[Federal Register Volume 66, Number 150 (Friday, August 3, 2001)]
[Notices]
[Pages 40757-40758]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-19380]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44607; File No. SR-CBOE-2001-40]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board Options 
Exchange, Inc. Establishing New Exchange Fees Based on the Number of 
Order Cancellations Routed Through its Automated Order Routing System

July 27, 2001.
    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 July 16, 2001, the Chicago Board Options Exchange Inc. 
(``CBOE'' 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 CBOE proposes to establish a new fee based upon the number of 
order cancellations that are routed to the CBOE through its automated 
Order Routing System (``ORS'').
    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 it received on the proposed rule change. The 
text of these statements

[[Page 40758]]

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 Exchange is proposing to establish a fee to deal with various 
operational problems and costs resulting from the practice of 
immediately following orders routed through the Exchange's automated 
ORS with a cancel request. Since these order frequently come in large 
numbers, components of the ORS, such as the Public Automated Routing 
(``PAR'') system, can very quickly become backlogged, which increases 
Exchange costs and adversely impacts public customers, their clearing 
firms, and Exchange designed primary market-makers (``DPMs'') by making 
the execution of other customer orders less timely. A high volume of 
cancellations sent through the ORS to PAR, or to the Exchange's E-Book 
or ``Live Ammo'' systems, also increases Exchange costs by requiring 
the Exchange to spend increased amounts on systems and other hardware 
to process increased order traffic flow.
    Under the proposed fee, the executing Clearing Member would be 
changed $1.00 for every order that it cancels through the ORS in any 
month where the total number of cancellations sent by the executing 
Clearing Member exceeds the total number of orders that same firm 
executed through ORS in that same month. This fee will not apply to 
executing Clearing Members that cancel fewer than 500 orders through 
ORS in a given month. The Exchange believes that the fee will help ease 
backlogs on ORS and particularly PAR, and fairly allocate the related 
costs.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the act,\3\ in general, and Section 6(b)(4) of the Act,\4\ in 
particular, in that it is designed to provide for the equitable 
allocation of reasonable dues, fees and other charges among its 
members.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 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 that is not necessary or appropriate 
in furtherance of the purposes of the Act.

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

    No written comments were solicited nor received with respect to the 
proposed rule change.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \5\ and subparagraph (f)(2) of Rule 19b-4 
\6\ thereunder, because it establishes or changes a due, fee, or other 
charge. At any time within 60 days of the filing of such 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.\7\
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    \5\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \6\ 17 CFR 240.19b-4(f)(2).
    \7\ See 15 U.S.C. 78(b)(3)(C).
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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, N.W., 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 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 No. SR-CBOE-2001-40 and 
should be submitted by August 24, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-19380 Filed 8-2-01; 8:45 am]
BILLING CODE 8010-01-M