes and the Exchange acknowledges that it 
would be required to file a proposed rule change pursuant to Section 
19(b) of the Act before renewing or modifying these programs. 
Telephone conversation between Jamie Galvan, Attorney, CBOE, and 
Geoffrey Pemble, Attorney, Division of Market Regulation, Commission 
(July 20, 2000).
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2. Statutory Basis
    The CBOE believes that the proposed rule change is consistent with 
Section 6(b) of the Act, \5\ in general, and furthers the objectives of 
Section 6(b)(4) of the Act, \6\ 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
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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 burden on competition.

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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Because the foregoing rule change establishes our changes a due, 
fee, or other charge imposed by the Exchange, it has become effective 
pursuant to Section 19(b)(3)(A)(ii) \7\ of the Act and subparagraph 
(f)(2) of Rule 19b-4 thereunder.\8\ 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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    \7\ 15 U.S.C. 78s(b)(34)(A)(ii).
    \8\ 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. 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 will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to the File No. SR-CBOE-00-24 
and should be submitted by September 7, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-20955 Filed 8-16-00; 8:45 am]
BILLING CODE 8010-01-M