94-10888. Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Chicago Board Options Exchange, Inc. Relating to Modifications of Exchange Fees  

  • [Federal Register Volume 59, Number 87 (Friday, May 6, 1994)]
    [Unknown Section]
    [Page 0]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 94-10888]
    
    
    [[Page Unknown]]
    
    [Federal Register: May 6, 1994]
    
    
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    SECURITIES AND EXCHANGE COMMISSION
    
    [Release No. 34-33983; File No. SR-CBOE-94-13]
    
     
    
    Self-Regulatory Organizations; Notice of Filing and Immediate 
    Effectiveness of Proposed Rule Change by the Chicago Board Options 
    Exchange, Inc. Relating to Modifications of Exchange Fees
    
    April 29, 1994.
        Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
    (``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on April 1, 
    1994, 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. The 
    Commission is publishing this notice to solicit comments on the 
    proposed rule change from interested persons.
    
    I. Self-Regulatory Organization's Statement of the Terms of Substance 
    of the Proposed Rule Change
    
        The CBOE proposes to establish the following fees: (1) A $350 
    monthly fee for CBOE members who install ILX/WDN personal computer 
    (``PC'') terminals in their floor booth(s); and (2) a $150 quarterly 
    fee for non-clearing Designated Primary Market Makers (``DPMMs'') for 
    the Exchange's work in reviewing their SEC Form X-17A-5 reports and 
    conducting annual financial audits to ensure their compliance with the 
    Commission's net capital rule, as amended, effective April 1, 1994.\1\ 
    In addition, the Exchange proposes to expand its customer box spread 
    fee rebate program, which is currently limited to positions in Standard 
    & Poor's 500 (``SPX'') index options, to make the rebate available on a 
    member's request for qualifying public customer positions in any and 
    all European-style index options.\2\
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        \1\See Securities Exchange Act Release No. 32737 (August 11, 
    1993), 58 FR 43555 (File No. S7-27-88).
        \2\The current box spread rebate program provides a 50% rebate 
    on transaction and trade match fees for box trades by public 
    customers in SPX options, provided the box trade totals 500 or more 
    contracts for the four sides of the trade. See Securities Exchange 
    Act Release No. 31386 (February 8, 1993), 58 FR 8639 (File No. SR-
    CBOE-93-06) (``Fee Rebate Approval Order'').
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        The text of the proposed fee changes 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 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 the 
    Statutory Basis for, the Proposed Rule Change
    
        The purpose of the proposed rule change is to establish two new 
    fees and to extend the CBOE's current fee rebate program for SPX 
    options to additional classes of European-style options. The first new 
    fee is a $350 monthly fee to CBOE members who install ILX/WDN PC 
    terminals in their floor booth(s). These terminals, which will replace 
    booth-installed Quotron terminals, will use Windows-based software and 
    will include and ILX window for display of market data as well as a 
    CBOE WDN window for internal CBOE displays and functions.
        The second new fee is a $150 quarterly fee to be paid by non-
    clearing DPMMs for the Exchange's work in reviewing their reports on 
    SEC Form X-17A-5 and conducting annual financial audits of such DPMMs 
    to ensure compliance with the Commission's net capital rule, as 
    amended, effective April 1, 1994.\3\ In the past, because non-clearing 
    market makers were exempt from the net capital rule, the CBOE'S 
    financial oversight of non-clearing DPMMs was less extensive, as were 
    the CBOE'S costs therefor. Beginning on April 1, 1994, however, non-
    clearing DPMMs will be required to meet portions of the Commission's 
    net capital rule, and the Exchange's oversight costs will increase 
    accordingly. The CBOE believes that the $150 quarterly fee will recover 
    a substantial portion of the new oversight costs which the Exchange 
    estimates it will incur.
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        \3\See Securities Exchange Act Release No. 32737, supra note 1.
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        In addition to the two new fees described above, the CBOE proposes 
    to expand the customer box spread fee rebate program, which is 
    currently limited to positions in SPX options.\4\ The expansion will 
    make the rebate available on a member's request for qualifying public 
    customer positions in any and all European-style index options. The 
    existing rebate program, which was approved permanently in February 
    1993,\5\ enables members to reduce certain transaction and trade match 
    fees which they pay to the Exchange.
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        \4\See Fee Rebate Approval Order, supra note 2.
        \5\Id.
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        The terms of the fee rebate and the rebate procedures proposed for 
    all European-style index options will be identical to the rebate terms 
    and procedures applicable to SPX options. Under the current rebate 
    program, as under the proposal, CBOE members may request a rebate of 
    50% of their transaction and trade match fees\6\ assessed an options 
    transactions that meet the following parameters: (1) The options 
    transaction(s) are executed for a customer account; and (2) the 
    transactions are box spreads\7\ on a European-style index that total 
    500 or more contracts for the four sides of the spread (i.e., 125 
    contracts per side).
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        \6\The rebate is $.22 per contract ($.20 transaction fee, plus 
    $.02 trade match fee) on contracts with a premium greater than or 
    equal to $1 and $.12 per contract ($.10 transaction fee, plus $.02 
    trade match fee) on contracts with a premium less than $1.
        \7\For purposes of the rebate, a box spread is a four-sided 
    option spread on a given European-style index that is composed of 
    (i) a long call and a short put at one strike price and (ii) a short 
    call and long put at a different strike price. All four sides must 
    expire in the same month.
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        Members seeking a fee rebate must submit a rebate request together 
    with supporting documentation to the Exchange's Accounting Department. 
    At a minimum, the supporting documentation must include the trade date, 
    the executing broker acronym, and the contract class, series, premium, 
    and quality.
        The Exchange 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 provides for the 
    equitable allocation of reasonable dues, fees, and other charges among 
    CBOE members and other persons using the CBOE's facilities.
    
    (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
    
        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
    
        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) of the Act and subparagraph (e) of Rule 
    19b-4 thereunder. 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. 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 in the 
    Commission's Public Reference Section, 450 Fifth Street, NW., 
    Washington, DC 20549. Copies of such filing will also be available for 
    inspection and copying at the principal office of the CBOE. All 
    submissions should refer to the file number in the caption above and 
    should be submitted by May 27, 1994.
    
        For the Commission, by the Division of Market Regulation, 
    pursuant to delegated authority.
    Jonathan G. Katz,
    Secretary.
    [FR Doc. 94-10888 Filed 5-5-94; 8:45 am]
    BILLING CODE 8010-01-M
    
    
    

Document Information

Published:
05/06/1994
Department:
Securities and Exchange Commission
Entry Type:
Uncategorized Document
Document Number:
94-10888
Pages:
0-0 (1 pages)
Docket Numbers:
Federal Register: May 6, 1994, Release No. 34-33983, File No. SR-CBOE-94-13