[Federal Register Volume 70, Number 181 (Tuesday, September 20, 2005)]
[Notices]
[Pages 55189-55191]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-18619]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52412; File No. SR-BSE-2005-38]


Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment Nos. 1 and 2 Thereto Relating to the Exchange's 
Transaction Fees and Tape a Revenue Sharing Program for Electronically 
Routed Cross Trades

September 13, 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 August 19, 2005, the Boston Stock Exchange, Inc. (``BSE'' 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 Exchange. The BSE 
filed the proposal pursuant to Section 19(b)(3)(A)(ii) of the Act,\3\ 
and Rule 19b-4(f)(2) thereunder,\4\ as one establishing or changing a 
due, fee or other charge imposed by the BSE, which renders the proposal 
effective upon filing with the Commission. On September 9, 2005, the 
Exchange filed Amendment No. 1 to the proposed rule change.\5\ On 
September 12, 2005, the Exchange filed Amendment No. 2 to the proposed 
rule change.\6\ The Commission

[[Page 55190]]

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\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
    \5\ The BSE withdrew Amendment No. 1 on August 12, 2005 for 
technical and formatting reasons.
    \6\ In Amendment No. 2, the Exchange: (1) provided additional 
detail about the Exchange's rules and procedures regarding 
electronically routed cross trades; (2) clarified that the proposed 
changes will not adversely affect the BSE's regulatory 
responsibilities; and (3) amended the proposed rule text regarding 
the Exchange's Tape A revenue sharing program to clarify how the 
revenue sharing will be calculated. The effective date of the 
original proposed rule change is August 19, 2005, and the effective 
date of Amendment No. 2 is September 12, 2005. 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 September 12, 2005, the date on which the Exchange filed 
Amendment No. 2. See 15 U.S.C. 78s(b)(3)(C).
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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 Transaction Fee Schedule in 
relation to electronically routed cross trade executions. The text of 
the proposed rule change is available on the Exchange's Web site 
(http://www.bostonstock.com), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

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 Exchange 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 Exchange 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 BSE proposes to amend its Transaction Fee Schedule by 
eliminating all fees for cross trades delivered electronically to the 
Exchange.\7\ Specifically, the Exchange proposes to waive all Value 
Charges and Trade Recording Fees on cross trades that are 
electronically routed to the BSE for execution. The current fee 
structure for Automated Portfolio Crosses will also be eliminated. The 
category of Automated Portfolio Crosses was created in the Transaction 
Fee Schedule several years ago for a specific type of business related 
only to cross trades that would be routed to the Exchange as part of a 
larger basket of trades. The BSE no longer receives this type of 
specialized cross trade. Therefore, the separate category of fees for 
Automated Portfolio Crosses is no longer required. The BSE believes 
that these changes to its Transaction Fee Schedule will allow the 
Exchange to attract a new segment of business to the Exchange, which 
will, in turn, allow the Exchange to remain competitive in the overall 
marketplace.
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    \7\ Upon entry into the BEACON trading system, all orders are 
transmitted to a BSE specialist. Depending on factors such as order 
size and type, the orders are either automatically or manually 
executed. Cross trades would automatically execute, provided that no 
customer orders existed on the book which held priority over either 
side of the cross and could ``break up'' the cross. See Chapter II, 
``Dealings on the Exchange,'' Section 6, ``Bids and Offer for 
Stocks,'' and Section 18, ``Orders to Buy and Sell the Same 
Security'' of the Rules of the Board of Governors of the BSE (``BSE 
Rules''). Additionally, cross trades of 5,000 shares or more are 
considered, under Chapter II, Section 18 of the BSE Rules, to be 
``clean crosses,'' which can execute within the prevailing bid and 
offer given a set of qualifying conditions.
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    The BSE is now proposing to eliminate all fees for all 
electronically delivered cross trades. Since the Exchange requires that 
all orders submitted to a BSE specialist by members be transmitted 
through the BEACON trading system, all cross trades submitted to BSE 
specialists for execution would be considered to be electronically 
routed, with the exception of those entered by a BSE Floor Broker. 
While floor brokered orders must also be entered into the BEACON 
trading system for transmission to a BSE specialist, the Exchange does 
not consider floor brokered orders to be electronically routed cross 
trades, due to the intervention of and handling by the floor broker. 
Thus, the proposed fee waiver would not apply to floor broker entered 
cross trades, even though such cross trades are entered through the 
BEACON trading system, but would apply to all other cross trades 
submitted to BSE specialists through BEACON.
    The Exchange also proposes to amend its Tape A revenue sharing 
program to further encourage its member firms to electronically route 
cross trades to the BSE. Under this proposal, electronically routed 
cross trades would be excluded from the current Tape A revenue sharing 
program, which requires that a pre-determined Exchange-wide Tape A 
revenue target be achieved, and requires that a member firm generate a 
minimum of $50,000 in overall monthly transaction fees before being 
eligible to participate in a 50% revenue share for Tape A business. The 
BSE is proposing that member firms that electronically route cross 
trades to the BSE for execution be permitted to receive 50% of the Tape 
A revenue generated by such electronically routed cross trades, 
regardless of whether the Exchange has met its pre-determined Tape A 
revenue target, and regardless of the amount of the firm's overall 
monthly transaction fees. The 50% revenue sharing would be a flat rate, 
calculated on a trade-by-trade basis. Thus, a BSE member would receive 
50% of the Tape A revenue generated by each electronically routed cross 
trade that the member routes to the BSE for execution.
    The Exchange is cognizant of its surveillance and compliance 
responsibilities as a self-regulatory organization. Although this 
proposal involves the waiver of certain fees and amendments to the Tape 
A revenue sharing program, which could result in a reduction of revenue 
to the BSE, the Exchange represents that its responsibilities as a 
self-regulatory organization will in no way be compromised by the 
implementation of the changes proposed herein.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of 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 provides for the equitable allocation of reasonable dues, fees, and 
other charges among its members and issuers 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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition.

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

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

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

    The proposed rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(ii) 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

[[Page 55191]]

imposed by the BSE. At any time within 60 days of the filing of such 
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)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
    \12\ See supra note 6.
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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-BSE-2005-38 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-BSE-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 Room. Copies of the 
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-BSE-2005-38 and should be submitted on or before October 
11, 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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Jonathan G. Katz,
Secretary.
[FR Doc. 05-18619 Filed 9-19-05; 8:45 am]
BILLING CODE 8010-01-P