[Federal Register Volume 69, Number 106 (Wednesday, June 2, 2004)]
[Notices]
[Pages 31145-31146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-12369]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49769; File No. SR-CBOE-2004-13]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change and Amendment No. 1 Thereto by the Chicago Board Options 
Exchange, Inc. Relating to Retroactive Crediting of Certain DPM 
Principal Acting as Agent Order Transaction Fees

May 25, 2004.
    On March 9, 2004, the Chicago Board Options Exchange, Inc. 
(``CBOE'' or ``Exchange'') submitted to the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to change its Fee Schedule to 
retroactively credit Designated Primary Market-Makers (``DPMs'') for 
transaction fees they incur related to the execution of outbound 
``principal acting as agent''

[[Page 31146]]

(``P/A'') Orders,\3\ as defined in the Plan for the Purpose of Creating 
and Operating an Intermarket Option Linkage (the ``Linkage Plan''). On 
March 31, 2004, the CBOE submitted Amendment No. 1 to the proposed rule 
change.\4\ The Federal Register published the proposed rule change, as 
amended, for comment on April 23, 2004.\5\ The Commission received no 
comments on the proposed rule change. This order approved the proposed 
rule change, as amended.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ A ``P/A Order'' is defined as an order for the principal 
account of a Market Maker that is authorized to represent Customer 
orders, reflecting the terms of a related unexecuted Customer order 
for which the Market Maker is acting as agent. See Section 2(16) of 
the Linkage Plan.
    \4\ See Letter from Chris Hill, Attorney, CBOE, to Nancy Sanow, 
Assistant Director, Commission, dated March 26, 2004 (``Amendment 
No. 1''). In Amendment No. 1, the CBOE submitted a new Form 19b-4, 
which replaced and superceded the original filing in its entirety.
    \5\ See Securities Exchange Act Release No. 49575 (April 16, 
2004), 69 FR 22110.
---------------------------------------------------------------------------

    After careful consideration, 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.\6\ In particular, the Commission believes that the proposed 
rule change is consistent with Section 6(b)(4) of the Act,\7\ which 
requires, among other things, that the rules of the Exchange provide 
for the equitable allocation of reasonable dues fees, and other charges 
among its members and issuers and other persons using its facilities.
---------------------------------------------------------------------------

    \6\ In approving this rule, the Commission notes that it has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Commission notes that the proposed rule change, which would 
apply retroactively to July 1, 2003 an existing program that rebates 
transaction and trade match fees that DPMs incur when they trade 
against a customer order that underlies a P/A Order the DPM sent 
through the Intermarket Option Linkage (``Linkage''), and that credits 
the DPMs up to an additional 50% of such transaction and trade match 
fees (the ``50% rebate''),\8\ will offset some of the fees that the 
DPMs have incurred for submitting P/A Orders through the Linkage since 
shortly after the full implementation of the Linkage. Moreover, the 
Commission notes that the proposed rule change clarifies that the DPM 
is eligible for the 50% rebate only when a DPM that sends a P/A Order 
incurs additional fees from another Participant for the execution of 
such a P/A Order, and clarifies that the aggregate amount of the 50% 
rebate for all DPMs will be limited to no more than the total amount of 
fees that the Exchange earns from fees generated by inbound Linkage 
transaction and trade match fees.
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 49341 (March 1, 
2004), 69 FR 10492 (March 5, 2004) (Notice of Filing and Immediate 
Effectiveness of SR-CBOE-2004-08).
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-CBOE-2004-13), as amended, 
be, and it hereby is, approved.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-12369 Filed 6-1-04; 8:45 am]
BILLING CODE 8010-01-P