October 1, 2004

VIA FACSIMILE AND U.S. MAIL

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 conditionally or on specific 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 11Aa-32(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 with regards to paying the new Participant fee thereunder.³ As discussed below, the Commission is extending the exemption for the BSE from certain provisions of the Linkage Plan for a period of six months.

By your letter dated September 30, 2004, the BSE requests that the Commission extend the exemption for at least six more months to allow the BSE and the Options Linkage Authority Operating Committee ("OLAOC") to continue their deliberations and reach an agreement as to the appropriate new Participant fee. You state in your letter that the fee dispute between the BSE and the OLAOC that prompted the request for the Initial Exemption Letter has not been resolved. You further express the view that it would be appropriate for the OLAOC to consider and incorporate into the Linkage Plan objective standards consistent with criteria set forth in a letter dated August 3, 2004 sent by Division of Market Regulation staff to the participants of another national market system plan, the CTA Plan.

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 OLAOC determine the appropriate new Participant 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 with regards to paying the new participant fee until April 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 requested by the OLAOC in escrow with the Options Clearing Corporation; and
    
3. not participating in any 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 OLAOC and the BSE 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. The Commission expresses no view with respect to other questions that BSE may raise, including the applicability of other provisions of the Linkage Plan to BOX.

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.

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 ("Initial Exemption Letter").

Incoming Letter:

The Incoming Letter is in Acrobat format.

http://www.sec.gov/divisions/marketreg/mr-noaction/bse100104.htm