Document ID: SEC-2006-0484-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Boston Stock Exchange, Inc.
Posted Date: 2006-04-13T04:00Z

[Federal Register: April 13, 2006 (Volume 71, Number 71)]
[Notices]               
[Page 19221-19222]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13ap06-126]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53607; File No. SR-BSE-2006-05]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change To Modify the Boston Options 
Exchange's Fee Schedule To Impose Surcharge Fees for Transactions in 
Options on ETFs on a Retroactive Basis

April 6, 2006.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 15, 2006, 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. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The BSE is proposing to retroactively establish certain Boston 
Options Exchange (``BOX'') licensing fee surcharges applicable to 
broker-dealer proprietary accounts and market maker accounts for trades 
in options on certain exchange traded funds (``ETFs''). The Exchange is 
proposing to apply these surcharge fees retroactively for each product 
as of the Effective Dates listed in Table 1, below, through January 3, 
2006. On January 4, 2006, the Exchange filed an identical amendment to 
the BOX Fee Schedule,\3\ which became immediately effective under 
section 19(b)(3)(A) of the Act.\4\ Because the Exchange seeks to apply 
the surcharge fees listed in the BOX Fee Schedule on a retroactive 
basis, the Exchange is submitting this proposal to the Commission 
pursuant to section 19b(2) of the Act \5\ to be published for notice 
and comment. The current BOX Fee Schedule is available on the BOX Web 
site at http://www.bostonoptions.com. The text of the proposed rule 

change is available on the BOX's Web site, at the principal office of 
BOX, and at the Commission's Public Reference Room.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 53454 (March 8, 
2006), 71 FR 13439 (March 15, 2006) (SR-BSE-2006-01).
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

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. The BSE 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 Exchange is proposing to amend BOX's Fee Schedule to 
retroactively establish, from the Effective Dates listed in Table 1 
below through January 3, 2006, a surcharge fee for certain transactions 
in ETF options on BOX that are affected by market makers and broker-
dealer proprietary accounts.\6\ The respective surcharge fees became 
effective on January 4, 2006 pursuant to a previous proposed rule 
change submitted by the Exchange.\7\
---------------------------------------------------------------------------

    \6\ The surcharge fee for trading in the options listed in 
Section 2(c) of the BOX Fee Schedule is equal to the cost charged to 
BOX by the licensor in the associated licensing agreement. BSE 
represents these fees are only charged to BOX Participants.
    \7\ See supra note 3.

------------------------------------------------------------------------
                                                              Effective
             Name                    Symbol          Fee         date
------------------------------------------------------------------------
Standard & Poor's Depository    SPY.............      $0.10      1/10/05
 Receipts.
iShares Russell 2000 Index      IWM.............       0.10       5/2/05
 Fund.
S&P Energy Select Sector SPDR   XLE.............       0.09       6/6/05
 Fund.
iShares Russell 2000 Growth     IWO.............       0.10      6/27/05
 Index Fund.
iShares Nasdaq Biotechnology    IBB.............       0.10      6/27/05
 Index Fund.
S&P Financial Select Sector     XLF.............       0.09      6/27/05
 SPDR Fund.
------------------------------------------------------------------------

    The BOX Fee Schedule that was in effect when these products started 
trading (i.e., on the Effective Dates specified in Table 1 above), 
stated in section 2(c) that applicable surcharges applied for options 
on ETFs that are passed-through by BOX.\8\ However, in an 
administrative oversight, the BSE did not update the list of ETF 
products that

[[Page 19222]]

BOX added and the amount of the pass-through licensing surcharges BOX 
was charging for each product in conjunction with the licensing 
agreements. While the BSE should have specifically listed each 
individual ETF option product and the associated surcharge fee on the 
BOX Fee Schedule, the BSE also believes that, nevertheless, its 
Participants were (1) aware that surcharges were applicable for options 
on ETFs pursuant to the language in Section 2(c) of the BOX Fee 
Schedule; and (2) aware of the specific pass-through licensing 
surcharges for each product via their monthly billing statement. The 
BSE believes it was open and transparent with its Participants 
regarding the applicable surcharges in the above-mentioned products, 
notwithstanding the fact that the specific information was not updated 
on the BOX Fee Schedule. The Exchange now proposes to extend this 
surcharge fee retroactively to all applicable transactions occurring 
since, and as of, the Effective Dates listed in Table 1.
---------------------------------------------------------------------------

    \8\ Section 2(c) of the BOX Fee Schedule then stated, as it 
currently does: ``Plus, where applicable, any surcharge for options 
on ETFs that are passed through by BOX.''
---------------------------------------------------------------------------

    In addition, the Exchange proposes to amend the BOX Fee Schedule to 
clarify the meaning of the current text in section 4(b) (``InterMarket 
Linkage'') of the BOX Fee Schedule, which includes an explicit 
reference to the surcharge with respect to Inbound P and PA orders that 
are billed per contract.\9\ The BSE also proposes that the title of 
section 4(b) of the BOX Fee Schedule be changed from ``Per contract, 
billed to away market'' to ``Per contract, billed to clearing firm of 
away market Member'' to provide more clarity as to which party is 
billed. The BSE believes that the new text is not a substantive change 
to the BOX Fee Schedule, does not impose any new fees on Linkage 
Orders, and is consistent with the Linkage Fee pilot program. The 
Exchange notes that Linkage Orders have always been assessed this 
surcharge and have been invoiced as such. The Exchange is proposing 
these changes to section 4 to clarify the BOX Fee Schedule.
---------------------------------------------------------------------------

    \9\ Specifically, the Exchange proposes to replace the sentence 
``Same as if were BOX Participant'' with ``This charge is the same 
as that which is applicable to a BOX Participant under section 2. 
These orders are also subject to any additional pass-through 
surcharge fees specified in section 2(c), as applicable.'' Telephone 
conversation between Bill Meehan, General Counsel, BOX, and Richard 
Holley, Special Counsel, Division of Market Regulation, Commission, 
on March 28, 2006.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of section 6(b) of the Act,\10\ in general, and section 
6(b)(4) of the Act,\11\ in particular, in that it is designed to 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its members and issuers and other persons using its 
facilities.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

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 comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which BSE consents, the Commission shall:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File No. SR-BSE-2006-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-BSE-2006-05. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). 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 also will be available for inspection and copying at the 
principal office of the BOX. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-BSE-2006-05 and should be submitted on or before May 4, 
2006.
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6-5482 Filed 4-12-06; 8:45 am]

BILLING CODE 8010-01-P