[Federal Register Volume 69, Number 249 (Wednesday, December 29, 2004)]
[Notices]
[Pages 78070-78072]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3878]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50903; File No. SR-CBOE-2004-84]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Exchange Fees

December 21, 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 December 13, 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, II, and III below, which Items have been prepared by CBOE. The 
proposed rule change has been filed by CBOE as establishing or changing 
a due, fee, or other charge under Section 19(b)(3)(A)(ii) of the Act 
\3\ and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal 
effective upon filing. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 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 to (i) make certain 
fee changes, and (ii) adopt a communication review fee. The text of the 
proposed rule change is available at the Office of the Secretary, CBOE, 
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, 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 IV below. 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, Proposed Rule Change

1. Purpose
    CBOE proposes to: (i) Amend its Annual FOCUS Report Filing Fee, 
Firm FOCUS Minimum Monthly Fee, Order Routing System (``ORS'') Order 
Cancellation Fee and Floor Broker Workstation (``FBW'') Fees; and (ii) 
adopt a Communication Review Fee. The Exchange also proposes to delete 
from its Fee Schedule certain fees that it represents are now outdated. 
The Exchange proposes to amend the following fees:

[[Page 78071]]

    (i) Annual FOCUS Report Filing Fee. CBOE market-makers are required 
to file annual financial statements with the Exchange pursuant to Rule 
17a-5(d) under the Act and CBOE Rule 15.5. Currently, the Exchange 
charges an annual filing fee of $100 to CBOE market-makers who make 
their annual filing by paper copy and $25 to CBOE market-makers who 
submit their annual filing electronically.\5\ The Exchange proposes to 
increase the fee for a paper filing to $150 and increase the fee for an 
electronic filing to $50. The Exchange represents that these increased 
fees will assist it in offsetting increased costs of staff review of 
these filings.
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    \5\ See Securities Exchange Act Release No. 40566 (October 19, 
1998), 63 FR 57339 (October 27, 1998).
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    (ii) Firm FOCUS Minimum Monthly Fee. CBOE charges member 
organizations and Designated Primary Market-Makers (``DPMs'') that are 
subject to Rule 15c3-1 under the Act, and for which the Exchange is the 
Designated Examining Authority (``DEA''), an annual fee of $.40 per 
$1,000 of gross revenue as reported on the member organization's FOCUS 
report (excluding commodity commission revenue) (``DPM & Firm DEA 
Fee''). The DPM & Firm DEA Fee is currently subject to a monthly 
minimum fee of $1,000 for clearing firms and $250 for non-clearing 
member firms (``Firm FOCUS Minimum Monthly Fee'').\6\ The Exchange 
proposes to increase the Firm FOCUS Minimum Monthly Fee assessed to 
non-clearing member firms to $275 to help the Exchange more closely 
cover the costs of regulating these member firms.
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    \6\ See Securities Exchange Act Release No. 43144 (August 10, 
2000), 65 FR 50258 (August 17, 2000). The Firm FOCUS Minimum Monthly 
Fee applies to those clearing member firms and non-clearing member 
firms whose DPM & Firm DEA Fee would not otherwise exceed the 
thresholds of $1,000 and $250.
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    (iii) ORS Order Cancellation Fee. CBOE currently assesses an 
executing clearing firm $1 per cancelled ORS order if the number of 
cancelled ORS orders exceeds the number of executed ORS orders in the 
same month (``ORS Order Cancellation Fee'').\7\ The ORS Order 
Cancellation Fee is not charged if fewer than 500 ORS orders are 
cancelled in the month. The Exchange proposes to revise the methodology 
used to assess the ORS Order Cancellation Fee. Specifically, the 
Exchange proposes to assess $1 for each cancelled ORS order in excess 
of the number of orders that the executing clearing member executes in 
a month. As is presently the case, the ORS Order Cancellation Fee will 
not be assessed if fewer than 500 orders are cancelled in a month.
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    \7\ See Securities Exchange Act Release No. 44607 (July 27, 
2001), 66 FR 40757 (August 3, 2001).
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    The proposed ORS Order Cancellation Fee is similar to cancellation 
fees adopted by other exchanges.\8\ The Exchange believes that this 
revised fee will result in increased order flow to CBOE.
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    \8\ See Securities Exchange Act Release No. 46189 (July 11, 
2002), 67 FR 47587 (July 19, 2002.
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    (iv) FBW Fee. FBW terminals were initially rolled out to equity 
option trading crowds. CBOE currently assesses a fee of $425 per month 
for FBW functionality that is placed on a desktop terminal. CBOE 
assesses an additional $100 per month if the FBW application resides on 
