Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), and Rule 19b-4 thereunder, notice is hereby given that on August 1, 2002, 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 Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
17 CFR 240.19b-4.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to adopt an access fee for non-customer orders in the Nasdaq 100® Index Tracking Stock (“QQQ”), Nasdaq-100® Index (“NDX”), CBOE Mini-NDX Index (“MNXSM”), and European style S&P 100® Index (“XEO®”) option classes executed through its Retail Automatic Execution System (“RAES”). The text of the proposed rule change appears below. New text is in italics.
Fee Schedule as of July 1, 2002
| 4. RAES (Retail Automatic Execution System) (1)(4) | Per contract |
|---|---|
| Assessed to Index Customer Transactions | $.25 |
| • Dow Jones, Assessed on the First 25 Contracts Only | |
| Assessed to Non-Customer Transactions in MNX, NDQ, QQQ and XEO | $.30 |
(1) Per contract side, including FLEX options. Transaction and Trade Match Fees are applicable to the CBOEdirect system.
(4) Transaction, trade match and RAES fees are charged to the CBOE executing firm on the input record.
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 CBOE proposes to adopt a $0.30 per contract access fee for all non-customer orders in the MNXSM, NDX, QQQ, and XEO® option classes that are executed through RAES. Under this proposal, all non-customer transactions in these options classes that are executed via RAES would be uniformly assessed this fee.
According to the CBOE, non-customer orders subject to this proposed fee are Firm orders, CBOE market maker orders, non-CBOE market maker orders, orders from a specialist in the underlying security, and orders for the account of a registered broker-dealer. The CBOE also notes that this fee would only be charged to Exchange member firms through the customary monthly billing that occurs shortly after the close of each trading month. Non-members of the Exchange would not be charged this proposed fee.
Telephone conversation between Christopher R. Hill, Attorney, CBOE, and Christopher Solgan, Attorney, Division of Market Regulation, Commission, on August 15, 2002.
The CBOE recently began to allow broker-dealer orders to be executed on RAES for products within the jurisdiction of the Exchange's Index Floor Procedure Committee. Currently, such orders are only authorized in the QQQ, NDX, MNXSM, and XEO® option classes. Having extended the benefits of rapid, automatic execution to such non-customer orders, CBOE seeks to impose this fee to help allocate to such orders a fair share of the related costs of running RAES and related Exchange systems. The CBOE notes in this regard that most index customer orders are already assessed a RAES fee of $0.25 per contract. The CBOE believes that this fee would help to better equalize RAES fees between customer and non-customer RAES orders. The CBOE also notes that this proposal is modeled after File No. SR-PCX-2002-10.
See Securities Exchange Act Release No. 46113 (June 25, 2002), 67 FR 44486 (July 2, 2002).
The CBOE notes that QQQ customer orders are currently exempt from the RAES fee, and Dow Jones Industrial Index customer orders executed through RAES are only assessed the fee on the first 25 contracts.
Under that proposal, the Pacific Exchange, Inc. established a $0.45 per contract surcharge fee for all broker-dealer orders executed via its automatic execution system. See Securities Exchange Act Release No. 45662 (March 27, 2002), 67 FR 16786 (April 8, 2002).
(2) Statutory Basis
The CBOE believes that the proposed rule change is consistent with section 6(b) of the Act, in general, and furthers the objectives of section 6(b)(4), in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges among CBOE members.
15 U.S.C. 78f(b)(4).
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 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
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 rule change establishes or changes a due, fee, or charge imposed by the Exchange and, therefore, has become effective upon filing pursuant to section 19(b)(3)(A)(ii) of the Act and Rule 19b-4(f)(2) hereunder. 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 purpose of the Act.
15 U.S.C. 78(s)(b)(3)(A)(ii).
17 CFR 240.19b-4(f)(2).
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 20549-0609. 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 will also be available for inspection and copying at the principal office of the Exchange. All submissions should refer to File No. SR-CBOE-2002-42 and should be submitted by October 1, 2002.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-22889 Filed 9-9-02; 8:45 am]
BILLING CODE 8010-01-P