[Federal Register Volume 70, Number 121 (Friday, June 24, 2005)]
[Notices]
[Pages 36676-36678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3295]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51880; File No. SR-CBOE-2005-38]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Inc; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change Relating to the Sales Value Fee

June 20, 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 May 13, 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 and 
II below, which Items have been prepared by the CBOE. The Exchange 
filed a proposed rule change as a ``non-controversial'' rule change 
pursuant to Rule\2\ 19b-4(f)(6) under the Act,\3\ 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\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CBOE proposes to amend its Fees Schedule and rules and issue a 
Regulatory Circular relating to its ``Sales Value Fee.'' The text of 
the proposed rule change is below. Proposed new language is italicized; 
proposed deletions are in brackets.
Chicago Board Options Exchange, Inc.--Fees Schedule
[May 2] May 13, 2005

    1.-4. Unchanged.
    Notes: (1)-(15) Unchanged.
    5. ETFs, STRUCTURED PRODUCTS, RIGHTS, WARRANTS (per round lot):

(A) TRANSACTION FEES:                MAXIMUM FEE:
    Customer $.00..................  N/A
    Member Firm Proprietary .10....  $100 per side
    Market Maker .05...............  $100 per side
(B) LISTING FEES:
    Initial Fee (minimum) $10,000..
    Annual Fee 2,500--10,000.......
(C) SEC VALUE FEE:
    $0.00252 for every $100 of
     value sold (seller only)].
 

    6. SALES VALUE FEE:
    The Sales Value Fee (``Fee'') is assessed by CBOE to each member 
for sales of securities on CBOE with respect to which CBOE is obligated 
to pay a fee to the SEC under Section 31 of the Exchange Act. To the 
extent there may be any excess monies collected under this Section 6, 
the Exchange may retain those monies to help fund its general operating 
expenses. The sales transactions to which the Fee applies are sales of 
options (other than options on a security index), sales of non-option 
securities, and sales of securities resulting from the exercise of 
physical-delivery options traded on CBOE. The Fee is collected 
indirectly from members through their clearing firms by OCC on behalf 
of CBOE with respect to options sales and options exercises. CBOE 
collects the Fee indirectly from members through their clearing firms 
with respect to non-option sales. Consistent with CBOE Rule 3.23, the 
Fee is collected by billing the member's designated clearing firm for 
the amount owed by the member to the Exchange. The amount of the Fee is 
calculated as described below.
    Calculation of Fee for Options Sales and Options Exercises: The 
Sales Value Fee is equal to (i) the Section 31 fee rate multiplied by 
(ii) the member's aggregate dollar amount of covered sales resulting 
from options transactions occurring on the Exchange during any 
computational period. Calculation of Fee for Non-Options Sales: The 
Sales Value Fee is calculated using the same formula as the formula 
above for options transactions, except as applied only to the member's 
covered sales other than those resulting from options transactions.
    6.-9. Renumbered 7.-10. Otherwise unchanged.
    [10. {Reserved{time} ]
    11.-23. Unchanged.
    Remainder of Fee Schedule--Unchanged.
* * * * *
CHAPTER XXX
Stocks, Warrants and Other Securities
    [Rule 30.60. Securities and Exchange Commission Transaction Fee 
There shall be paid to the Exchange by each member and member 
organization, in such manner and at such time as the Exchange shall 
direct, the sum of one cent for each $300 or fraction thereof of the 
dollar volume of securities sold by such member or member organization 
on the Exchange. The monies so paid to the Exchange shall be paid to 
the Securities and Exchange Commission as the transaction fee imposed 
upon the Exchange under the Exchange Act.
    * * * Interpretations and Policies:
    .01 The fee required to be paid under this Rule does not apply to 
any bond, debenture, or other evidence of indebtedness, or any security 
which the Securities and Exchange Commission may, by rule, exempt from 
imposition of the fee.]

[[Page 36677]]