a workstation that includes ILX and TNT functionalities. No fee is 
assessed for use of a mobile FBW.\9\
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    \9\ See Securities Exchange Act Release No. 48223 (July 24, 
2003), 68 FR 44978 (July 31, 2003).
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    The Exchange represents that it plans to roll out FBW terminals to 
index options trading crowds. Only mobile FBWs will be used in index 
option trading crowds due to lack of space for desktop FBW 
applications. The Exchange proposes to assess a fee of $100 per month 
per login ID for mobile FBWs used in index option trading crowds. 
Additionally, the Exchange proposes to assess DPMs $100 per month per 
login ID for use of an FBW, whether it is the desktop application or 
mobile. The Exchange represents that these FBW fees will assist the 
Exchange in offsetting the cost of rolling out FBWs to its index 
options trading crowds.
    (v) Communication Review Fee. CBOE represents that its Department 
of Financial and Sales Practice Compliance reviews a member firm's 
options-related advertisements, educational material and sales 
literature for compliance with applicable rules of the CBOE, 
Commission, and the Securities Investor Protection Corporation.\10\ 
These public communications include, for example, print, television and 
radio advertisements, or electronic communications, such as Web sites.
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    \10\ Under CBOE Rule 9.21(c), CBOE members and member 
organizations are required to submit to the Exchange's Department of 
Financial and Sales Practice Compliance for approval every 
advertisement and all educational materials pertaining to options at 
least ten days prior to use. Telephone conversation between Jaime 
Galvan, Senior Attorney, CBOE, and Natasha Cowen, Attorney, Division 
of Market Regulation (``Division''), Commission, on December 15, 
2004.
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    CBOE proposes to implement a fee for this service (``Communication 
Review Fee'') as follows: Regular review--(1) for printed material 
reviewed, $75 per submission, plus $10 for each page reviewed in excess 
of 10 pages; and (2) for video and audio media reviewed, $75 per 
submission, plus $10 per minute for each minute of tape reviewed in 
excess of 10 minutes; Expedited review--(1) for printed material 
reviewed, $500 per submission, plus $25 for each page reviewed in 
excess of 10 pages; and (2) for video and audio media reviewed, $500 
per submission, plus $25 per minute for each minute of tape reviewed in 
excess of 10 minutes.
    CBOE represents that expedited review will be completed within 
three business days, not including the date the item is received by the 
Department of Financial and Sales Practice Compliance, unless a shorter 
or longer period is agreed to by the Department of Financial and Sales 
Practice Compliance. The Department of Financial and Sales Practice 
Compliance may, in its sole discretion, refuse requests for expedited 
review. The proposed Communication Review Fee is similar to the 
communication review charge of the National Association of Securities 
Dealers, Inc. (NASD).\11\
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    \11\ See NASD By-Laws, Schedule A, Section 13.
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    The Exchange intends to implement the fee changes discussed above 
and the new Communication Review Fee on January 1, 2005.
    (vi) Expired Fees. The Exchange proposes to delete the paragraph 
relating to the Booth Rental Incentive Program from its Fee Schedule. 
The Program is due to expire on December 31, 2004, and the Exchange has 
determined not to extend the Program. Also, the Exchange proposes to 
delete the Option Trading Permit Lease Pool Bid Fee as these permits 
expired.\12\
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    \12\ See Securities Exchange Act Release No. 49723 (May 18, 
2004), 69 FR 29591 (May 24, 2004).
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    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\13\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act,\14\ in particular, in that it 
is designed to provide for the equitable allocation of reasonable dues, 
fees, and other charges among CBOE members.

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

    CBOE does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

[[Page 78072]]

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

    Because the foregoing rule change establishes or changes a due, 
fee, or other charge imposed by the Exchange, it has become effective 
pursuant to Section 19(b)(3)(A)(ii) of the Act \15\ and subparagraph 
(f)(2) of Rule 19b-4 thereunder.\16\ At any time within 60 days of the 
filing of the 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.\17\

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-CBOE-2004-84 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-2004-84. 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 
CBOE. 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-2004-84 and should be submitted on or before January 19, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-3878 Filed 12-28-04; 8:45 am]
BILLING CODE 8010-01-P