[Federal Register Volume 63, Number 209 (Thursday, October 29, 1998)]
[Notices]
[Pages 58078-58079]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-29009]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 40591; File No. SR-BSE-98-9]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Boston Stock Exchange,
Inc. Relating to its Fees Schedule
October 22, 1998.
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 October 1, 1998, the Boston Stock Exchange, Inc. (``BSE'' or
Exchange'') filed with the Securities and Exchange Commission (``SEC''
or ``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.
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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 its fee schedules to: (1) eliminate
fees for specialist odd lot trades; (2) increase specialist and floor
broker occupancy fees; (3) revise transaction fee maximums under the
Competing Specialist Initiative program; (4) increase Members' Dues;
and (5) implement a revenue sharing program for member firms
(``firms'').
The text of the proposed rule change is available at the Office of
the Secretary, the BSE 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 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 purpose of the proposed rule change is to amend several of the
Exchange's fee schedules as follows:
Floor Operation Fees
The Exchange proposes to eliminate specialist odd lot fees.\3\ The
purpose of this rule change is to support the Exchange's Floor Members'
efforts in attracting additional odd lot order flow to the Exchange.
The Exchange also proposes to increase specialist and floor broker
occupancy fees from $400 per post per month to $500 per post per month.
The purpose of this increase is to help offset the costs associated
with operating the trading floor.
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\3\ Specialist odd lot fees were $.75 per order.
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Additionally, the Exchange proposes to revise Competing Specialist
Initiative (CSI) transaction fee maximums to:
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Monthly
CTA trade rank transaction
fee maximum
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1-50....................................................... $400
[[Page 58079]]
51-100..................................................... 300
101-500.................................................... 250
501+....................................................... * 0
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* Includes Exchange executions only. For all other executions, the
applicable trade rate will continue to apply.
The purpose of this revision is to better align the maximum
transaction fees per CSI issue with the associated value of trading
each stock.
Membership and Other Fees
The Exchange proposes to increase Membership Dues from $400 to $600
per membership per quarter. The purpose of this revision is to better
reflect the current value of a membership on the Exchange.
Transaction Fees
The Exchange proposes to implement a revenue sharing program
(``credit'') with those firms that generate $50,000 in monthly
automated transaction fees. This credit will be applied toward a firm's
total monthly transaction fees (the total of Value Charge and Trade
Recording and Comparison Fees) once a firm generates $50,000 in
automated fees. However, no firm that receives the credit will pay less
than $7,000 (compared to the current monthly maximum of $50,000) in
automated transaction fees.
The amount of revenue to be shared will be determined by the total
amount of transaction related revenue (Value Charge fees, Trade
Recording fees, Specialist Transaction fees, Consolidated Tape Revenue
and Net ITS fees) the Exchange generates on a monthly basis. Once the
Exchange generates $1,300,000 in monthly transaction related revenue,
50% of the revenue above this amount will be shared with those firms
that have generated $50,000 in monthly automated transaction revenue.
This amount will be reviewed periodically by the Executive Committee of
the Board of Governors and adjusted as required to meet the costs of
operating the trading floor. Each firm that reaches the $50,000 cap
will receive a pro-rata share of the excess revenue based on the total
number of Exchange automated executions executed by those firms that
reach the cap. However, if the Exchange does not attain its monthly
revenue goal, no revenue will be shared for that month.
The application of the credit can be demonstrated by the following
example: Suppose the Exchange generates $1,500,000 in transaction
related revenue (as defined above) for the month. Additionally, four
retail/institutional firms each generate $50,000 in automated
transaction fees. Of the four firms, firm 1 executes 150,000 Exchange
executions, firm 2--125,000, firm 3--75,000, and firm 4--25,000. Total
Exchange executions for these four firms would be 375,000. Total
revenue to be shared with these four firms would be $100,000
(($1,500,000 minus $1,300,000) multiplied by 50%). The credit would be
allocated back such that firm 1 would receive a credit of $40,000
(150,000 divided by 375,000=40%, 40% of $100,000 $40,000), firm 2 would
receive a credit of $33,333 (125,000 divided by 375,000=33.33%, 33.3%
of $100,000=$33,333), firm 3 would receive a credit of $20,000 (75,000
divided by 375,000=20%, 20% of $100,000=$20,000), and firm 4 would
receive a credit of $6,667 (25,000 divided by 375,000=6.67%, 6.67% of
$100,000=$6,667).
The purpose of the above credit is to offer firms additional
incentives to route order flow to the Exchange. This revision
represents a continuing effort by the Exchange to provide its
membership with a cost-effective market center in which to execute
equity transactions.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) \4\ of the Act, in general, and furthers the objectives of
Section 6(b)(4),\5\ in particular, in that it is designed to provide
for the equitable allocation of reasonable dues, fees and other charges
among its members.\6\
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(4).
\6\ The Commission notes that the filing may raise questions
concerning payment for order flow. To the extent that it does raise
such issues, exchange members should consider any associated
disclosure obligations, namely pursuant to Rules 10b-10 and 11 Acl-3
under the Act, 17 CFR 240.10b-10 and 17 CFR 240.11 Acl-3,
respectively.
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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 inappropriate 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 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 establishes or changes a due, fee, or
other charge and, therefore, has become effective pursuant to Section
19(b)(30(A) and the Act \7\ and subparagraph (e)(2) of Rule 19b-4
thereunder.\8\
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\7\ 17 U.S.C. 78s(b)(30(A).
\8\ 17 CFR 240.19b-4(e)(2).
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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.
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, N.W., Washington, D.C. 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
Exchange. All submissions should refer to File No. SR-BSE-98-9 and
should be submitted by November 19, 1998.
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. 98-29009 Filed 10-29-98; 8:45 am]
BILLING CODE 8010-01-M
