[Federal Register Volume 71, Number 93 (Monday, May 15, 2006)]
[Notices]
[Pages 28058-28059]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-7321]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53774; File No. SR-BSE-2006-10]


Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change To Establish Fees Per Contract 
Traded for Improvement Orders Submitted Into a Price Improvement Period 
by a Public Customer That Are Not Submitted as Customer PIP Orders

May 9, 2006.
    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 6, 2006, 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 substantially by the BSE. 
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.
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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 the Fee Schedule of the Boston 
Options Exchange (``BOX'') to establish fees per contract traded for 
Improvement Orders,\3\ submitted into a Price Improvement Period 
(``PIP'') by a Public Customer \4\ that are not submitted as Customer 
PIP Orders (``CPO's'').
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    \3\ The term ``Improvement Orders'' is defined in the BOX Rules 
Chapter V, Section 18(e)(i).
    \4\ ``Public Customer'' means a person that is not a broker or 
dealer in securities. BOX Rules Chapter I, Section 1(a)(50).
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    The BOX Fee Schedule is available on the BOX Web site at: 
www.bostonoptions.com. The text of the proposed rule change is provided 
below, with additions italicized and deletions in [brackets].
Boston Options Exchange Facility
    Fee Schedule
Sec. 1 Trading Fees for Public Customer Accounts
    [None] $0.20 per contract traded for Improvement Orders submitted 
into a Price Improvement Period (``PIP'') by a Public Customer, that 
are not submitted as Customer PIP Orders (``CPO's'').
* * * * *

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 as 
amended 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
    Currently, there are two ways Public Customer Orders can be 
submitted into a PIP auction as an Improvement Order. The first way is 
a CPO, which is an order a Public Customer provides to her/his BOX 
Order Flow Provider (``OFP'') that contains a standard limit order 
price in a nickel increment and the CPO PIP Reference Price \5\ in a 
penny increment. The premise of a CPO order is for a Public Customer to 
provide a standard limit order price to be submitted to the BOX book, 
and the additional penny auction limit price to be submitted into a PIP 
auction should one occur while her/his limit order is on the BOX book. 
The CPO PIP Reference Price provided by the Public Customer to OFP 
allows the Public Customer to participate in PIP auction by the OFP 
submitting Improvement Orders on her/his behalf up to the CPO PIP 
Reference Price. The CPO order allows the average investor to 
participate in penny price PIP auctions when she/he already has an 
order on the BOX book for that particular series.
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    \5\ The term ``CPO Reference Price'' is defined in BOX Rules 
Chapter V, Section 18(g)(i).
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    The second way a Public Customer Order can be submitted into a PIP 
auction as an Improvement Order is by submitting instructions to an OFP 
to submit an Improvement Order on her/his behalf under any instructions 
the OFP wishes to accept. These Public Customer Improvement Orders that 
are not submitted as CPO's do not have a limit order on the BOX book 
coupled with their Improvement Order. These Improvement Orders are 
being submitted in reaction to the PIP auction broadcast.\6\
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    \6\ The PIP broadcast is disseminated once a PIP is initiated 
and is distributed solely to BOX Options Participants. The 
broadcasting of this message advises the Options Participants: (1) 
That a Primary Improvement Order, as that term is defined in the BOX 
Rules Chapter V, Section 18(e), has been processed; (2) of 
information concerning series, size, price and side of market, and; 
(3) when the PIP will conclude (``PIP Broadcast'').
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    A Public Customer receiving and reacting to the PIP broadcast needs 
highly developed technology similar to the technology used by BOX OFPs 
and Market Makers, which is not readily available to the average 
investor. This technology is necessary for the Public Customer to 
receive significant amounts of data at an extremely high rate of speed 
and to react to the PIP broadcast, within the time frame of the three-
second PIP auction. Typically, a Public Customer who can receive a PIP 
broadcast and react to it by submitting an Improvement Order would be a 
sophisticated investor possessing the aforementioned technology. The 
sophisticated Public Customer investor's possession of the technology, 
similar to BOX OFPs and Market Makers, allows this Public Customer to 
compete in PIPs on the same level playing field as OFPs and Market 
Makers.
    The BOX proposes to charge a $0.20 per contract traded fee for 
Improvement Orders submitted into a PIP by a Public Customer that are 
not submitted as CPO's. The BOX believes this fee is reasonable because 
these orders are submitted into a PIP auction, which is a special 
trading mechanism within the BOX Trading Host that utilizes the PIP 
broadcast to create these orders. The BOX believes it is fair that 
customers behaving as ``options professionals'' should be subject to 
the same trading fees in the interests of a level playing field. The 
BOX is not proposing to charge a fee for Public Customer Improvement 
Orders, which are submitted as CPO's. All other Public Customer Orders 
traded on BOX, including marketable orders, which interact with a PIP 
already underway, will continue to be free.

[[Page 28059]]

2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\7\ in general, and Section 
6(b)(4) of the Act,\8\ in particular, in that it is designed to provide 
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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    \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 Exchange believes that the proposed rule change would not 
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

    The Exchange has not solicited or received comments on the proposed 
rule change.

III. Date of Effectiveness of the Proposed Rule

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change; or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 No. SR-BSE-2006-10 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE, 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BSE-2006-10. 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 Commissions 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-BSE-2006-10 
and should be submitted by June 5, 2006.
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    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
Nancy M. Morris,
Secretary.
 [FR Doc. E6-7321 Filed 5-12-06; 8:45 am]
BILLING CODE 8010-01-P