[Federal Register Volume 67, Number 249 (Friday, December 27, 2002)]
[Notices]
[Pages 79196-79197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32732]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47032; File No. SR-CBOE-2002-68]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by the Chicago Board Options 
Exchange, Incorporated Relating to the Extension of an Access Fee for 
Non-Customer RAES Orders

December 18, 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 November 20, 2002, the Chicago Board Options Exchange (``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 CBOE. 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 make a change to its Fee Schedule to extend 
the applicability of an access fee for non-customer RAES orders. Below 
is the text of the proposed rule change. Proposed new text is 
italicized, and proposed deleted text is bracketed.
* * * * *
FEE SCHEDULE
NOVEMBER 1, 2002

    4. RAES (RETAIL AUTOMATIC EXECUTION SYSTEM) (1)(4): Per Contract

Assessed to Non-Customer Transactions (all RAES transactions with 
origin codes other than ``C'')[In MNX, NDQ, QQQ and XEO] * * * $.30
* * * * *
(1) Per contract side, including FLEX options. Transaction and Trade 
Match Fees are applicable to the CBOEdirect system.
* * * * *
(4) Transaction, trade match and RAES fees are charged to the CBOE 
executing firm on the input record.
* * * * *

[[Page 79197]]

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 is proposing to extend a $.30 per contract Access Fee to 
all non-customer transactions (defined as all transactions with origin 
codes other than ``C'') \3\ in option classes that are executed by 
means of the CBOE's Retail Automatic Execution System (``RAES'').\4\ 
Under this proposal, all non-customer RAES transactions would be 
uniformly assessed this fee. 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. The 
fee would not be charged to non-members of the Exchange.
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    \3\ Every order entering the CBOE Order Routing System is 
assigned an origin code to reflect the category (though not the 
specific identity) of the source of each order: ``C'' for public 
customers, ``B'' for Broker-Dealers, ``F'' for proprietary accounts 
of member firms of the Options Clearing Corporation, ``M'' for CBOE 
market-makers, ``N'' for non-CBOE market-makers, and ``Y'' for 
specialists in an underlying security. The CBOE adopted a related 
order identification rule for market-maker and specialist orders. 
See Securities Exchange Act Release No. 46102 (June 21, 2002), 67 FR 
43692 (June 28, 2002) (SR-CBOE-2002-33).
    \4\ The CBOE applies the $.30 per contract Access Fee for non-
customer RAES orders in options on the Nasdaq 100[reg] Index 
Tracking Stock (``QQQ''), Nasdaq-100[reg] Index Options (NDX), CBOE 
Mini-NDX Index Options (``MNX\SM\''), and European style S&P 
100[reg] Index options (``XEO[reg]'') classes. See Securities 
Exchange Act Release No. 46455 (September 3, 2002), 67 FR 57468 
(September 10, 2002) (SR-CBOE-2002-42).
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    This proposal is related to the fact that the CBOE has begun to 
permit certain broker-dealer orders to be executed on RAES for equity 
option classes.\5\ Having thus extended the benefits of rapid, 
automatic execution to such non-customer orders, the Exchange seeks to 
impose this fee to help allocate to such orders a fair share of the 
related costs of running the RAES and related Exchange systems. The 
CBOE notes in this regard that most index customer orders are already 
assessed a RAES fee of $.25 per contract.\6\ In addition, as noted 
earlier, the CBOE has already adopted the Access Fee for non-customer 
RAES transactions in the QQQ, NDX, MNX, and XEO option classes.\7\
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    \5\ See Securities Exchange Act Release No. 46598 (October 3, 
2002), 67 FR 63478 (October 11, 2002) (SR-CBOE-2002-56).
    \6\ QQQ customer orders are currently exempt from the RAES fee, 
and DJX RAES customer orders are only assessed the fee on the first 
25 contracts.
    \7\ See supra note 4.
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    Under this proposal, the Access Fee would continue to apply to non-
customer RAES options transactions in QQQ, NDX, MNX, and XEO and would 
be extended to non-customer RAES transactions in equity options, as 
well as other option classes when non-customer orders in those classes 
become eligible for execution via RAES.
    The CBOE believes that this fee would help better equalize RAES 
fees between customer and non-customer RAES orders. The CBOE also notes 
that this proposal, like SR-CBOE-2002-42, is modeled on a filing by the 
Pacific Exchange, Inc., which adopted a $.45 per contract surcharge fee 
for all broker-dealer orders executed via its automatic execution 
system.\8\
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    \8\ See Securities Exchange Act Release No. 45662 (March 27, 
2002), 67 FR 16786 (April 8, 2002) (SR-PCX-2002-10).
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2. Statutory Basis
    The CBOE believes the proposed rule change is consistent with 
Section 6(b) of the Act \9\ in general, and furthers the objectives of 
Section 6(b)(4) \10\ in particular, in that it is designed to provide 
for the equitable allocation of reasonable dues, fees, and other 
changes among CBOE members.
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    \9\ 15 U.S.C. 78f(b)
    \10\ 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 proposed rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \11\ and subparagraph (f)(2) of Rule 19b-4 
thereunder \12\ because it establishes or changes a due, fee, or other 
charge imposed by the Exchange. 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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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 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, 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 also will be available for inspection and copying at the 
principal office of the CBOE. All submissions should refer to File No. 
SR-CBOE-2002-68 and should be submitted by January 17, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\

    \13\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 02-32732 Filed 12-26-02; 8:45 am]
BILLING CODE 8010-01-P