April 1, 2005

George W. Mann, Jr.
Executive Vice President and General Counsel
Boston Stock Exchange
One Financial Place
100 Franklin Street
Boston, MA 02110

Dear Mr. Mann:

Rule 11Aa3-2(f) under the Securities Exchange Act of 1934 ("Exchange Act") provides that the Securities and Exchange Commission ("Commission") may exempt from the provisions of that rule, either unconditionally or on specified terms and conditions, any self-regulatory organization, member thereof, or specified security, if the Commission determines that such exemption is consistent with the public interest, the protection of investors, the maintenance of fair and orderly markets and the removal of impediments to, and perfection of the mechanisms of, a national market system.¹ On February 4, 2004, the Commission granted a temporary exemption from Exchange Act Rule 11Aa3-2(d) to permit the Boston Stock Exchange ("BSE") to be a Participant² in the Linkage Plan without complying with Sections 4(c)(i)(iv), 5(c)(ii), and 11(b) of the Linkage Plan regarding payment of the new Participant fee thereunder.³ On October 1, 2004, the Commission extended the exemption for the BSE from complying with those provisions of the Linkage Plan for a period of six months.⁴ As discussed below, the Commission is again extending the exemption for the BSE from certain provisions of the Linkage Plan for a period of up to six months.

By your letter dated March 18, 2005, the BSE requests that the Commission extend the exemption for an additional six months to enable the BSE to present further information and facts related to the ongoing dispute between the BSE and the other members of the Options Linkage Authority Operating Committee ("OLAOC") in determining a fair and reasonable new Participant fee. You state in your letter that the BSE and the other members of the OLAOC have held several discussions on the new Participant fee and have been unsuccessful in reaching agreement on a new Participant fee.

Response:

Based on the representations in your letter, the Commission finds that the requested extension of the fee exemption is consistent with the public interest, the protection of investors, the maintenance of fair and orderly markets and the removal of impediments to, and perfection of the mechanism of, a national market system because it will permit the BSE to remain a Participant in the Linkage Plan and to continue uninterrupted the operation of its facility, the Boston Options Exchange, Inc. ("BOX"), while the BSE and the other Participants determine the appropriate participation fee.

Pursuant to Exchange Act Rule 11Aa3-2(f), the Commission hereby extends the exemption for the BSE from the requirement under Exchange Act Rule 11Aa3-2(d) that the BSE comply with Sections 4(c)(i)(iv), 5(c)(ii), and 11(b) of the Linkage Plan regarding payment of the new Participant fee until October 1, 2005, or such earlier time as the Commission determines is appropriate. This exemption is expressly contingent upon the BSE complying with the following conditions:

1. continuing to satisfy all of the other requirements to become a Participant in the Linkage Plan as set forth in Sections 4(c)(i)(i)-(iii) of the Linkage Plan;
    
2. maintaining the full amount of the participation fee for new Participants requested by the OLAOC in escrow with the Options Clearing Corporation; and
    
3. not participating in the portion of any meeting of the OLAOC at which a vote on objective standards for determining a participation fee for new Participants or on the specific participation fee applicable to the BSE is taken.
    

The Commission urges the BSE and the other members of the OLAOC to continue their discussion on the appropriate standards for setting a participation fee in good faith, maintaining the objective of the fair distribution of development costs, and to agree on an appropriate participation fee, prior to the expiration of this exemption.

This exemption is conditioned solely on the facts and representations presented in your letter. In the event that any material change occurs with respect to any of the facts or representations presented, the exemption will expire and BOX must immediately cease operating except in accordance with all of the provisions in the Linkage Plan.

Endnotes

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¹ The Division of Market Regulation has delegated authority to grant an exemption pursuant to 17 CFR 200.30-3(a)(42).

² The term "Participant" is used as defined in the Linkage Plan. See Section 2(24) of the Linkage Plan.

³ See Letter from Robert L.D. Colby, Deputy Director, Division of Market Regulation ("Division"), Commission, to George W. Mann, Jr., Executive Vice President and General Counsel, BSE, dated February 4, 2004.

⁴ See Letter from Robert L.D. Colby, Deputy Director, Division, Commission, to George W. Mann, Jr., Executive Vice President and General Counsel, BSE, dated October 1, 2004.

⁵ 17 CFR 200.30-3(a)(42).

Incoming Letter:

The Incoming Letter is in Acrobat format.

http://www.sec.gov/divisions/marketreg/mr-noaction/bse040105.htm