[Federal Register Volume 70, Number 113 (Tuesday, June 14, 2005)]
[Notices]
[Pages 34510-34511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3063]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51749; File No. SR-CBOE-2005-31]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change and Amendment No. 1 Thereto Relating to Transaction Fees in 
Options on the Russell 2000 Index

May 26, 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 20, 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 the CBOE. 
On May 17, 2005, the CBOE filed Amendment No. 1 to the proposed rule 
change.\3\ 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,\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, as amended, from interested persons.
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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 made a few technical 
corrections to the purpose section and rule text of the proposed 
rule change and added a sentence to the purpose section to clarify 
the reason for the proposed reduction in the license fee. The 
effective date of the original proposed rule change is April 20, 
2005, and the effective date of the amendment is May 17, 2005. For 
purposes of calculating the 60-day period within which the 
Commission may summarily abrogate the proposed rule change, as 
amended, 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. 1. See 15 U.S.C. 78s(b)(3)(C).
    \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 Fees Schedule relating to 
transaction fees in options on the Russell 2000 Index (``RUT''). Below 
is the text of the proposed rule change. Proposed new language is 
italicized; proposed deletions are in [brackets].

CHICAGO BOARD OPTIONS EXCHANGE, INC. FEES SCHEDULE [MARCH 2] APRIL 20, 
2005

    1. OPTIONS TRANSACTION FEES (1)(3)(4)(7): PER CONTRACT
    EQUITY OPTIONS (13):
    I.--VIII. Unchanged.
    QQQQ and SPDR OPTIONS:
    I.--VI. Unchanged.
    INDEX OPTIONS (includes Dow Jones DIAMONDS, OEF and other ETF and 
HOLDRs options):
    I. CUSTOMER (2):


 S&P 100, PREMIUM > or = $1--$.35
 S&P 100, PREMIUM < $1--$.20
 MNX and NDX--$.15
 RUT and REDUCED VALUE RUSSELL 2000--$.15
 ETF and HOLDRs options (except DIA)--$.15
 OTHER INDEXES, PREMIUM > OR = $1--$.45
 OTHER INDEXES, PREMIUM < $1--$.25
    II. MARKET-MAKER AND DPM--EXCLUDING DOW JONES PRODUCTS (10)--$.24

MARKET-MAKER--DOW JONES PRODUCTS (10)--$.34
    III. MEMBER FIRM PROPRIETARY: (11)

 FACILITATION OF CUSTOMER ORDER, MNX and NDX--$.24
 FACILITATION OF CUSTOMER ORDER, OTHER INDEXES--$.20
 NON-FACILITATION ORDER--$.24

    IV. BROKER-DEALER (EXCLUDING THE PRODUCTS BELOW) INDEX CUSTOMER 
RATES

 ETF, HOLDRS, RUT and REDUCED VALUE RUSSELL 2000, PREMIUM > or 
= $1--$.45
 ETF, HOLDRS, RUT and REDUCED VALUE RUSSELL 2000, PREMIUM < 
$1--$.25
 MNX and NDX--$.25

    V. NON-MEMBER MARKET MAKER:

 S&P 100 (including OEF), PREMIUM > or = $1--$.37
 S&P 100 (including OEF), PREMIUM < $1--$.22
 OTHER INDEXES, PREMIUM > or = $1--$.47
 OTHER INDEXES, PREMIUM < $1--$.27

    VI. MNX and NDX LICENSE FEE (15)--$.10
    VII. RUT DPM and MARKET MAKER LICENSE FEE (Russell 2000 cash 
settled index) (12)--$[.40].10
    VIII. LINKAGE ORDERS (8)(15):

 S&P 100 (OEF), PREMIUM > or = $1--$.35
 S&P 100 (OEF), PREMIUM < $1--$.20
 OTHER INDEXES, PREMIUM > OR = $1--$.45
 OTHER INDEXES, PREMIUM < $1--$.25

    2. MARKET-MAKER, e-DPM & DPM MARKETING FEE (in option classes in 
which a DPM has been appointed)(6) Unchanged.
    3. FLOOR BROKERAGE FEE (1)(5): Unchanged.
    4. RAES ACCESS FEE (RETAIL AUTOMATIC EXECUTION SYSTEM) (1)(4): 
Unchanged.
    Notes: (1)-(11) Unchanged.
    (12) The RUT License [Transaction] Fee applies to all RUT contracts 
traded by the DPM and other Market-Makers. [The RUT DPM shall be 
assessed for any shortfall between the proceeds of the RUT License Fee 
and the Exchange's license obligation to Russell.]
    (13)-(15) Unchanged.
    5.-21. Unchanged.
    Remainder of Fee Schedule--Unchanged.
* * * * *

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

[[Page 34511]]

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 proposes to amend its Fees Schedule to reduce public 
customer transaction fees and the license fee assessed to the 
Designated Primary Market-Maker (``DPM'') and market-makers in options 
on the RUT.
    Specifically, the Exchange proposes to reduce public customer 
transaction fees to $.15 per contract for transactions in RUT options. 
Currently, RUT customer transaction fees are $.45 per contract if the 
premium is greater than or equal to $1 and $.25 per contract if the 
premium is less than $1. The Exchange believes this proposed fee 
reduction will help the Exchange compete more effectively for order 
flow in the RUT product.
    The Exchange also proposes to reduce from $.40 per contract to $.10 
per contract the license fee that is currently assessed on all DPM and 
market-maker transactions in RUT options (``RUT License Fee''). The RUT 
License Fee is assessed by the Exchange to help it recoup the license 
fees the Exchange pays to the Frank Russell Company (``Russell'') for 
its license to trade the RUT product.\6\ The Exchange recently 
renegotiated its license agreement with Russell. The license fees owed 
to Russell have been lowered in conjunction with the renegotiated 
agreement. As a result, the Exchange has determined to reduce the 
amount of the RUT License Fee as well as eliminate the requirement that 
the RUT DPM make up any shortfall between the proceeds of the RUT 
License Fee and the Exchange's license obligation to Russell.
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    \6\ See Securities Exchange Act Release No. 49601 (April 22, 
2004), 69 FR 23836 (April 30, 2004) (SR-CBOE-2004-19).
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    The Exchange intends to implement these fee changes on May 1, 2005.
2. Statutory Basis
    The CBOE believes that the proposed rule change is consistent with 
Section 6(b) of the Act, \7\ in general, and furthers the objectives of 
Section 6(b)(4)\8\ of the Act in particular, in that it is designed to 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among CBOE members.
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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 CBOE 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

    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 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 \9\ and subparagraph (f)(2) 
of Rule 19b-4 thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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.\11\
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    \11\ See supra note 3.
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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:

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-2005-31 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-2005-31. 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-2005-31 and should be submitted on or before July 
5, 2005.

    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. E5-3063 Filed 6-13-05; 8:45 am]
BILLING CODE 8010-01-P