[Federal Register Volume 68, Number 201 (Friday, October 17, 2003)]
[Notices]
[Pages 59829-59831]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-26285]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48623; File No. SR-CBOE-2003-43]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the Chicago Board Options Exchange, Incorporated To Make Changes to Its 
Fee Schedule Involving the Exchange's Hybrid Trading System and Retail 
Automatic Execution System Orders

October 10, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on October 1, 2003, the Chicago Board Options Exchange, Inc. 
(``CBOE'' or ``Exchange'') submitted to 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. 
On October 7, 2003, the CBOE filed an amendment to the proposed rule 
change. 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.
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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 four changes to its Fee Schedule. The 
first three changes involve fees connected to the Exchange's Hybrid 
trading system. The fourth change involves the access fee for Retail 
Automatic Execution System (``RAES'') orders. The text of the proposed 
rule change, as amended, to the fee schedule is available at the Office 
of the Secretary, 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, as 
amended, 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.

[[Page 59830]]

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

1. Purpose
    The Exchange proposes to make several changes to its Fee Schedule 
involving Hybrid and RAES fees.

Actant Infrastructure User Charge

    The Exchange is providing certain hardware and related maintenance 
needed by Actant, a third party vendor that is providing quoting 
software and a connection to the CBOEdirect system that many CBOE 
members are using to stream quotes to the Hybrid trading system. The 
Exchange provided the hardware and maintenance in order to facilitate 
Actant's service of Exchange members; however, the Exchange wishes to 
recover its costs in doing so. As a result, beginning on October 1, 
2003, all users of Actant software for the Hybrid system will incur a 
$100 per month Exchange user fee. The Exchange states that this fee 
will offset the cost of the hardware and ongoing maintenance that the 
Exchange is incurring in order to facilitate Actant's service.

Market Data User Fee

    The Exchange states that numerous Exchange members making markets 
on the CBOE's trading floor in the Hybrid trading system make use of 
data feeds of underlying market information that are provided by the 
CBOE through its TickerXpress service (``TX''). The Exchange proposes 
to charge a fee of $100 per month to members receiving TX market data 
to compensate the CBOE for providing the infrastructure to make this 
market data available. Alternatively, members may receive TX market 
data from the Exchange that has been enhanced by the data processing 
services of a third party service provider to the Exchange. The 
Exchange proposes to charge a fee of $200 per month to members 
receiving the enhanced TX data to compensate the CBOE for providing the 
infrastructure to make this market data available. The Exchange 
proposes to waive these TX fees through the end of 2003 and to make 
them effective on January 1, 2004.

CBOEdirect Connectivity Fee Waiver

    Currently, the Exchange charges monthly connection fees for users 
of its CBOEdirect electronic trading platform of $900 per month for 
each connection to CBOEdirect through the CBOE Market Interface (CMi) 
and $600 for a connection through the FIX (Financial Information 
Exchange) interface. The Exchange states that these fees help the CBOE 
begin to recover its substantial investment in CBOEdirect.
    However, as the Exchange expands its rollout of the Hybrid trading 
system, which also uses CBOEdirect, the Exchange proposes to waive the 
CBOEdirect connectivity fees for all connections to CBOEdirect for the 
purpose of using the CBOE's Hybrid system effective October 1, 2003. 
The Exchange believes that this wavier will encourage members to begin 
using Hybrid, and help offset the related costs that members must incur 
in order to stream quotes for Hybrid.
    The Exchange will review the subject of this waiver again when it 
conducts next year's budget review of fees.

RAES Access Fee Waiver for Non-Customer Equity Orders Submitted From 
the Trading Floor

    Currently, the Exchange charges a $.30 per contract access fee for 
all Non-Customer orders (i.e., those with an origin code other than 
``C'') entered into RAES.\3\ The Exchange proposes to waive this fee, 
effective October 1, 2003, in cases where a RAES order in an equity 
option class is entered from the Exchange trading floor. In such cases, 
a floor broker, who assumes responsibility for filling such an order in 
exchange for a floor brokerage fee, may have come to believe that his/
her customer will receive a better ``fill'' electronically through 
RAES. However, the Exchange believes that imposing the RAES access fee 
burdens such orders with what is tantamount to a second execution fee 
(in addition to the floor broker's fee). The Exchange does not believe 
that it should place such an additional burden on the best execution of 
such orders. For this reason, the Exchange believes it is fair and 
equitable to waive the fee in such circumstances.
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    \3\ See Securities Exchange Act Release No. 48223 (July 24, 
2003), 68 FR 44978 (July 31, 2003).
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2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act \4\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \5\ in particular, in that it 
is designed to provide for the equitable allocation of reasonable dues, 
fees, and other charges among the CBOE members.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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, as amended, has become effective pursuant 
to Section 19(b)(3)(A)(ii) of the Act \6\ and Rule 19b-4(f)(2) \7\ 
thereunder because it establishes or changes a due, fee, or other 
charge imposed by the CBOE. At any time within 60 days of the filing of 
the proposed rule change, as amended, 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.\8\
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    \6\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \7\ 17 CFR 240.19b-4(f)(2).
    \8\ For purposes of calculating the 60-day abrogation period, 
the Commission considers the period to commence on October 7, 2003, 
the date on which 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-2003-43 and should be submitted by November 7, 2003.


[[Page 59831]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-26285 Filed 10-16-03; 8:45 am]
BILLING CODE 8010-01-P