[Federal Register Volume 68, Number 169 (Tuesday, September 2, 2003)]
[Notices]
[Pages 52252-52254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-22235]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48396; File No. SR-BSE-2003-12]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the Boston Stock Exchange, Inc. Relating to Its Transaction and Floor 
Operations Fee Schedules

August 22, 2003.
    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 July 1, 2003, the Boston Stock Exchange, Inc. (``BSE'' 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 BSE. On August 5, 
2003, the BSE filed an amendment to the proposal.\3\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, 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 John Boese, Vice President Legal and 
Compliance, BSE, to Ms. Nancy Sanow, Assistant Director, Division of 
Market Regulation, Commission, dated August 14, 2003 (``Amendment 
No. 1''). In Amendment No. 1, the BSE added purpose language that 
elaborates on the overarching purpose of the rulefiling, inserted 
purpose language to clarify that the rulefiling will apply solely to 
BSE members, and provided purpose language that describes the 
necessity of the fee change to offset systems related expenses 
incurred by the Exchange in providing facilities for its member 
firms to provide layoff services to the BSE specialist community. 
For purposes of calculating the 60-day abrogation period, the 
Commission considers the period to have commenced on August 5, 2003.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The BSE proposes to amend its Floor Operations Fees and Transaction 
Fees schedules. The text of the proposed rule change is below. Proposed 
new language is italicized; proposed deletions are in brackets.
* * * * *

        FLOOR OPERATION FEES
 
(1) Occupancy/Technology Occupancy    $500.00 per post per month.
 Fee.
Specialist/Floor Trader Technology    $500.00 per BEACON terminal per month.
 Fee.
Floor Broker Technology Fee.........  $100.00 per BEACON terminal per month.
Security Routing Fee................  $500.00 per month per BEACON user-ID that has stocks routed to it.
Floor Facility Fee..................  $250.00 per person that regularly accesses the trading floor.
Electronic Trading Permit Fee.......  $1,000.00 per trader trading from a remote location per month.
(2) Specialist Post Clearing and      $750.00 per specialist book for first 3 books per firm.
 Cashiering Post Cashiering Fee.      $100.00 per specialist book for any books in excess of 3 per firm.
Clearing Fee........................  $.05 per trade.
(3) Specialist Trade Processing Fees/ No Charge.
 Credits Pre-Opening Trades.
Trades in CTA Securities ranked       No Charge (BSE executions only).
 1,001 and greater.
Round lot...........................  $.50 per order.
Odd Lot Trades (includes CSI Issues)  $.05 per order ($400 maximum per account).
Trading Account Trades..............  $1.50 per order.

[[Page 52253]]

 
ETF Trade Credit....................  $2.00 per trade (maximum annual credit capped at total amount paid in
                                       upfront annual registration fees).
Revenue Sharing Program.............  100% (50% after 1st 6 months) non specialist revenue and 50% CTA revenue
                                       will be shared on all floor broker generated volume in CTA 501+ issues.
 
                                                  * * * * * * *
(4) Other Charges ITS User Fee......  $[.003] $.0018 per share on [net] outbound specialist trades [(charge for
                                       outgoing trades offset by cumulative credit for incoming trades)]. No
                                       charge for non-specialist firms.
Quotation Services..................  Member assumes 100% of cost.
Specialist Margin Account Financing.  Charged daily at current broker call rate.
Solely Listed Issue Credit..........  $50.00 Credit per issue traded.
Miscellaneous Charges...............  At cost for phone, postage, courier service, fax usage, after hours BSE
                                       staff assistance and other applicable items.
Late Fees...........................  1.5% will be charged on outstanding balances as of the last calendar day
                                       of the month.
 
          TRANSACTION FEES
 
1. Trade Recording and Comparison
 Charges
    [sbull] All BSE executions up to  No Charge.
     and including 2,500 shares.
    [sbull] All BSE single-sided      No Charge.
     executions from 2,501-5,000
     shares.
    [sbull] All other executions
     (excluding automated non-BSE
     executions)
        First 2,500 trades per month  $.29 per 100 shares
        Next 2,500 trades per month.  $.25 per 100 shares
        Next 2,500 trades per month.  $.15 per 100 shares
        Over 7,500 trades per month.  $.04 per 100 shares
        Floor Brokered non-BSE        $.05 per 100 shares
         executions.
        Automated non-BSE executions  [$.05 per 100 net non-BSE automated shares].
                                      $.025 per 100 shares for non-BSE automated shares offset by automated
                                       incoming volume routed to BSE
                                      $.05 per 100 shares for non-BSE automated shares in excess of automated
                                       incoming volume routed to BSE.
        Maximum charge per side       $50.00
         (single-sided).
        Maximum charge per side       $25.00
         (cross).
    (all trades accumulate for
     volume discounts)
2. Value Charges
 
                                                 * * * * * * *
REVENUE SHARING:
    TAPE A--Should the Exchange generate its monthly Tape A revenue target, 50% of any amount in excess of this
     target amount will be shared on a pro-rata basis with those firms that generate a minimum of $50,000 in
     overall monthly automated transaction fees.
    TAPE B--50% of NET Tape B revenues will be shared on a per executed trade routed to the BSE.
 

