[Federal Register Volume 69, Number 177 (Tuesday, September 14, 2004)]
[Notices]
[Pages 55480-55482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2181]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50322; File No. SR-BSE-2004-41]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the Boston Stock Exchange, Inc. Relating to Fees Applicable to Newly 
Listed Classes and New Market Maker Positions in Currently Listed 
Classes on the Boston Options Exchange Facility

September 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 August 30, 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, II, 
and III below, which Items have been prepared by the Exchange. On 
September 2, 2004, the Exchange submitted Amendment No. 1 to the 
proposal.\3\ The proposed rule change has been filed by the Exchange as 
establishing or changing a due, fee, or other charge under Section 
19(b)(3)(A)(ii) of the Act \4\ and Rule 19b-4(f)(2) thereunder,\5\ 
which renders the proposal effective upon filing with the Commission. 
The Commission is publishing this notice to solicit comments on the 
proposed rule from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Annah Y. Kim, Chief Regulatory Officer, 
Boston Options Exchange Regulation, BSE, to Nancy Sanow, Assistant 
Director, Division of Market Regulation, Commission, dated September 
1, 2004 (``Amendment No. 1''). In Amendment No. 1, the Exchange 
revised the filing to clarify the text of the proposed rule change.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Fee Schedule for the Boston 
Options Exchange \6\ to allow the Exchange to take into account newly 
listed classes and new market maker positions in currently listed 
classes. Newly listed classes are classes not traded by BOX Market 
Makers on the date new market maker appointments are made in such 
classes; currently listed classes are classes traded by BOX Market 
Makers on the date new market maker appointments are made in such 
classes. The text of the proposed rule change appears below. Proposed 
new text is in italics and language to be deleted is in brackets.
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    \6\ http://www.bostonoptions.com/pdf/ FeeFilingSECofficial.pdf 
(accessed Sept. 7, 2004).
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BOSTON OPTIONS EXCHANGE FACILITY FEE SCHEDULE

* * * * *
Sec. 3 Market Maker Trading Fees
    a. No change.
    b. Minimum Activity Charge (``MAC'')
* * * * *
1. MAC ``Levels''
    a. For Classes that have been trading on any options exchange for 
at least six calendar months
    The table below provides the MAC for each of the six ``categories'' 
of options classes listed by BOX. The category for each class is 
determined by its total trading volume across all U.S. options 
exchanges as determined by OCC data. The classifications will be 
adjusted at least twice annually (in January and July, based on the 
average daily volume for the preceding six month period).

------------------------------------------------------------------------
                                                        MAC per Market
                                   OCC average daily       Maker per
         Class category           volume  (    appointment per
                                     of contracts)           month
------------------------------------------------------------------------
A...............................  >100,000..........             $15,000
B...............................  50,000 to 99,999..               3,000
C...............................  25,000 to 49,999..               2,000
D...............................  10,000 to 24,999..                 750
E...............................  5,000 to 9,999....                 250
F...............................  Less than 5,000...                 100
------------------------------------------------------------------------

    b. For Classes that have been trading for less than six calendar 
months
    A class will not be placed into a MAC category [A MAC will not be 
applied] until a class has been trading on any options exchange for a 
full calendar month. After a class has been trading for a full calendar 
month, the MAC category for such class will be determined, applying the 
criteria set forth in the table above, based on the average daily 
volume for such full calendar month across all U.S. options exchanges 
as determined by OCC data. The classification will be adjusted at the 
beginning of each new calendar month thereafter based on the average 
daily trading volume for the previous calendar months in which the 
options class was traded for the entire month, until the class has been 
trading for six full calendar months. Thereafter, the classification 
will be adjusted at least twice annually (in January and July, based on 
the average daily volume for the preceding six month period) as set 
forth in subsection 1.a. above. Until an options class is placed in a 
MAC category, only per contract trade execution fees will apply to 
trades in that class.
2. MAC ``Adjustments''
    [The MAC will not be applied during the first three calendar months 
following launch.] With respect to market makers appointed to classes 
traded by BOX Market Makers on the date of such appointment, if the 
market maker is not already a BOX Market Maker in at least one other 
class, the MAC will be applied the earlier of either

[[Page 55481]]

