Document ID: SEC-2006-0344-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Boston Stock Exchange, Inc.
Posted Date: 2006-03-15T05:00Z

[Federal Register: March 15, 2006 (Volume 71, Number 50)]
[Notices]               
[Page 13439-13441]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15mr06-181]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53454; File No. SR-BSE-2006-01]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment Nos. 1 and 2 Thereto To Establish Fees for Options on 
Certain Exchange Traded Funds

March 8, 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 January 4, 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. On February 
1, 2006, the BSE filed Amendment No. 1 to the proposed rule change.\3\ 
On February 6, 2006, the BSE filed Amendment No. 2 to the proposed rule 
change.\4\ The BSE has designated this proposal as one establishing or 
changing a due, fee, or other charge imposed by the BSE under Section 
19(b)(3)(A)(ii) of the Act,\5\ and Rule 19b-4(f)(2) thereunder,\6\ 
which renders the proposal effective upon filing with the Commission. 
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    \3\ Amendment No. 1 was withdrawn on February 2, 2006.
    \4\ Amendment No. 2 made changes to the filing to supplement the 
names of certain of the underlying exchange traded funds (``ETFs'') 
to reflect their full titles as used by their respective sponsors 
and clarified that (1) the fees will be charged only to Boston 
Options Exchange (``BOX'') Participants, (2) the products in this 
filing constitute ``Fund Shares'' as defined in the BOX Rules, and 
(3) the surcharge fee for trading in options on the products in this 
filing is equal to the cost charged to BOX by the licensor in the 
associated licensing agreement. The changes in Amendment No. 2 do 
not affect the fees for transactions in options on the ETFs covered 
by this filing.
    \5\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \6\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Fee Schedule of the BOX to 
establish fees for transactions in options on certain ETFs effected by 
a broker-dealer through its proprietary accounts. The text of the 
proposed rule change is below. Proposed new language is in

[[Page 13440]]

italics; proposed deletions are in [brackets].

Boston Options Exchange Facility

Fee Schedule

[(as of October 2005)]

(as of January 2006)

    Sec. 1 No Change.
    Sec. 2 Trading Fees Broker Dealer Proprietary Accounts
    Subsections (a) and (b) No Change.
    c. Plus, where applicable, any surcharge for options on ETFs that 
are passed through by BOX. The applicable surcharges are as follows:
    (1) $0.10 per contract for options on the ETF Nasdaq 100 
(``QQQQs'').
    (2) $0.10 per contract for options on the Standard & Poor's 
Depository Receipts (SPY).
    (3) $0.10 per contract for options on the iShares Nasdaq 
Biotechnology Index Fund (IBB). 
    (4) $0.10 per contract for options on the iShares Russell 2000 
Index Fund (IWM).
    (5) $0.10 per contract for options on the iShares Russell 2000 
Growth Index Fund (IWO).
    (6) $0.09 per contract for options on the S&P Energy Select Sector 
SPDR Fund (XLE).
    (7) $0.09 per contract for options on the S&P Financial Select 
Sector SPDR Fund (XLF).
    Sec. 3-6 No Change.
* * * * *

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
    BSE is proposing to amend the BOX's Fee Schedule to establish 
surcharge fees for certain ETF option transactions effected through 
broker-dealer proprietary accounts. Currently, BOX assesses a surcharge 
fee for options on the ETF Nasdaq 100 (``QQQQ'') that are effected 
through broker-dealer proprietary accounts.\7\ BOX is proposing to 
establish similar surcharge fees for transactions in options on 
Standard & Poor's Depository Receipts (``SPY''), the iShares Nasdaq 
Biotechnology Index Fund (``IBB''), the iShares Russell 2000 Index Fund 
(``IWM''), the iShares Russell 2000 Growth Index Fund (``IWO''), the 
S&P Energy Select Sector SPDR Fund (``XLE''), and the S&P Financial 
Select Sector SPDR Fund (``XLF'').\8\ The amount of the surcharge fee 
will vary, as specified in the Fee Schedule, depending on the ETF, and 
will range from nine (9) cents to ten (10) cents per contract. The 
Exchange believes the proposed rule change will further the Exchange's 
goal of introducing new products to the marketplace that are 
competitively priced.
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    \7\ BSE represents that fees will be charged only to BOX 
Participants. The Commission notes that, pursuant to Section 
19(b)(1) of the Act and Rule 19b-4 thereunder, the BSE filed with 
the Commission a proposed rule change to enact various fees for the 
BOX facility, including a fee for trades executed via the 
InterMarket Linkage, which fee was approved on a pilot basis and 
which is ``equivalent to the regular trading fee for Market Maker 
and broker-dealer accounts on BOX.'' See Securities Exchange Release 
Nos. 48787 (November 14, 2003), 68 FR 65477 (November 20, 2003) (SR-
BSE-2003-17) (Notice of filing of proposed rule change); 49066 
(January 13, 2004), 69 FR 2775 (January 20, 2004) (SR-BSE-2003-17) 
(Order approving the fee schedule and approving the Linkage fees on 
a pilot basis until January 31, 2004). Specifically, the Commission 
notes that, under this pilot program, inbound Principal and 
Principal as Agent orders sent to BOX via InterMarket Linkage are 
subject to a $0.20 per contract fee and, where applicable, BOX 
passes-through a surcharge for options on certain ETFs. These pilot 
fees are currently set to expire on July 31, 2006. See Securities 
Exchange Release Nos. 49300 (February 23, 2004), 69 FR 9655 (March 
1, 2004) (SR-BSE-2004-07) (extending the pilot until July 31, 2004); 
50124 (July 30, 2004), 69 FR 47963 (August 6, 2004) (SR-BSE-2004-32) 
(extending the pilot until July 31, 2005); and 52147 (July 28, 
2005), 70 FR 44706 (August 3, 2005) (SR-BSE-2005-28) (extending the 
pilot until July 31, 2006).
    \8\ BSE represents that SPY, IBB, IWM, IWO, XLE, and XLF 
constitute ``Fund Shares'' as defined in Chapter IV, Section 3(i) of 
the BOX Rules.
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    The Exchange has entered into a license agreement with each ETF 
issuer in connection with the listing and trading of options on SPY, 
IBB, IWM, IWO, XLE, and XLF. As with licensed options on the QQQQ, the 
Exchange is adopting a surcharge fee for trading in these options to 
defray the licensing costs.\9\ The Exchange believes that charging the 
Participants that trade these instruments is the most equitable means 
of recovering the costs of the license.
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    \9\ 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.
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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 BOX Participants and other persons using its 
facilities.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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 burden on competition that is 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

    The foregoing rule change, as amended, has become effective 
pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(2) 
\13\ thereunder because it establishes or changes a due, fee, or other 
charge imposed by the Exchange. At any time within 60 days of the 
filing of such amended 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.\14\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 19b-4(f)(2).
    \14\ The effective date of the original proposed rule is January 
4, 2006. The effective date of Amendment No. 2 is February 6, 2006. 
For purposes of calculating the 60-day period within which the 
Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on February 6, 2006, the date on which the BSE submitted 
Amendment No. 2. See 15 U.S.C. 78s(b)(3)(C).
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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 proposed rule 
change, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

[[Page 13441]]

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-2006-01 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-2006-01. 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 the filing 
also will be available for inspection and copying at the principal 
office of the BSE. 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-
2006-01 and should be submitted on or before April 5, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-3697 Filed 3-14-06; 8:45 am]

BILLING CODE 8010-01-P