[Federal Register Volume 69, Number 40 (Monday, March 1, 2004)]
[Notices]
[Pages 9655-9657]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-4429]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49300; File No. SR-BSE-2004-07]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Amendment No. 
1 Thereto by the Boston Stock Exchange, Inc. Relating to the Extension 
of a Linkage Fee Pilot Program

February 23, 2004.
    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 February 11, 2004, the Boston Stock Exchange, Inc. (``Exchange'' or 
``BSE'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. On February 
20, 2004, the BSE filed Amendment No. 1 to the proposed rule change.\3\ 
The Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons and is 
approving the proposed rule change, as amended, on an accelerated 
basis, until July 31, 2004.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from John A. Boese, Assistant Vice President, 
Legal and Compliance, BSE, to Nancy J. Sanow, Assistant Director, 
Commission, dated February 19, 2004 (``Amendment No. 1''). In 
Amendment No. 1, the Exchange made technical corrections to the 
proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The BSE proposes to extend the current pilot program applicable to 
Options Intermarket Linkage (``Linkage'') fees \4\ for six months until 
July 31, 2004.
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    \4\ See Exchange Act Release No. 49066 (January 13, 2004), 69 FR 
2773 (January 20, 2004) (SR-BSE-2003-17) (Approving Linkage fees on 
a pilot basis to expire January 31, 2004).
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    The proposed fee schedule is available at the Exchange and at the 
Commission.

[[Page 9656]]

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 III 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 BSE proposes to extend the current pilot program for the 
effectiveness of its Linkage fees on its Boston Options Exchange 
(``BOX'') facility through July 31, 2004. BOX's current fee structure 
for Principal (``P'') and Principal Acting as Agent (``P/A'') orders 
\5\ executed on BOX is operating under a pilot program which expired on 
January 31, 2004.\6\ Because all Linkage Orders received by BOX are for 
the account of a market maker on another exchange, the fees applicable 
to P and P/A Orders would be the same as fees applicable to market 
makers on other exchanges that submit orders to BOX outside of Linkage. 
The side of a BOX trade opposite an inbound P or P/A order would be 
billed normally as any other BOX trade. Also, consistent with the 
Linkage Plan, no fees would be charged to a party sending a 
Satisfaction request (``S'' order) to BOX. However, a fee would be 
charged to the BOX Options Participant that was responsible for the 
trade-through that caused the S order to be sent.
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    \5\ Under the Options Intermarket Linkage Plan (``Plan'' or 
``Linkage Plan'') and Chapter XII of the BOX Rules, which tracks the 
language of the Plan, a ``Linkage Order'' means an Immediate or 
Cancel order routed through the Linkage as permitted under the Plan. 
There are three types of Linkage orders:
    (i) ``P/A Order,'' which is an order for the principal account 
of a Market Maker (or equivalent entity on another Participant 
Exchange that is authorized to represent Public Customer orders), 
reflecting the terms of a related unexecuted Public Customer order 
for which the specialist is acting as agent;
    (ii) ``P Order,'' which is an order for the principal account of 
a market maker (or equivalent entity on another Participant 
exchange) and is not a P/A Order; and
    (iii) ``Satisfaction Order,'' which is an order sent through the 
Linkage to notify a Participant Exchange of a Trade-Through and to 
seek satisfaction of the liability arising from that Trade-Through.
    \6\ See supra note 4.
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    The BSE now proposes to extend the pilot program to July 31, 2004, 
and have the requested extension applied retroactively to February 1, 
2004, in order to remain consistent with the other options exchanges 
concerning these fees. The Exchange notes that BOX did not commence 
trading until February 6, 2004, and therefore the Linkage fees would 
not be applicable until that date.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with section 
6(b) of the Act,\7\ in general, and section 6(b)(4),\8\ in particular, 
in particular, in that it provides for the equitable allocation of 
reasonable dues, fees, and other charges among its 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 that is 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. 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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-BSE-2004-07. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review your comments more efficiently, comments should be sent in 
hardcopy or by e-mail but not by both methods. 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 be submitted by March 22, 2004.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change and Amendment No. 1

    After careful consideration, the Commission finds that the proposed 
rule change, as amended, is consistent with the requirements of the Act 
and the rules and regulations thereunder, applicable to a national 
securities exchange,\9\ and, in particular, with the requirements of 
section 6(b) of the Act \10\ and the rules and regulations thereunder. 
The Commission finds that the proposed rule change, as amended, is 
consistent with section 6(b)(4) of the Act,\11\ which requires that the 
rules of the Exchange provide for the equitable allocation of 
reasonable dues, fees, and other charges among its members and other 
persons using its facilities. The Commission believes that the 
extension of the Exchange's Linkage fee pilot program until July 31, 
2004 will give the Exchange and the Commission opportunity to evaluate 
whether such fees are appropriate.
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    \9\ In approving this rule, the Commission notes that it has 
considered its impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
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    The BSE has requested that the Commission approve the extension of 
the pilot retroactively to February 1, 2004. The Commission notes that 
BOX did not commence trading until February 6, 2004 and, therefore, the 
Linkage fees would not be applicable until that date. The Commission 
believes that applying the fees retroactively will enable BOX to charge 
fees for Linkage Orders in a manner consistent with the charges for 
Linkage fees imposed pursuant to the rules of the other options 
exchanges, which were previously approved by the Commission.
    The Commission finds good cause, pursuant to section 19(b)(2) of 
the Act,\12\ for approving the proposed rule change, as amended, prior 
to the thirtieth day after the date of publication of the notice of the 
filing thereof in the

[[Page 9657]]

Federal Register. The Commission believes that granting accelerated 
approval of the proposed rule change will allow the Exchange to 
implement its existing pilot program for Linkage fees as the BSE and 
the Commission consider the appropriateness of Linkage fees.
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    \12\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\13\ that the proposed rule change (SR-BSE-2004-07), as amended, is 
hereby approved on an accelerated basis for a pilot period to expire on 
July 31, 2004.
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    \13\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-4429 Filed 2-27-04; 8:45 am]
BILLING CODE 8010-01-P