[Federal Register Volume 69, Number 116 (Thursday, June 17, 2004)]
[Notices]
[Pages 33962-33964]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13637]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49820; File No. SR-BSE-2004-21]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Boston Stock Exchange, 
Inc. Relating to Its Boston Options Exchange Regulation By-Laws

June 7, 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 May 18, 2004, the Boston Stock Exchange, Incorporated (``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 BSE. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend certain sections of the Boston 
Options Exchange Regulation LLC By-Laws relating to the separation of 
duties between the BSE's Chairman and Chief Executive Officer. Proposed 
new language is in italics; proposed deletions are in brackets.
* * * * *

Rules of the Boston Stock Exchange

Boston Options Exchange Regulation LLC By-Laws

Secs. 1-2 no change
Sec. 3
Number of Directors
    The Board shall consist of no fewer than seven nor more than 
thirteen Directors, the exact number to be determined by resolution 
adopted by the BSE Board from time to time. The BSE Board shall appoint 
directors to the BOXR Board, 50% of whom will serve until the first 
annual meeting of the BOXR Board, and 50% of whom will serve until the 
second consecutive annual meeting of the BOXR Board, in accordance with 
Section 5, below. In accordance with Section 4, below, the [Chief 
Executive Officer] Chairman of the BSE will be considered a member of 
the Board of Directors for voting purposes, but not for qualification 
percentage purposes. The General Counsel of the BSE will not be 
considered a member of the Board of Directors for voting purposes or 
qualification percentage purposes.
Sec. 4
Qualifications
    Directors need not be Participants of BOX, or members of BSE. 
Industry Directors must be representatives of the securities industry 
as provided in Article II of the BSE Constitution. At least fifty 
percent (50%) of the Directors will be Public Directors. The Board 
shall include the [Chief Executive Officer] Chairman of the BSE, who 
will not be considered for the purposes of determining the 
qualification percentages for the Board set forth herein. The General 
Counsel of the BSE shall act as an advisor to the Board for all legal 
and regulatory matters, and shall not be a member or director of the 
Board. At least twenty percent (20%) of the Directors (but no fewer 
than two (2) Directors) will be officers or directors of a firm 
approved as a BOX Option Participant. An officer or director of a 
facility of the BSE may serve on the Board of Directors. The term of 
office of a Director shall not be affected by any decrease in the 
authorized number of Directors.
    As soon as practicable, following the annual appointment of 
Directors, the Board shall elect from its members a Chair and Vice 
Chair and such other persons having such titles as it shall deem 
necessary or advisable to serve

[[Page 33963]]

until the next annual appointment or until their successors are chosen 
and qualify. The persons so elected shall have such powers and duties 
as may be determined from time to time by the Board. The Board, by 
resolution adopted by a majority of Directors then in office, may 
remove any such person from such position at any time.
Secs. 5-13 no change
Sec. 14
Committees
    (a)-(c) no change.
    (d) The Board may appoint an Executive Committee, which shall, to 
the fullest extent permitted by Delaware Law and other applicable law, 
have and be permitted to exercise all the powers and authority of the 
Board in the management of the business and affairs of BOXR between 
meetings of the Board. The Executive Committee shall consist of five 
Directors, including at least two Public Directors, and at least one 
Options Participant Director. The [Chief Executive Officer] Chairman of 
the BSE shall be a member of the Executive Committee, and the General 
Counsel of the BSE will act in advisory role to the Executive Committee 
on legal and regulatory matters. Executive Committee members shall hold 
office for a term of one year. At all meetings of the Executive 
Committee, a quorum for the transaction of business shall consist of a 
majority of the Executive Committee, including at least fifty percent 
of the Public Directors and at least one Options Participant Director.
* * * * *

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

    In its filing with the Commission, 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. 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 rule change is to amend certain sections of the 
Boston Options Exchange Regulation LLC (``BOXR'') By-Laws concerning 
the position of the BSE Chief Executive Officer, in light of recent 
changes to the BSE Constitution providing for the separation of the 
Chairman and Chief Executive Officer roles.
    On April 23, 2004, the Commission approved SR-BSE-2004-10, and 
Amendment No. 1 thereto.\3\ That rule change permits the BSE Board of 
Governors to separate the positions of Exchange Chairman and Chief 
Executive Officer. The separation allows for the independence of the 
Exchange's regulatory function from its marketplace function. In 
particular, the Exchange's Constitution sets forth that the Chairman 
would, among other duties, be responsible for the management of the 
regulatory affairs of all exchange facilities, subsidiaries, or other 
legal entities to which the Exchange is a party. The Chief Executive 
Officer's duties would primarily be limited to responsibilities for the 
management and administration of the Exchange's marketplace functions, 
and would not include any involvement in the Exchange's regulatory 
affairs, including the regulatory affairs of any exchange facilities, 
subsidiaries, or other legal entities to which the Exchange is a party.
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    \3\ See Securities Exchange Act Release No. 49611, 69 FR 23833 
(April 30, 2004).
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    At the time the BOXR By-Laws were drafted, the Exchange's Chairman 
and Chief Regulatory Officer were the same person, as the Exchange's 
Constitution then mandated. Since the positions have since been 
separated, in accordance with recent BSE Constitutional changes, the 
Exchange is now seeking to replace ``Chief Executive Officer'' with 
``Chairman'' in the BOXR By-Laws. This change would not only be 
consistent with the current changes to the BSE Constitution but with 
the purpose of BOXR, as a subsidiary of the Exchange responsible for 
regulatory oversight of the Boston Options Exchange, a facility of the 
BSE.
2. Statutory Basis
    The statutory basis for the proposed rule change is the requirement 
under Section 6(b)(1) of the Act \4\ that an exchange be organized and 
have the capacity to be able to carry out the purposes of the Act; the 
requirement under Section 6(b)(3) \5\ that the rules of an exchange 
assure a fair representation of its members in the selection of its 
directors and administration of its affairs; and the requirement under 
Section 6(b)(5) \6\ to have rules that are designed to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating securities transactions, to remove 
impediments to perfect the mechanism of a free and open market and a 
national market system and, in general, to protect investors and the 
public interest.
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    \4\ 15 U.S.C. 78f(b)(1).
    \5\ 15 U.S.C. 78f(b)(3).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    BSE does not believe that the proposed rule change will result in 
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

    Written comments were neither solicited nor received.

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

    The foregoing rule change will become effective upon filing 
pursuant to Section 19(b)(3)(A)(i) of the Act \7\ and subparagraph 
(f)(1) of Rule 19b-4 under the Act because it constitutes a stated 
policy, practice or interpretation with respect to the meaning, 
administration or enforcement of an existing rule.\8\ 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.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(i).
    \8\ 17 CFR 240.19b-4(f)(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 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-CHX-2004-10 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary,

[[Page 33964]]

Securities and Exchange Commission, 450 Fifth Street, NW., Washington, 
DC 20549-0609.
    All submissions should refer to File Number SR-BSE-2004-21. 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 Section, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
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-
2004-21 and should be submitted on or before July 8, 2004.

    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. 04-13637 Filed 6-16-04; 8:45 am]
BILLING CODE 8010-01-P