[Federal Register Volume 67, Number 148 (Thursday, August 1, 2002)]
[Notices]
[Pages 49969-49971]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-19454]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46266; File No. SR-CBOE-2002-37]


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

July 25, 2002.
    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 27, 2002, the Chicago Board Options Exchange, Inc. (``CBOE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the

[[Page 49970]]

proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. On July 24, 2002, 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\ See Letter from Nancy L. Nielsen, Director of Arbitration 
and Assistant Secretary, CBOE, to Nancy Sanow, Assistant Director, 
Division of Market Regulation, Commission, dated July 23, 2002 
(``Amendment No. 1''). In Amendment No. 1, the CBOE deleted the 
proposed increased transaction fees for non-member market maker 
transactions for equity, QQQ, and index options.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to make certain changes to its fee schedule 
and to Exchange Rule 2.22, entitled ``Other Fees or Charges.''
    The text of the proposed rule change is available at 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 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 CBOE proposes to make certain fee additions and changes, as 
well as to renew and amend the Exchange's Prospective Fee Reduction 
Program. The CBOE represents that the proposed changes are the product 
of the Exchange's annual budget review. The CBOE also represents that 
the fee changes were approved by the Exchange Board of Directors 
pursuant to CBOE Rule 2.22 and will take effect on July 1, 2002.
    The Exchange is amending the following fees. (1) The annual and 
transfer Registration fees for Registered Representatives, Registered 
Options Principals, and Financial/Operations Principals will be 
increased from $50 to $55. A new $30 fee for terminations of the 
registrations of such individuals will also be instituted. The Exchange 
represents that this fee is comparable to one already imposed by the 
American Stock Exchange LLC (``Amex'').\4\ The Exchange proposes to 
amend Rule 2.22(b) to reflect the changes in these fees, which will 
help offset the cost of increased regulatory efforts by the Exchange. 
(2) Monthly member dues will increase from $208.33 to $250, to help 
fairly distribute the Exchange's increased costs across all members. 
(3) The current Index Customer Large Trade Discount Program will be 
eliminated. (4) The Floor Brokerage Fee will increase from $0.03 to 
$0.04 per contract. The Exchange represents that this fee has not been 
changed since its inception in 1974, and the current waiver of this fee 
for customer transactions in equity and QQQ options will continue. (5) 
The Firm Facilitation Transaction Fee, which is applied to orders in 
which a firm accommodates its customer by taking the other side of an 
options transaction, will increase from $0.10 to $0.15 per contract. 
The Exchange represents that the increased fee will still be $0.04 less 
per contract than the regular firm transaction rate. (6) The 
transaction fee for Broker-Dealer transactions in equities and QQQ 
options will increase from $0.19 to $0.20 per contract. (7) The DPM 
Facilities Fee, which the Exchange charges its Designated Primary 
Market-Makers (``DPMs'') each month for use of Exchange floor trading 
stations, will increase from $300 to $500 for a standard station, from 
$600 to $1,000 for a super station, and from $900 to $1,500 for a giant 
station. The Exchange represents that these fees help offset the 
Exchange's costs to provide a physical location and technology to the 
DPMs.
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    \4\ See Securities Exchange Act Release No. 44286 (May 9, 2001), 
66 FR 27187 (May 16, 2001) (File No. SR-Amex-2001-22).
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    The CBOE represents that the various fee changes contained in this 
filing are structured to fairly allocate the costs of operating the 
Exchange.
    The Exchange also proposes to amend and renew its Prospective Fee 
Reduction Program (``Program''). Under the amended Program, if at the 
end of the second or third 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 market-maker transaction fees will be reduced in the 
following fiscal quarter in accordance with a fee reduction schedule. 
The CBOE proposes that the Program begin on January 1, 2003, at the 
beginning of the Exchange's third fiscal quarter, and continue through 
the end of the Exchange's 2003 fiscal year, terminating June 30, 2003. 
The program's potential applicability is being limited to only the 
third and fourth quarters of the Exchange's fiscal year.
    The Exchange represents that the changes to the Program 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 Program will 
terminate at the end of the Exchange's 2003 fiscal year, the Exchange 
intends to evaluate the Program prior to the beginning of the 2004 
fiscal year and may renew the Program in the same or modified form for 
the 2004 fiscal year.
2. Statutory Basis
    The Exchange represents 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 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 or 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 \7\ and subparagraph (f)(2) of Rule 19b-4 
\8\ thereunder, because it establishes or changes a due, fee, or other 
charge. At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change it if 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors,

[[Page 49971]]

or in furtherance of the purposes of the Act.\9\
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    \7\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \8\ 17 CFR 240.19b-4(f)(2).
    \9\ For purposes of calculating the 60-day abrogation period, 
the Commission considers the period to commence on July 24, 2002, 
the date the Exchange filed Amendment No. 1.
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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, as amended, 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 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-2002-37 and should be submitted by August 22, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-19454 Filed 7-31-02; 8:45 am]
BILLING CODE 8010-01-P