* * * * *

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 BSE 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 and is set forth in Sections A, B, and C below.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's 
Floor Operation Fees schedule with the overall goal of increasing the 
number of stocks traded on the BSE. The Exchange is proposing to 
eliminate the credit it offers to specialists for inbound Intermarket 
Trading System (``ITS'') volume and to also reduce the fee that it 
charges to specialists to execute outbound volume through the same 
system. The credit was initially implemented to induce specialists to 
attract volume to the BSE through ITS by openly displaying their limit 
orders. Since the initial implementation of this credit, overall market 
conditions have changed and, more importantly, the Limit Order Display 
Rule, SEC Rule 11Ac1-4,\4\ now requires that specialists display their 
limit orders. The Exchange realizes that eliminating this credit may 
increase the overall cost to transact business on the BSE for some 
specialists and, as a result, further proposes to reduce the cost to 
transact outbound ITS volume from $.003/share to $.0018/share to offset 
this cost.
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    \4\ 17 CFR 240.11Ac1-4.
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    The Exchange also proposes to implement a credit program for its 
specialists by which, for the first six (6) months of the program, the 
BSE will credit back 100% of the Trade Recording and Value Charge 
revenue it generates on BSE executed Floor-Brokered trades in the 
issues ranked 501

[[Page 52254]]

or greater in listed securities volume reported to the Consolidated 
Tape Association (``CTA''). In addition, as part of the credit program, 
the BSE proposes to include 50% Tape Revenue sharing for revenue 
generated on the same Floor-Brokered volume.\5\ After the first six (6) 
months of the program, the credit of 100% of the Trade Recording and 
Value Charge revenue will be reduced to 50%. CTA revenue sharing will 
remain at the current rate of 50%. The purpose of the credit program 
for the specialists is to acknowledge the importance of their 
participation in the Exchange's overall initiative by implementing 
incentives for specialists to increase the number of issues, and 
related executions, traded on the BSE.
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    \5\ The BSE represented to the Commission that the proposed BSE 
specialist Revenue Sharing Program will not result in a market data 
revenue rebate that exceeds 50% of Tape A or B market data revenue. 
See 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). 
The BSE represented that the instant proposal simply clarifies the 
BSE's existing Revenue Sharing arrangement, which does not 
specifically indicate to whom market data revenue rebates are to be 
awarded. The Commission has relied on the BSE's representations in 
not abrogating the proposed fee filing. Telephone conference between 
John Boese, Vice President Legal and Compliance, BSE, and 
Christopher B. Stone, Special Counsel, Division of Market 
Regulation, Commission (August 22, 2003).
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    Additionally, the BSE also proposes to amend its Transaction Fees 
schedule by revising the rate at which it charges member firms that 
route orders to the BSE and also provide BSE specialists with the 
capability of routing order flow to other exchanges (for example, 
through DOT \6\ terminals). A firm may currently use its automated 
inbound volume that it routes to the BSE to qualify for reduced rates 
on outbound volume executed through its DOT terminals and will continue 
to be able to do so. However, a firm that provides automated inbound 
volume to the BSE, will now be charged rates on its outbound volume (up 
to the amount of inbound volume routed to the BSE) of $.025/100 shares. 
Rates on outbound volume executed in excess of automated inbound volume 
routed to the BSE will continue to be charged at the rate of $.05/100 
shares, as previously established. These fees are necessary to offset 
systems related expenses incurred by the Exchange in providing 
facilities for its member firms to provide layoff services to the BSE 
specialist community.
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    \6\ DOT is the New York Stock Exchange's (``NYSE'') Designated 
Order Turnaround System, an application that permits NYSE members to 
route market orders and day limit orders on an automated basis 
directly to the appropriate specialist on the NYSE trading floor. 
See Securities Exchange Act Release No. 16649 (March 13, 1980), 45 
FR 18541.
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2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act,\8\ in particular, in that it 
is an equitable allocation of reasonable dues, fees, and other charges 
among Exchange 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 inappropriate burden on competition.

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

    No written comments were either solicited or received.

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

    The foregoing proposed rule change has been designated as a fee 
change pursuant to Section 19(b)(3)(A)(ii) of the Act \9\ and Rule 19b-
4(f)(2) thereunder.\10\ Accordingly, the proposal will take effect upon 
filing with the Commission. 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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    \9\ 15 U.S.C. 78s(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 proposal 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 BSE. All 
submissions should refer to File No. SR-BSE-2003-12 and should be 
submitted by September 23, 2003.

    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. 03-22235 Filed 8-29-03; 8:45 am]
BILLING CODE 8010-01-P