[Federal Register Volume 67, Number 175 (Tuesday, September 10, 2002)]
[Notices]
[Pages 57468-57469]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-22889]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46455; File No. SR-CBOE-2002-42]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board Options 
Exchange, Inc. Establishing To Adopt an Access Fee for Non-Customer 
Orders in the MNXSM, NDX, QQQ, and XEO[reg] Options Classes Executed 
Through the Retail Automatic Execution System

September 3, 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 August 1, 2002, 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. 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 Exchange proposes to adopt an access fee for non-customer 
orders in the Nasdaq 100[reg] Index Tracking Stock (``QQQ''), Nasdaq-
100[reg] Index (``NDX''), CBOE Mini-NDX Index (``MNXSM''), 
and European style S&P 100[reg] Index (``XEO[reg]'') option classes 
executed through its Retail Automatic Execution System (``RAES''). The 
text of the proposed rule change appears below. New text is in italics.

                     Fee Schedule as of July 1, 2002
------------------------------------------------------------------------
                                                                  Per
      4. RAES (Retail Automatic Execution System) (1)(4)        contract
------------------------------------------------------------------------
Assessed to Index Customer Transactions......................       $.25
    [sbull] Dow Jones, Assessed on the First 25 Contracts
     Only
Assessed to Non-Customer Transactions in MNX, NDQ, QQQ and          $.30
 XEO.........................................................
------------------------------------------------------------------------

* * * * *
    (1) Per contract side, including FLEX options. Transaction and 
Trade Match Fees are applicable to the CBOEdirect system.
* * * * *

[[Page 57469]]

    (4) Transaction, trade match and RAES fees are charged to the CBOE 
executing firm on the input record.

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

(1) Purpose
    The CBOE proposes to adopt a $0.30 per contract access fee for all 
non-customer orders in the MNXSM, NDX, QQQ, and XEO[reg] 
option classes that are executed through RAES. Under this proposal, all 
non-customer transactions in these options classes that are executed 
via RAES would be uniformly assessed this fee.
    According to the CBOE, non-customer orders subject to this proposed 
fee are Firm orders, CBOE market maker orders, non-CBOE market maker 
orders, orders from a specialist in the underlying security, and orders 
for the account of a registered broker-dealer.\3\ The CBOE also notes 
that this fee would only be charged to Exchange member firms through 
the customary monthly billing that occurs shortly after the close of 
each trading month. Non-members of the Exchange would not be charged 
this proposed fee.
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    \3\ Telephone conversation between Christopher R. Hill, 
Attorney, CBOE, and Christopher Solgan, Attorney, Division of Market 
Regulation, Commission, on August 15, 2002.
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    The CBOE recently began to allow broker-dealer orders to be 
executed on RAES for products within the jurisdiction of the Exchange's 
Index Floor Procedure Committee.\4\ Currently, such orders are only 
authorized in the QQQ, NDX, MNXSM, and XEO[reg] option 
classes. Having extended the benefits of rapid, automatic execution to 
such non-customer orders, CBOE seeks to impose this fee to help 
allocate to such orders a fair share of the related costs of running 
RAES and related Exchange systems. The CBOE notes in this regard that 
most index customer orders are already assessed a RAES fee of $0.25 per 
contract.\5\ The CBOE believes that this fee would help to better 
equalize RAES fees between customer and non-customer RAES orders. The 
CBOE also notes that this proposal is modeled after File No. SR-PCX-
2002-10.\6\
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    \4\ See Securities Exchange Act Release No. 46113 (June 25, 
2002), 67 FR 44486 (July 2, 2002).
    \5\ The CBOE notes that QQQ customer orders are currently exempt 
from the RAES fee, and Dow Jones Industrial Index customer orders 
executed through RAES are only assessed the fee on the first 25 
contracts.
    \6\ Under that proposal, the Pacific Exchange, Inc. established 
a $0.45 per contract surcharge fee for all broker-dealer orders 
executed via its automatic execution system. See Securities Exchange 
Act Release No. 45662 (March 27, 2002), 67 FR 16786 (April 8, 2002).
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(2) Statutory Basis
    The CBOE believes that 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),\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

    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 establishes or changes a due, fee, or 
charge imposed by the Exchange and, therefore, has become effective 
upon filing pursuant to section 19(b)(3)(A)(ii) of the Act \9\ and Rule 
19b-4(f)(2) hereunder.\10\ 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 purpose of the Act.
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    \9\ 15 U.S.C. 78(s)(b)(3)(A)(ii).
    \10\ 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 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 
Exchange. All submissions should refer to File No. SR-CBOE-2002-42 and 
should be submitted by October 1, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-22889 Filed 9-9-02; 8:45 am]
BILLING CODE 8010-01-P