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, Proposed Rule Change

1. Purpose
    Pursuant to Section 5(c) of the CBOE Fees Schedule and CBOE Rule 
30.60, the Exchange currently assesses a fee on its members for sales 
of securities on the Exchange to recoup amounts paid by the Exchange to 
the Commission under Section 31 of the Act.\4\ On June 28, 2004,\5\ the 
Commission established new procedures governing the calculation, 
payment, and collection of fees and assessments on securities 
transactions owed by national securities exchanges and associations 
under Section 31 of the Act (``Adopting Release'').\6\ In the Adopting 
Release, the Commission stated that the fees SROs pass to their members 
and the fees members pass to their customers are not ``Section 31 
Fees'' or ``SEC Fees'' and should not be labeled as such.\7\
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    \4\ 15 U.S.C. 78ee.
    \5\ In the notice prepared by the CBOE in its Form 19b-4 filing, 
the CBOE inadvertently referred to this date as July 28, 2004. 
Telephone conversation between Jamie Galvin, Senior Attorney, CBOE 
and Hong-Anh Tran, Special Counsel, Division of Market Regulation 
(``Division''), Commission, dated May 17, 2005.
    \6\ See Securities Exchange Act Release No. 49928 (June 28, 
2004), 69 FR 41060 (July 7, 2004).
    \7\ Id. at 41072.
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    In response to the statements made by the Commission in the 
Adopting Release, the Exchange proposes to amend its Fees Schedule to 
change the name of its fee, provide greater explanation and description 
of the fee and how it is collected, and clarify that it applies with 
respect to both covered sales of options and covered sales of non-
option securities. The Exchange also proposes to delete CBOE Rule 30.60 
since the fee will be set forth and fully described in the CBOE Fees 
Schedule.
    Specifically, the Exchange proposes to delete Section 5(c) of the 
CBOE Fees Schedule, which is currently labeled ``SEC Value Fee.'' The 
Exchange proposes to add a new CBOE Section 6 to the Fees Schedule 
labeled ``Sales Value Fee.'' Proposed new CBOE Section 6 defines the 
Sales Value Fee (``Fee'') as the fee assessed by CBOE to each member 
for sales of securities on CBOE with respect to which CBOE is obligated 
to pay a fee to the SEC under Section 31 of the Act. Proposed CBOE 
Section 6 provides that, to the extent the Exchange may collect more 
from members under CBOE Section 6 than is due from the Exchange to the 
Commission under Section 31 of the Act, for example due to rounding 
differences, the excess monies collected may be used by the Exchange to 
fund its general operating expenses.
    Proposed CBOE Section 6 explains that the transactions to which the 
Fee applies are sales of options (other than options on a security 
index), sales of non-option securities, and sales of securities 
resulting from the exercise of physical-delivery options traded on 
CBOE. The Fee is collected indirectly from members through their 
clearing firms by the Options Clearing Corporation (``OCC'') on behalf 
of the Exchange with respect to options sales and options exercises. 
The Exchange collects the Fee indirectly from members through their 
clearing firms with respect to non-option sales. Consistent with CBOE 
Rule 3.23, the Fee is collected by billing the member's designated 
clearing firm for the amount owed by the member to the Exchange.
    Proposed CBOE Section 6 also sets forth the formula for calculating 
the Fee with respect to covered options and non-options transactions. 
The Fee with respect to options sales and options exercises is equal to 
(i) the Commission's Section 31 fee rate multiplied by (ii) the 
member's aggregate dollar amount of covered sales resulting from 
options transactions occurring on the Exchange during any computational 
period. The Fee with respect to non-options sales is calculated using 
the same formula as the formula for options transactions, except as 
applied only to the member's covered sales other than those resulting 
from options transactions. The Exchange notes that, if the Commission's 
Section 31 fee rate changes in the middle of a month, the Exchange will 
perform a separate calculation with respect to covered sales under the 
new fee rate for the remaining portion of the month.
    In further response to the statements made by the Commission in the 
Adopting Release, the Exchange proposes to issue a Regulatory Circular 
to its members that prohibits members from characterizing the pass-
through of the CBOE Sales Value Fee to their customers as a ``Section 
31 fee,'' ``SEC fee,'' or other label that implies an SEC rule or 
requirement that these funds be collected from broker-dealers or 
customers. The proposed Regulatory Circular would become effective 
approximately 45 days following effectiveness of the proposed rule 
change.
2. Statutory Basis
    The Exchange believes that for this proposed rule change is 
consistent with Section 6(b)(4) of the Act,\8\ which permits the rules 
of an Exchange to provide for the equitable allocation of reasonable 
dues, fees, and other charges among its members, and issuers and other 
persons using its facilities. In addition, the Exchange believes that 
the proposed rule change, including the proposed Regulatory Circular, 
is consistent with Section 6(b)(5) of the Act \9\ in that it is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, and, in general, to 
protect investors and the public interest.
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    \8\ 15 U.S.C. 78f(b)(4).
    \9\ 15 U.S.C. 78f(b)(5).
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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.

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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act\10\ and Rule 19b-4(f)(6) thereunder \11\ 
because it does not: (i) significantly affect the protection of 
investors or the public interest; (ii) impose any significant burden on 
competition; and (iii) become operative prior to 30 days after the date 
of filing (or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest). A 
proposed rule change filed under 19b-4(f)(6) normally does not become 
operative prior to 30 days after the date of filing. However, Rule

[[Page 36678]]

19b-4(f)(6)(iii) permits the Commission to designate a shorter time if 
such action is consistent with the protection of investors and the 
public interest. The Exchange satisfied the five-day pre-filing 
requirement. The Exchange requests that the Commission waive the 30-day 
operative delay, as specified in Rule 19b-4(f)(6)(iii),\12\ and 
designate the proposed rule change to become operative immediately.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission hereby grants that request.\13\ The Commission 
believes that waiving the 30-day operative date is consistent with the 
protection of investors and the public interest because doing so will 
allow the Exchange's Fees Schedule and Rules to be consistent with the 
Commission's guidance on Section 31 without undue delay.
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    \13\ For the purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. See 15 
C.S.C. 78c(f).
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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 the furtherance of the purposes of the Act.

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-2005-38 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-CBOE-2005-38. 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. 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-2005-38 and should be submitted on or before July 
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).

Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3295 Filed 6-23-05; 8:45 am]
BILLING CODE 8010-01-P