(i) the date the Market Maker commences quoting the class, or (ii) 
three months after the date of such appointment. However, if the market 
maker is already a BOX Market Maker in at least one other class, the 
MAC will not be applied until the earlier of either (i) the date the 
Market Maker commences quoting the class, or (ii) the eleventh trading 
day after the date of such appointment.
    With respect to market makers appointed to classes not traded by 
BOX Market Makers on the date of such appointment, if the market maker 
is not already a BOX Market Maker in at least one other class, the MAC 
will be applied the earlier of either (i) the date the Market Maker 
commences quoting the class, or (ii) three months after the date of 
such appointment. However, if the market maker is already a BOX Market 
Maker in at least one other class, the MAC will be applied the date the 
class is listed on BOX.
    Any MAC that becomes applicable on a day other than the first 
trading day of a calendar month is applied on a pro rata basis based on 
the number of trading days in that month for which the class was traded 
on BOX.
    Furthermore, the MAC will be ``indexed to BOX's overall market 
share as determined by OCC clearing volumes. At the beginning of each 
calendar month, BOX will calculate its market share for the previous 
month (market share equals total BOX traded volume divided by the total 
OCC cleared volume for the classes that BOX has listed). If BOX's 
overall market share is less than 10%, BOX will reduce the MAC 
applicable for each Market Maker according to the following table.

------------------------------------------------------------------------
            BOX Market Share                    MAC Applicable Rate
------------------------------------------------------------------------
0% to 4.99%.............................  33.3%
5% to 9.99%.............................  66.7%
10% and more............................  full MAC
------------------------------------------------------------------------

    These adjustments are subject to subsection 1.b. above.
    c. Volume discount on total volume traded across all assigned 
classes (calculated on monthly basis)
    No change.
* * * * *

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 Exchange 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 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 purpose of the proposed rule change is to allow the Exchange to 
adjust the application of the minimum activity charge (the ``MAC'') for 
newly listed classes and new market maker positions in currently listed 
classes as follows:
    With respect to market makers appointed to classes traded by BOX 
Market Makers on the date of such appointment, if the market maker is 
not already a BOX Market Maker in at least one other class, the MAC 
will be applied the earlier of either (i) the date the Market Maker 
commences quoting the class, or (ii) three months after the date of 
such appointment. However, if the market maker is already a BOX Market 
Maker in at least one other class, the MAC will not be applied until 
the earlier of either (i) the date the Market Maker commences quoting 
the class, or (ii) the eleventh trading day after the date of such 
appointment.
    With respect to market makers appointed to classes not traded by 
BOX Market Makers on the date of such appointment, if the market maker 
is not already a BOX Market Maker in at least one other class, the MAC 
will be applied the earlier of either (i) the date the Market Maker 
commences quoting the class, or (ii) three months after the date of 
such appointment. However, if the market maker is already a BOX Market 
Maker in at least one other class, the MAC will be applied the date the 
class is listed on BOX.
    Any MAC that becomes applicable on a day other than the first 
trading day of a calendar month is applied on a pro rata basis based on 
the number of trading days in that month for which the class was traded 
on BOX.
    These adjustments are subject to Section 3.b.1.b of the Fee 
Schedule which provides that until an options class is placed in a MAC 
category, only per contract trade execution fees will apply to trades 
in that class.
    The purpose of the proposed rule is also to clarify that a class 
will not be placed into a MAC category until such class has been 
trading on any options exchange for at least six calendar months.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act \7\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \8\ in particular, in that 
it provides for the equitable allocation of reasonable dues, fees and 
other charges among Exchange members. The Exchange believes that it is 
appropriate to adjust the application of the MAC for certain newly 
created market maker positions in order to avoid applying a minimum 
trading fee before the market maker has commenced trading. However, 
with respect to newly listed classes, market makers who already have 
experience trading on BOX are expected to commence trading on the date 
the class is listed on BOX.
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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 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 comments on the 
proposed rule change.

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

    The proposed rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(ii) of the Act \9\ and subparagraph (f)(2) of 
Rule 19b-4 thereunder \10\ because it changes a due, fee, or other 
charge imposed by the Exchange. 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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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f)(2).
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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

[[Page 55482]]

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-2004-41 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-2004-41. 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. Copies of such 
filing also will be available for inspection and copying at the 
principal office 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-BSE-2004-41 and should be submitted on or before October 
5, 2004.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-2181 Filed 9-13-04; 8:45 am]
BILLING CODE 8010-01-P