[Federal Register Volume 70, Number 100 (Wednesday, May 25, 2005)]
[Notices]
[Pages 30158-30160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2603]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51705; File No. SR-CBOE-2005-35]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change and Amendment Nos. 1 and 2 Thereto Eliminating the Remote 
Market-Maker Inactivity Fee

May 18, 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 April 26, 2005, the Chicago Board Options Exchange, Inc. (``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 the CBOE. On May 11, 
2005, the CBOE submitted Amendment No. 1 to the proposed rule 
change.\3\ On May 17, 2005, the CBOE submitted Amendment No. 2 to the 
proposed rule change.\4\ The CBOE has designated this proposal as one 
establishing or changing a due, fee, or other charge imposed by the 
CBOE under Section 19(b)(3)(A)(ii) of the Act,\5\ and Rule 19b-4(f)(2) 
thereunder,\6\ 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\ In Amendment No. 1, the Exchange clarified the description 
of the purpose of the inactivity fee and amended the proposal's rule 
text to indicate the date of its Fees Schedule.
    \4\ In Amendment No. 2, the Exchange made technical corrections 
to the proposal's rule text and further revised the date of its Fees 
Schedule.
    \5\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \6\ 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 eliminate the Remote Market-Maker 
(``RMM'') inactivity fee. Below is the text of the proposed rule 
change, as amended. Proposed new language is italicized; proposed 
deletions are in [brackets].

Chicago Board Options Exchange, Inc. Fees Schedule

[Aril 20, 2005] May 13, 2005
    1. Options Transaction Fees (1)(3)(4)(7): Per Contract

Equity Options (13):
    I.-VIII. Unchanged.

[[Page 30159]]

    IX. Remote Market-Maker [(16)]--$.26

QQQQ and SPDR Options:
    I.-VI. Unchanged.
    VII. Remote Market-Maker [(16)]--$.26

    2.-4. Unchanged

Notes:
    (1)-(15) Unchanged
    [(16) Effective May 1, 2005, RMMs may be assessed an inactivity 
fee, as described in Section 22.]
    5.-21. No change
    22. RMM Inactivity Fee
    A one-time inactivity fee will be charged to RMMs, on a per product 
basis, for each product for which an RMM receives an appointment 
through the initial RMM allocation process but does not submit quotes, 
as described below.
    An inactivity fee of $1,000 per product will be assessed upon an 
RMM for each product: (a) In which the RMM receives an appointment 
during the initial RMM allocation process; (b) that the RMM maintains 
as part of its appointment for the entire period commencing with the 
date of the initial RMM allocation process and ending thirty days after 
the termination of the rollout of the RMM program; and (c) in which the 
RMM does not submit any quotations during the period described in (b). 
The termination of the rollout of the RMM program will not occur prior 
to July 15, 2005.
    An inactivity fee of $1,000 per product will be assessed upon an 
RMM for each product: (a) In which the RMM receives an appointment 
during the initial RMM allocation process; (b) in which the RMM 
relinquishes its appointment at any time during the period commencing 
with the date of the initial RMM allocation process and ending thirty 
days after the termination of the rollout of the RMM program; and (c) 
in which the RMM does not submit any quotations during the period 
described in (b). The termination of the rollout of the RMM program 
will not occur prior to July 15, 2005. RMM organizations that 
relinquish appointments by virtue of the fact that they obtained an 
appointment in the identical product either as a DPM or e-DPM will not 
be required to pay the inactivity fee.]
* * * * *

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 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
    The Exchange received approval of its RMM program on March 14, 
2005.\7\ On April 14, 2005, the Commission approved the Exchange's 
inactivity fee, which basically is imposed upon members that receive 
initial allocations of products as RMMs but then cancel those 
appointments prior to quoting those products.\8\ The inactivity fee was 
also to be imposed when an RMM received an appointment of an option 
class, retained its appointment in the option class, but did not submit 
quotes in that product during any portion of the rollout of the RMM 
program. The purpose of the inactivity fee was to prevent members from 
applying for appointments in products in which they had no intention of 
quoting, thereby preventing other members from securing appointments in 
products.
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    \7\ See Securities Exchange Act Release No. 51366 (March 14, 
2005), 70 FR 13217 (March 18, 2005).
    \8\ See Securities Exchange Act Release No. 51542 (April 14, 
2005), 70 FR 20952 (April 22, 2005).
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    Now that the initial appointment allocation process is over, all 
RMMs have received all of their requested appointments and there are no 
waiting lists. In this regard, the threat of the inactivity fee served 
its purpose. The Exchange now proposes to eliminate it, thereby 
allowing free movement (i.e., allowing RMMs to freely change 
appointments). Because there is no waiting list in any products, the 
Exchange does not believe retaining the inactivity fee serves any 
purpose. Any RMM, currently, may request and receive an appointment in 
any class, so preventing some RMMs from changing appointments by virtue 
of the threat of the inactivity fee serves no purpose. Upon elimination 
of this fee, any RMM will be free to give up its appointments without 
owing any Exchange fees. The proposal eliminates the possible 
imposition of a fee upon any RMM that gives up its appointments in a 
product without having submitted any quotes in that product.
2. Statutory Basis
    For the reasons described above, the CBOE believes that the 
proposed rule change, as amended, is consistent with the Act and the 
rules and regulations under the Act applicable to a national securities 
exchange and, in particular, the requirements of Section 6(b) of the 
Act.\9\ Specifically, the Exchange believes the proposed rule change, 
as amended, is consistent with Section 6(b)(4) of the Act \10\ in that 
it provides for the equitable allocation of reasonable dues, fees, and 
other charges among CBOE members.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The 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 the 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.

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

    Because the foregoing rule change, as amended, establishes or 
changes a due, fee, or other charge imposed by the Exchange, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \11\ and 
subparagraph (f)(2) of Rule 19b-4 thereunder.\12\ Accordingly, the 
proposal will take effect upon filing with the Commission.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(2).
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    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.\13\
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    \13\ 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 the period 
to commence on May 17, 2005, the date on which the Exchange 
submitted Amendment No. 2. 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, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

[[Page 30160]]

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-2005-35 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-2005-35. 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 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-2005-35 and should be submitted on or before June 
15, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2603 Filed 5-24-05; 8:45 am]
BILLING CODE 8010-01-P