[Federal Register: September 2, 2003 (Volume 68, Number 169)]
[Notices]
[Page 52252-52254]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02se03-145]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48396; File No. SR-BSE-2003-12]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by
the Boston Stock Exchange, Inc. Relating to Its Transaction and Floor
Operations Fee Schedules
August 22, 2003.
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 July 1, 2003, the Boston Stock Exchange, Inc. (``BSE'' 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 BSE. On August 5,
2003, the BSE filed an amendment to the proposal.\3\ The Commission is
publishing this notice to solicit comments on the proposed rule change,
as amended, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from John Boese, Vice President Legal and
Compliance, BSE, to Ms. Nancy Sanow, Assistant Director, Division of
Market Regulation, Commission, dated August 14, 2003 (``Amendment
No. 1''). In Amendment No. 1, the BSE added purpose language that
elaborates on the overarching purpose of the rulefiling, inserted
purpose language to clarify that the rulefiling will apply solely to
BSE members, and provided purpose language that describes the
necessity of the fee change to offset systems related expenses
incurred by the Exchange in providing facilities for its member
firms to provide layoff services to the BSE specialist community.
For purposes of calculating the 60-day abrogation period, the
Commission considers the period to have commenced on August 5, 2003.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The BSE proposes to amend its Floor Operations Fees and Transaction
Fees schedules. The text of the proposed rule change is below. Proposed
new language is italicized; proposed deletions are in brackets.
* * * * *
FLOOR OPERATION FEES
(1) Occupancy/Technology Occupancy $500.00 per post per month.
Fee.
Specialist/Floor Trader Technology $500.00 per BEACON terminal per month.
Fee.
Floor Broker Technology Fee......... $100.00 per BEACON terminal per month.
Security Routing Fee................ $500.00 per month per BEACON user-ID that has stocks routed to it.
Floor Facility Fee.................. $250.00 per person that regularly accesses the trading floor.
Electronic Trading Permit Fee....... $1,000.00 per trader trading from a remote location per month.
(2) Specialist Post Clearing and $750.00 per specialist book for first 3 books per firm.
Cashiering Post Cashiering Fee. $100.00 per specialist book for any books in excess of 3 per firm.
Clearing Fee........................ $.05 per trade.
(3) Specialist Trade Processing Fees/ No Charge.
Credits Pre-Opening Trades.
Trades in CTA Securities ranked No Charge (BSE executions only).
1,001 and greater.
Round lot........................... $.50 per order.
Odd Lot Trades (includes CSI Issues) $.05 per order ($400 maximum per account).
Trading Account Trades.............. $1.50 per order.
[[Page 52253]]
ETF Trade Credit.................... $2.00 per trade (maximum annual credit capped at total amount paid in
upfront annual registration fees).
Revenue Sharing Program............. 100% (50% after 1st 6 months) non specialist revenue and 50% CTA revenue
will be shared on all floor broker generated volume in CTA 501+ issues.
* * * * * * *
(4) Other Charges ITS User Fee...... $[.003] $.0018 per share on [net] outbound specialist trades [(charge for
outgoing trades offset by cumulative credit for incoming trades)]. No
charge for non-specialist firms.
Quotation Services.................. Member assumes 100% of cost.
Specialist Margin Account Financing. Charged daily at current broker call rate.
Solely Listed Issue Credit.......... $50.00 Credit per issue traded.
Miscellaneous Charges............... At cost for phone, postage, courier service, fax usage, after hours BSE
staff assistance and other applicable items.
Late Fees........................... 1.5% will be charged on outstanding balances as of the last calendar day
of the month.
TRANSACTION FEES
1. Trade Recording and Comparison
Charges
[sbull] All BSE executions up to No Charge.
and including 2,500 shares.
[sbull] All BSE single-sided No Charge.
executions from 2,501-5,000
shares.
[sbull] All other executions
(excluding automated non-BSE
executions)
First 2,500 trades per month $.29 per 100 shares
Next 2,500 trades per month. $.25 per 100 shares
Next 2,500 trades per month. $.15 per 100 shares
Over 7,500 trades per month. $.04 per 100 shares
Floor Brokered non-BSE $.05 per 100 shares
executions.
Automated non-BSE executions [$.05 per 100 net non-BSE automated shares].
$.025 per 100 shares for non-BSE automated shares offset by automated
incoming volume routed to BSE
$.05 per 100 shares for non-BSE automated shares in excess of automated
incoming volume routed to BSE.
Maximum charge per side $50.00
(single-sided).
Maximum charge per side $25.00
(cross).
(all trades accumulate for
volume discounts)
2. Value Charges
* * * * * * *
REVENUE SHARING:
TAPE A--Should the Exchange generate its monthly Tape A revenue target, 50% of any amount in excess of this
target amount will be shared on a pro-rata basis with those firms that generate a minimum of $50,000 in
overall monthly automated transaction fees.
