[Federal Register Volume 67, Number 233 (Wednesday, December 4, 2002)]
[Notices]
[Pages 72251-72252]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-30671]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46911; File No. SR-BSE-2002-10]


Self Regulatory Organizations; The Boston Stock Exchange, 
Incorporated; Order Granting Approval to Proposed Rule Change To 
Eliminate the BSE's Current Revenue Sharing Program and To Establish 
Two Market Data Revenue Sharing Programs

November 26, 2002.
    On July 22, 2002, The Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'')\1\ a proposed rule change to eliminate 
its existing revenue sharing program and to establish two market data 
revenue sharing programs. The BSE amended the proposed rule change on 
August 2, 2002 and on August 20, 2002. The proposed rule change, as 
amended, was published for notice and comment in the Federal Register 
on September 19, 2002.\2\ The Commission received two comments on the 
proposal.\3\ On October 28, 2002, the BSE responded to the NYSE 
Letter.\4\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ See Securities Exchange Act Release No. 46496 (September 13, 
2002), 67 FR 59084.
    \3\ See October 21, 2002 letter from Meyer S. Frucher, Chairman 
and Chief Executive Officer, The Philadelphia Stock Exchange, Inc., 
to Jonathan G. Katz, Secretary, Commission (``Phlx Letter''); and 
October 21, 2002 letter from Darla C. Stuckey, Corporate Secretary, 
New York Stock Exchange, Inc. (``NYSE''), to Jonathan G. Katz, 
Secretary, Commission (``NYSE Letter''). The Phlx Letter took no 
position on the BSE proposal, but instead spoke generally about the 
regulation of market data fees and revenues. The NYSE Letter asked 
the Commission to institute disapproval proceedings ``as a first 
step in eradicating all such [market data] rebate programs.'' 
Because neither letter specifically addresses the BSE proposed rule 
change, the Commission has not included a summary of comments in 
this order. The letters are available for review in the Public 
Reference Room at the Commission.
    \4\ See October 28, 2002 letter from John A. Boese, Assistant 
Vice President, Legal and Regulatory, BSE, to Jonathan Katz, 
Secretary, Commission (``BSE Response Letter''). The BSE did not 
respond to the Phlx Letter because it did not receive the Phlx 
letter until after the BSE submitted its response to the NYSE 
Letter. The Commission did not require the BSE to submit an 
additional response letter to address the comments in the Phlx 
Letter, because the Phlx Letter ``expresses no view'' on the BSE's 
proposed rule change. See Phlx Letter at p. 1. The BSE Response 
Letter is available for review in the Public Reference Room at the 
Commission.
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    The BSE proposes to operate market data revenue sharing programs 
that are substantially similar to existing programs at other self-
regulatory organizations.\5\ As set forth in its July 2, 2002 Order of 
Summary Abrogation (``Abrogation Order''),\6\ the Commission will 
continue to examine the issues surrounding market data fees, the 
distribution of market data rebates, and the impact of market data 
revenue sharing programs on both the accuracy of market data and on the 
regulatory functions of self-regulatory organizations. In the interim, 
the Commission believes it is reasonable to allow the BSE to operate 
market data revenue sharing programs that place the BSE on 
substantially similar footing as other self-regulatory organizations.
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    \5\ See e.g., Securities Exchange Act Release No. 41238 (March 
31, 1999), 64 FR 17204 (April 8, 1999)(SR-CSE-99-03).
    \6\ Securities Exchange Act Release No. 46159 (July 2, 2002), 67 
FR 45775 (July 10, 2002)(File Nos. SR-NASD-2002-61, SR-NASD-2002-68, 
SR-CSE-2002-06, and SR-PCX-2002-37)(Order of Summary Abrogation).
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    Thus, the Commission finds that the proposed rule change is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange \7\ 
and, in particular, the requirements of Section 6 of the Act \8\ and 
the rules and regulations

[[Page 72252]]

thereunder. The Commission finds specifically that the proposed rule 
change is consistent with Section 6(b)(5) of the Act,\9\ in that it is 
designed to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating 
securities transactions, and to remove impediments to and perfect the 
mechanism of a free and open market and a national market system.
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    \7\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(5).
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    The decision to allow the BSE to establish the market data revenue 
sharing programs described in this proposed rule change, however, is 
narrowly drawn, and should not be construed as resolving the issues 
raised in the Abrogation Order, and does not suggest what, if any, 
future actions the Commission may take with regard to market data 
revenue sharing programs.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
\10\ that the proposed rule change (SR-BSE-2002-10), as amended, be, 
and it hereby is, approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
Margaret H. McFarland,
Deputy Secretary.
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    \11\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 02-30671 Filed 12-3-02; 8:45 am]
BILLING CODE 8010-01-P