[Federal Register Volume 64, Number 20 (Monday, February 1, 1999)]
[Notices]
[Pages 4915-4916]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-2297]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40973; File No. SR-CBOE-98-55]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by
the Chicago Board Options Exchange, Inc. Relating to Exchange Fees for
CBOT Exercisers.
January 25, 1999.
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 December 30, 1998, the Chicago Board Options Exchange, Inc.
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
by the Exchange. On January 13, 1999, the Exchange submitted Amendment
No. 1 to the proposed rule change.\3\ The Commission is publishing this
notice to solicit comments on the proposed rule change, as amended,
from interested person.
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\1\ 17 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from Arthur B. Reinstein, Assistant General
Counsel, CBOE, to Richard Strasser, Assistant Director, SEC, dated
January 12, 1999. (``Amendment No. 1''). In Amendment No. 1, CBOE
described the amount of CBOE dues and the technology fee which the
rule change imposes on CBOT Exercisers. Additionally, CBOE
summarized the fee waiver provisions of CBOE Rule 3.16(c) and the
Agreement entered into on September 1, 1992, between the Chicago
Board of Trade and CBOE.
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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 certain fees so that these fees are
charged to Chicago Board of Trade (``CBOT'') exercise members of CBOE
in the same manner that they are charged to other CBOE members. 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 it received on the proposed rule change. The
text of these statement 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
1. Purpose
The purpose of this proposed rule change is to amend certain fees
so that these fees are charged to CBOE members that are also members of
the CBOT (``CBOT Exercisers'') in the same manner they are charged to
the other CBOE members.
Article Five(b) of the CBOE Certificate of Incorporation provides
that:
[E]very present and future member of the [the Board of Trade of
the City of Chicago] who applies for membership in the [CBOE] and
who otherwise qualifies qualifies shall, so long as he remains a
member of said Board of Trade, be entitled to be a member of the
[CBOE] notwithstanding any such limitation on the number of members
and without the necessity of acquiring such membership for
consideration or value from the [CBOE], its members, or elsewhere.
Members of the [CBOE] admitted pursuant to this paragraph (b) shall,
as a condition of membership in the [CBOE], be subject to fees,
dues, assessments and other like charges, and shall otherwise be
vested with all rights and privileges and subject to all obligations
of membership, as provided in the by-laws.
CBOE Rule 3.16(c) further provides that for the purpose of entitlement
to membership on the CBOE in accordance with Article Fifth(b), the term
``member of the Board of Trade of the City of Chicago'' is interpreted
to mean an individual who is either an ``Eligible CBOT Full Member'' or
an ``Eligible CBOT Full Member Delegate'' as those terms are defined in
the Agreement entered into on September 1, 1992, between CBOT and CBOE
(``1992 Agreement''), and shall not mean any other person.
On February 12, 1988, CBOE and CBOT entered into a Joint Venture
Agreement (``JV Agreement''). The JV Agreement provided, among other
things, that the CBOE would waive dues in a given quarter for CBOT
Exercisers who made no trades in CBOE contracts
[[Page 4916]]
for the immediate previous quarter and that the access/exerciser fee
for CBOT Exercisers would be zero for the duration of the joint
venture. The JV Agreement terminated on December 29, 1998. As a result,
CBOE dues will no longer be waived for CBOT Exercisers who make no
trades in CBOE contracts in the immediate previous quarter, and all
CBOT Exercisers will be charged CBOE dues to the same extent that other
CBOE members are charged CBOE dues. Accordingly, each person who is an
effective CBOT Exerciser member of CBOE at the end of the first
business day of a calendar quarter will be charged the applicable CBOE
dues for that quarter.\4\
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\4\ Amendment No. 1 states that CBOE dues are currently $625.00
per quarter, subject to a 25% discount if CBOE average daily volume
on a fiscal year-to-date basis (``ADV'') is between 800,001-850,000
contracts, a 50% discount if CBOE ADV is between 850,001-875,000
contracts, a 75% discount if CBOE ADV is between 875,001-900,000
contracts, and a 100% discount if CBOE ADV exceeds 900,000
contracts. See note 3, supra.
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Similarly, the CBOE technology fee will no longer be waived for
CBOT Exercisers who make no trades in CBOE contracts in the immediate
previous month. As a result, each person who is an effective CBOT
Exerciser member of CBOE at the end of the first business day of a
month will be charged the technology fee for that month.\5\ CBOE began
assessing dues and the technology fee to CBOT Exercisers on January 4,
1999.
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\5\ According to Amendment No. 1, the technology fee is $200.00
a month. See note 3, supra.
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Due to the termination of the JV Agreement, the CBOE membership
application fees will also no longer be waived for CBOT Exercisers.
Accordingly, commencing on December 29, 1998, each CBOT Exerciser
membership applicant will be charged CBOE membership application fees
to the same extent that other CBOE membership applicants are charged
CBOE membership application fees. These membership application fees
include, but are not limited to, the $2,000 fee for new membership
applicants and the $100 renewal/change of status fee. These amendments
to CBOE's membership application fees will be incorporated into CBOE's
Membership Fee Circular.
Prior to the JV Agreement, CBOT Exerciser applicants were charged a
$500 CBOT Exerciser application fee. Because CBOT Exerciser applicants
will now be charged the same membership application fees as other CBOE
membership applicants, the $500 CBOT Exerciser application fee will be
eliminated.
The Exchange believes that it is appropriate to charge CBOT
Exerciser applicants the same membership application fees as other CBOE
membership applicants because CBOT Exerciser applications require the
same staff resources and effort to process as applications submitted by
other CBOE membership applicants. Finally, it should be noted that this
rule filing is not intended to affect the fee waiver provisions that
are set forth in the 1992 Agreement and Rule 3.16(c).\6\
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\6\ Amendment No. 1 explains that Rule 3.16(c) and the 1992
Agreement provide for CBOE to waive all membership dues, fees, and
other charges and all qualification requirements, other than those
imposed by law, in order to permit Eligible CBOT Full Members and
Eligible CBOT Full Member Delegates to participate in certain CBOE
offers, distributions, and redemptions defined by the 1992
Agreement. See note 3, supra.
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2. Statutory Basis
The Exchange represents that the proposed rule change is consistent
with Section 6(b) \7\ of the Act in general and furthers the objectives
of Section 6(b)(4) \8\ in particular, in that it is designed to provide
for the equitable allocation of reasonable dues, fees, and other
charges among CBOE members.\9\
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4).
\9\ In reviewing the proposed rule change, the Commission
considered its impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
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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 not received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
The foregoing rule change, which establishes or changes a due, fee,
or other charge imposed by the Exchange, has become effective pursuant
to section 19(b)(3)(A) of the Act \10\ and subparagraph (e)(2) of Rule
19b-4 thereunder.\11\ 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.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(e)(2).
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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 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 submissions should refer to File No. SR-CBOE-98-55 and should
be submitted by February 22, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\17\ CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-2297 Filed 1-29-99; 8:45 am]
BILLING CODE 8010-01-M