TAPE B--50% of NET Tape B revenues will be shared on a per executed trade routed to the BSE.
* * * * *
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 BSE 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 and is set forth in Sections A, B, and C below.
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 the Exchange's
Floor Operation Fees schedule with the overall goal of increasing the
number of stocks traded on the BSE. The Exchange is proposing to
eliminate the credit it offers to specialists for inbound Intermarket
Trading System (``ITS'') volume and to also reduce the fee that it
charges to specialists to execute outbound volume through the same
system. The credit was initially implemented to induce specialists to
attract volume to the BSE through ITS by openly displaying their limit
orders. Since the initial implementation of this credit, overall market
conditions have changed and, more importantly, the Limit Order Display
Rule, SEC Rule 11Ac1-4,\4\ now requires that specialists display their
limit orders. The Exchange realizes that eliminating this credit may
increase the overall cost to transact business on the BSE for some
specialists and, as a result, further proposes to reduce the cost to
transact outbound ITS volume from $.003/share to $.0018/share to offset
this cost.
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\4\ 17 CFR 240.11Ac1-4.
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The Exchange also proposes to implement a credit program for its
specialists by which, for the first six (6) months of the program, the
BSE will credit back 100% of the Trade Recording and Value Charge
revenue it generates on BSE executed Floor-Brokered trades in the
issues ranked 501
[[Page 52254]]
or greater in listed securities volume reported to the Consolidated
Tape Association (``CTA''). In addition, as part of the credit program,
the BSE proposes to include 50% Tape Revenue sharing for revenue
generated on the same Floor-Brokered volume.\5\ After the first six (6)
months of the program, the credit of 100% of the Trade Recording and
Value Charge revenue will be reduced to 50%. CTA revenue sharing will
remain at the current rate of 50%. The purpose of the credit program
for the specialists is to acknowledge the importance of their
participation in the Exchange's overall initiative by implementing
incentives for specialists to increase the number of issues, and
related executions, traded on the BSE.
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\5\ The BSE represented to the Commission that the proposed BSE
specialist Revenue Sharing Program will not result in a market data
revenue rebate that exceeds 50% of Tape A or B market data revenue.
See Securities Exchange Act Release No. 46159 (July 2, 2002), 67 FR
45775 (July 10, 2002)(File Nos. SR-NASD-2002-61, SR-NASD-2002-68,
SR-CSE-2002-06, and SR-PCX-2002-37)(Order of Summary Abrogation).
The BSE represented that the instant proposal simply clarifies the
BSE's existing Revenue Sharing arrangement, which does not
specifically indicate to whom market data revenue rebates are to be
awarded. The Commission has relied on the BSE's representations in
not abrogating the proposed fee filing. Telephone conference between
John Boese, Vice President Legal and Compliance, BSE, and
Christopher B. Stone, Special Counsel, Division of Market
Regulation, Commission (August 22, 2003).
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Additionally, the BSE also proposes to amend its Transaction Fees
schedule by revising the rate at which it charges member firms that
route orders to the BSE and also provide BSE specialists with the
capability of routing order flow to other exchanges (for example,
through DOT \6\ terminals). A firm may currently use its automated
inbound volume that it routes to the BSE to qualify for reduced rates
on outbound volume executed through its DOT terminals and will continue
to be able to do so. However, a firm that provides automated inbound
volume to the BSE, will now be charged rates on its outbound volume (up
to the amount of inbound volume routed to the BSE) of $.025/100 shares.
Rates on outbound volume executed in excess of automated inbound volume
routed to the BSE will continue to be charged at the rate of $.05/100
shares, as previously established. These fees are necessary to offset
systems related expenses incurred by the Exchange in providing
facilities for its member firms to provide layoff services to the BSE
specialist community.
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\6\ DOT is the New York Stock Exchange's (``NYSE'') Designated
Order Turnaround System, an application that permits NYSE members to
route market orders and day limit orders on an automated basis
directly to the appropriate specialist on the NYSE trading floor.
See Securities Exchange Act Release No. 16649 (March 13, 1980), 45
FR 18541.
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2. Statutory Basis
The Exchange believes that its proposed rule change is consistent
with Section 6(b) of the Act,\7\ in general, and furthers the
objectives of Section 6(b)(4) of the Act,\8\ in particular, in that it
is an equitable allocation of reasonable dues, fees, and other charges
among Exchange members.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4).
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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
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change has been designated as a fee
change pursuant to Section 19(b)(3)(A)(ii) of the Act \9\ and Rule 19b-
4(f)(2) thereunder.\10\ Accordingly, the proposal will take effect upon
filing with the Commission. 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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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 17 CFR 240.19b-4(f)(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 proposal 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 BSE. All
submissions should refer to File No. SR-BSE-2003-12 and should be
submitted by September 23, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-22235 Filed 8-29-03; 8:45 am]
BILLING CODE 8010-01-P