[Federal Register Volume 63, Number 148 (Monday, August 3, 1998)]
[Notices]
[Pages 41306-41308]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20558]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40264; File No. SR-CBOE-98-31]
Self-Regulatory Organization; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Chicago Board Options
Exchange, Inc. Relating to Exchange Fees.
July 24, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 \2\ thereunder notice is hereby given that
on June 30, 1998, 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 July 15,
1998, the Exchange filed a letter amendment to the proposed rule change
(``Amendment No. 1'').\3\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 corrected an error in the original filing
regarding the trade match fee reduction for a threshold volume of
925,000 contracts and above, and made other clarifying changes. See
letter from Stephanie C. Mullins, Attorney, CBOE to S. Kevin An,
Special Counsel, Division of Market Regulation, Commission (July 14,
1998).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange is proposing to amend and add certain fees, as well as
renew and amend (i) its Prospective Fee Reduction Program; and (ii) its
Customer ``Large'' Trade Discount Program. The text of the proposed
rule change is available at the Office of the Secretary, CBOE and at
the Commission.
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 its 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
The purpose of this proposed rule change its to make certain fee
changes and additions, and to renew and amend (i) the Exchange's
Prospective Fee Reduction Program; and (ii) its Customer ``Large''
Trade Discount Program. The foregoing fee changes are being implemented
by the Exchange pursuant to CBOE Rule 2.22 and will take effect on July
1, 1998.
The Exchange is amending the following fees: (1) Trade Match Fee
will be increased to $.05 from $.04 per contract side; (2) Trade Match
Report Fees will be changed to $.0025 per contract side for all matched
and unmatched information. Previously the fee was $.0008 for paper
reports per contract side, per copy, for matched and unmatched
information; $.0003 for data transmission per contract side, per pass;
and $.0003 for unmatched report transmission per contract, per pass;
(3) CBOE Market-Maker Handheld Terminals Fee will be increased to $.08
per record from $.05 per record; (4) DPM Regulatory Fee will be changed
to $.40 per $1,000 of gross revenue from a flat fee of $150 per
quarter; (5) Dow Jones Booth Fee will be changed to a flat $300 per
month, which previously was $300 per month for OCC firms and $625 per
month for Non-OCC firms (the fee also formerly included a variable fee
for insufficient fee credits for both OCC and Non-OCC firms). The
Exchange is proposing to add the following fees: (1) Technology Fee of
$200 per month; and (2) Book Manual Entry Fee of $1 per order.
The Exchange's Fee Reduction Program for Market-Maker Transaction
Fees, Floor Broker Fees, and Member Dues currently provides that if at
the end of any quarter of the Exchange's fiscal year, the Exchange's
average contract volume per day on a fiscal year-
[[Page 41307]]
to-date basis exceeds one of certain predetermined volume thresholds,
the Exchange's market-maker transaction fees, floor broker fees, and
member dues will be reduced in the following fiscal quarter in
accordance with a fee reduction schedule. The program is scheduled to
terminate on June 30, 1998 at the end of the Exchange's 1998 fiscal
year. The program is proposed to be amended to replace the market-maker
transaction fee and floor broker fee reduction with a trade match fee
reduction, and to continue the program during the Exchange's 1999
fiscal year, terminating June 30, 1999. The program also is proposed to
be amended to increase the volume thresholds at which the discount
commences.
The Exchange has decided to amend the name of the program and the
fees associated with it because market-maker transaction fees and floor
broker fees are not being increased, and the Exchange feels that it is
not in the best interest of the financial welfare of the Exchange to
give any further discount on those fees. However, the Exchange is
increasing trade match fees, and the Exchange feels that to compensate
for that increase, during high volume quarters, the trade match fee
will be discounted. Additionally, the trade match fee discount is an
across-the-board discount, applying fairly to both market-makers and
floor brokers.
Specifically, the threshold volume at which the $.005 trade match
fee reduction applies will be 800,000 contracts. Currently, a $.005 fee
reduction only applies to floor broker fees when the volume threshold
is between 725,000 and 775,000 contracts. The threshold volume at which
the $.01 trade match fee reduction applies will be 825,000 contracts.
Currently the $.01 fee reduction only applies to market-maker
transaction fees when the threshold volume is between 700,000 and
775,000 contracts. Also, there will be a $.015 trade match fee
reduction for a threshold volume of 925,000 contracts and above.
Currently, there is no $.015 fee reduction in the program.
Finally, the member dues fee reduction, which currently ranges from
25% to 75% for volumes ranging from 675,000 to 775,000 contracts, as
amended will range from 25% to 100% for volumes ranging from 800,000 to
900,000. The 25% discount will commence at 800,000 contracts, the 50%
discount will commence at 850,000 contract, the 75% discount will
commence at 875,000 contract, and the 100% discount will commence at
900,000 contract.
The Exchange's Customer ``Large'' Trade Discount Program currently
provides for discounts on the transaction fees that CBOE members pay
with respect to public customer orders for 500 or more contracts.
Specifically, for any month the Exchange's average contract volume per
day exceeds one of certain predetermined volume thresholds, the
transaction fees that are assessed by the Exchange in that month with
respect to public customer orders for 500 or more contracts are subject
to a discount in accordance with a discount schedule. The program is
scheduled to terminate on June 30, 1998 at the end of the Exchange's
1998 fiscal year. The program is proposed to be amended to provide that
the program will continue in effect during the Exchange's 1999 fiscal
year and will terminate on June 30, 1999. In addition to renewing the
current fee discount percentages under the program, the program is also
proposed to be amended to increase by 50,000 contracts all the
threshold levels to which the discount rates apply, increasing the
minimum threshold level from 600,000 to 650,000, contracts at which the
30% discount rate applies. Additionally, the Exchange proposes to
discontinue its Dow Jones Large Trade Discount Program as of June 30,
1998. Dow Jones customer orders will now be included in the CBOE's
Customer Large Trade Discount Program. In all other respect the program
remains unchanged.
The proposed amendments are the product of the Exchange's annual
budget review. The amendments are structured to fairly allocate the
costs of operating the Exchange in the event that the Exchange
experiences higher volume. In addition, although the proposed rule
change provides that the Exchange's Fee Reduction Program for Trade
Match Fees and Member Dues, and the Exchange's Customer ``Large'' Trade
Discount Program will terminate at the end of the Exchange's 1999
fiscal year, the Exchange intends to evaluate these programs prior to
the beginning of the 2000 fiscal year and may renew these programs in
the same or modified form for the 2000 fiscal year.
The proposed rule change is consistent with Section 6(b) of the
Act,\4\ in general, and furthers the objectives of Section 6(b)(4) \5\
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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\4\ 15 U.S.C. 78f(b).
\5\ 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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The CBOE has neither solicited nor received written comments on 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)(ii) of the Act \6\ and subparagraph
(e)(2) of Rule 19b-4 thereunder.\7\ 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.\8\
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\6\ 15 U.S.C. 78s(b)(3)(A)(ii).
\7\ 17 CFR 240.19b-4(e)(2).
\8\ In receiving this proposal, the Commission considered its
impact on efficiency, competition and capital formation. 15 U.S.C.
78c(f).
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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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.
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 at 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 submission should refer to File No. SR-CBOE-98-31 and should
be submitted by August 24, 1998.
[[Page 41308]]
For the Commission, by the Division of Market Regulation, pursuant
to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-20558 Filed 7-31-98; 8:45 am]
BILLING CODE 8010-01-M