[Federal Register Volume 70, Number 66 (Thursday, April 7, 2005)]
[Notices]
[Pages 17742-17743]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-1600]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51468; File No. SR-CBOE-2005-18]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the Chicago Board Options Exchange, Incorporated Relating to a Fee Cap 
for Options Dividend Spread Transactions

April 1, 2005.
    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 March 2, 2005, 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. On 
March 17, 2005, CBOE filed Amendment No. 1 to the proposed rule 
change.\3\ CBOE designated the proposed rule change, as amended, as 
establishing or changing a due, fee, or other charge imposed by CBOE 
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 change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced and superseded the proposed rule 
change in its entirety. Telephone conversation between Jaime Galvan, 
Assistant Secretary, CBOE, and Steve L. Kuan, Attorney, Division of 
Market Regulation, Commission, on March 30, 2005. In Amendment No. 
1, CBOE clarified that the effective date of the Fee Schedule is 
March 2, 2005, the date CBOE initially filed the proposed rule 
change. Further, CBOE proposed that the fee cap on dividend spread 
transactions operate on a pilot basis until September 1, 2005.
    \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 to modify its fee 
cap on dividend spread transactions and to update the symbol for the 
Nasdaq-100 Index Tracking Stock. The text of the proposed rule change 
is available on CBOE's Web site (http://www.cboe.com), 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. 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
    In July 2004, the Exchange implemented a program under which 
market-maker, firm and broker-dealer transaction fees associated with 
``dividend spread'' transactions are

[[Page 17743]]

capped at $2,000 per dividend spread transaction.\6\ CBOE defines a 
dividend spread as any trade done to achieve a dividend arbitrage 
between any two deep-in-the-money options. This program is similar to 
fee cap programs adopted by other exchanges.\7\
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    \6\ See Securities Exchange Act Release No. 50175 (August 10, 
2004), 69 FR 51129 (August 17, 2004) (SR-CBOE-2004-38).
    \7\ See Securities Exchange Act Release Nos. 48363 (August 19, 
2003), 68 FR 51625 (August 27, 2003) (SR-PCX-2003-39); 48983 
(December 23, 2003), 68 FR 75703 (December 31, 2003) (SR-Phlx-2003-
80); and 49358 (March 3, 2004), 69 FR 11469 (March 10, 2004) (SR-
Amex-2004-09).
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    The Exchange proposes to amend its Fee Schedule to enhance its 
dividend spread fee cap program. Specifically, the Exchange proposes to 
cap market-maker, firm, and broker-dealer transaction fees at $2,000 
for all dividend spread transactions executed on the same trading day 
in the same options class. The Exchange proposes to implement the 
enhanced fee cap program as a pilot program that will expire on 
September 1, 2005. The Exchange believes that enhancing the fee cap to 
accommodate these transactions will attract additional liquidity.
    As is done under the current program, the Exchange will rebate 
transaction fees for qualifying transactions. Members who wish to 
benefit from the fee cap will be required to submit to the Exchange a 
rebate request form with supporting documentation (e.g., clearing firm 
transaction data).
    In addition, the Exchange proposes to update the Fee Schedule in 
various places to reflect the symbol change, from QQQ to QQQQ, that 
accompanied the transfer of the listing of the Nasdaq-100 Index 
Tracking Stock from the American Stock Exchange to the Nasdaq Stock 
Market.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with section 6(b) of the Act\8\, in general, and furthers 
the objectives of section 6(b)(4) of the Act,\9\ in particular, in that 
it is designed to provide for the equitable allocation of reasonable 
dues, fees, and other charges among CBOE members and other persons 
using its facilities.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change, as amended, 
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, as amended.

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\10\ and subparagraph (f)(2) of Rule 19b-4 
thereunder\11\ because it establishes or changes a due, fee, or other 
charge imposed by the Exchange. 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.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(2).
    \12\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
section 19(b)(3)(C) of the Act, the Commission considers that period 
to have commenced on March 17, 2005, the date the Exchange filed 
Amendment No. 1 to the proposed rule change. See 15 U.S.C. 
78s(b)(3)(C)
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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-CBOE-2005-18 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-2005-18. 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-CBOE-2005-18 and should be submitted on or before April 
28, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-1600 Filed 4-6-05; 8:45 am]
BILLING CODE 8010-01-P