[Federal Register Volume 69, Number 112 (Thursday, June 10, 2004)]
[Notices]
[Pages 32640-32642]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13171]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49806; File No. SR-BSE-2004-22]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Boston Stock Exchange, 
Inc. To Extend a Pilot Program Under Which it Lists Options on Selected 
Stocks Trading Below $20 at One-Point Intervals Until June 5, 2005

June 4, 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 June 3, 2004, 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 and 
II below, which Items have been prepared by BSE. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

---------------------------------------------------------------------------

[[Page 32641]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The BSE proposes to extend its pilot program under which it lists 
options on selected stocks trading below $20 at $1 strike price 
intervals (``Pilot Program'') until June 5, 2005. The text of the 
proposed rule change is available at the Office of the Secretary, the 
BSE, and 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 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. The BSE 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 purpose of the proposed rule change is to extend the Pilot 
Program under the Rules of the Boston Options Exchange (the ``BOX 
Rules'') relating to the interval between strike prices of series of 
options on individual stocks. Chapter IV, Section 6 of the Box Rules 
establishes guidelines regarding the addition of series for trading on 
BOX. The BOX Rules include a Pilot Program that expires on June 5, 
2004, which allows Boston Options Exchange Regulation, LLC (``BOXR''), 
the wholly owned subsidiary of the BSE that has been delegated 
regulatory authority over BOX,\3\ list options on up to five underlying 
equities trading below $20 at one-point intervals and to list $1 strike 
prices on any equity option included in the $1 strike price pilot 
program of any other options exchange.\4\ This proposal seeks to extend 
the operation of the Pilot Program until June 5, 2005.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No.49065 (January 13, 
2004) 69 FR 2768 (January 20, 2004).
    \4\ See Securities Exchange Act Release No. 49292 (February 20, 
2004), 69 FR 8993 (February 26, 2004) (Notice of Filing and 
Immediate Effectiveness of File No. SR-BSE-2004-01).
---------------------------------------------------------------------------

    In sum, for options selected for the Pilot Program, BOXR may list 
strike prices at $1 intervals from $3 to $20, but no $1 strike price 
may be listed that is greater than $5 from the underlying stock's 
closing price in its primary market on the previous day. BOXR also may 
list $1 strikes on any other option class designated by another 
securities exchange that employs a similar Pilot Program under their 
respective rules. BOXR cannot list long-term option series 
(``LEAPS''[reg]) at $1 strike price intervals for any class selected 
for the Pilot Program. BOXR also is restricted from listing any series 
that would result in strike prices being $0.50 apart.
2. Statutory Basis
    The BSE believes that its proposal is consistent with Section 6(b) 
of the Act,\5\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\6\ specifically, in that it is designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and is not designed to permit unfair discrimination between 
customers, brokers, or dealers, or to regulate by virtue of any 
authority matters not related to the administration of the BSE.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The BSE 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

    The BSE has neither solicited nor received comments on the proposed 
rule change.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \7\ and subparagraph (f)(6) of Rule 19b-4 \8\ 
thereunder because it does not: (i) Significantly affect the protection 
of investors or the public interest; (ii) impose any significant burden 
on competition; (iii) become operative for 30 days from the date on 
which it was filed, or such shorter time as the Commission may 
designate; and BSE has given the Commission written notice of its 
intention to file the proposed rule change at least five business days 
prior to filing. At any time within 60 days of the filing of such 
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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    Under Rule 19b-4(f)(6)(iii) of the Act,\9\ the proposal does not 
become operative for 30 days after the date of its filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest and BSE is required to 
give the Commission written notice of its intention to file the 
proposed rule change at least five business days prior to filing. BSE 
has requested that the Commission waive the five-day pre-filing notice 
requirement and 30-day operative delay so that the Pilot Program may 
continue without interruption after it would have otherwise expired on 
June 5, 2004. For this reason, the Commission, consistent with the 
protection of investors and the public interest, has determined to 
waive the five-day pre-filing notice requirement and 30-day operative 
delay,\10\ and, therefore, the proposal is effective and operative upon 
filing with the Commission.\11\
---------------------------------------------------------------------------

    \9\ 17 CFR 240.19b-4(f)(6)(iii).
    \10\ For purposes only of waiving the five-day pre-filing notice 
requirement and 30-day operative delay for this proposal, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \11\ In the event that the BSE proposes to extend the Pilot 
Program beyond June 5, 2005, expand the number of options eligible 
for inclusion in the Pilot Program, or seek permanent approval of 
the Pilot Program, it should submit a Pilot Program report to the 
Commission along with the filing of such proposal. The report must 
cover the entire time the Pilot Program was in effect, and must 
include: (1) Data and written analysis on the open interest and 
trading volume for options (at all strike price intervals) selected 
for the Pilot Program; (2) delisted options series (for all strike 
price intervals) for all options selected for the Pilot Program; (3) 
an assessment of the appropriateness of $1 strike price intervals 
for the options the BSE selected for the Pilot Program; (4) an 
assessment of the impact of the Pilot Program on the capacity of the 
BSE's, OPRA's, and vendors' automated systems; (5) any capacity 
problems or other problems that arose during the operation of the 
Pilot Program and how the BSE addressed them; (6) any complaints 
that the BSE received during the operation of the Pilot Program and 
how the BSE addressed them; and (7) any additional information that 
would help to assess the operation of the Pilot Program. The 
Commission expects the BSE to submit a proposed rule change at least 
60 days before the expiration of the Pilot Program in the event the 
BSE wishes to extend, expand, or seek permanent approval of the 
Pilot Program.
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule

[[Page 32642]]

change is consistent with the Act. Comments may be submitted by any of 
the following methods:
    Electronic comments:
     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-BSE-2004-22 on the subject line.
    Paper comments:
     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609. All submissions should refer to File Number 
SR-BSE-2004-22. 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, please use only one method. The Commission 
will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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, 450 Fifth Street, NW., Washington, DC 20549. Copies of 
such filing also will be available for inspection and copying at the 
principal office of BSE. All comments received will be posted without 
change; the Commission does not edit personal identifying information 
from submissions. You should submit only information that you wish to 
make available publicly. All submissions should refer to File Number 
SR-BSE-2004-22 and should be submitted on or before July 1, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

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

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-13171 Filed 6-9-04; 8:45 am]
BILLING CODE 8010-01-P