[Federal Register Volume 69, Number 144 (Wednesday, July 28, 2004)]
[Notices]
[Pages 45102-45103]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17114]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50048; File No. SR-CBOE-2004-40]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the Chicago 
Board Options Exchange, Incorporated Relating To Extension of Linkage 
Fee Pilot Program

July 20, 2004.
    Pursuant to section 19(b)(1) of the Securities Exchange Act 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 7, 2004, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' 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 the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons and is approving the 
proposed rule change on an accelerated basis.
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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 Exchange proposes to extend for one year until July 31, 2005, 
the current pilot program applicable to Options Linkage (``Linkage'') 
fees.
    The proposed fee schedule is available at the Exchange 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 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 CBOE 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 Exchange's current fee structure for Principal (``P'') and 
Principal Acting as Agent (``P/A'') Orders \3\ executed on the Exchange 
is operating under a pilot

[[Page 45103]]

program scheduled to expire on July 31, 2004.\4\ Currently, because all 
Linkage orders received by the CBOE are for the account of a broker-
dealer market maker on another exchange, the fees applicable to P and 
P/A Orders are the same as fees applicable to market makers on other 
exchanges that submit orders to the CBOE outside of the Linkage, taking 
into account how those orders are handled at the CBOE. The Exchange now 
proposes extending the pilot program to July 31, 2005.
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    \3\ Under the Plan for the Purpose of Creating and Operating an 
Options Intermarket Linkage (``Plan'') and Exchange Rule 6.80(12) 
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 specialist (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 
an Eligible Market Maker and is not a P/A Order; and
    (iii) ``Satisfaction Order,'' which is an order sent through the 
Linkage to notify a member of another Participant Exchange of a 
Trade-Through and to seek satisfaction of the liability arising from 
that Trade-Through.
    \4\ See Securities Exchange Act Release No. 49172 (February 2, 
2004), 69 FR 6008 (February 9, 2004) (SR-CBOE-2004-06).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
section 6(b) of the Act \5\ in general and furthers the objectives of 
section 6(b)(4) of the Act \6\ in particular, in that it is an 
equitable allocation of reasonable dues, fees, and other charges.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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
    The Exchange has neither solicited nor received any comments on 
this 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. Comments may be submitted by any of 
the following methods:
    Electronic comments:
     Use the Commission's Internet comment from (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-CBOE-2004-40 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-CBOE-2004-40. 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 offices of the 
Exchange. 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-
CBOE-2004-40 and should be submitted on or before August 18, 2004.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    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,\7\ and, in particular, with the requirements of section 6(b) 
of the Act \8\ and the rules and regulations thereunder. The Commission 
finds that the proposed rule change is consistent with section 6(b)(4) 
of the Act,\9\ which requires that the rules of the Exchange provide 
for the equitable allocation or reasonable dues, fees and other charges 
among its members and other persons using its facilities. The 
Commission believes that the extension of the Linkage fee pilot until 
July 31, 2005, will give the Exchange and the Commission further 
opportunity to evaluate whether such fees are appropriate.
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    \7\ 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).
    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
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    The Commission finds good cause, pursuant to section 19(b)(2) of 
the Act, \10\ for approving the proposed rule change prior to the 
thirtieth day after the date of publication of the notice of the filing 
thereof in the Federal Register. The Commission believes that granting 
accelerated approval will preserve the Exchange's existing pilot 
program for Linkage fees without interruption as the CBOE and the 
Commission further consider the appropriateness of Linkage fees.
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    \10\ 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 
\11\ that the proposed rule change (SR-CBOE-2004-40) is hereby approved 
on an accelerated basis for a pilot period to expire on July 31, 2005.
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    \11\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3 (a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-17114 Filed 7-27-04; 8:45 am]
BILLING CODE 8010-01-M