70 FR 117 pgs. 35475-35476 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to a Fee Cap for Options Merger Spread Transactions
Type: NOTICEVolume: 70Number: 117Pages: 35475 - 35476
Docket number: [Release No. 34-51828; File No. SR-CBOE-2005-42]
FR document: [FR Doc. E5-3158 Filed 6-17-05; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51828; File No. SR-CBOE-2005-42]
Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to a Fee Cap for Options Merger Spread Transactions
June 13, 2005.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 ("Act")1and Rule 19b-4 thereunder,2notice is hereby given that on May 23, 2005, the Chicago Board Options Exchange, Incorporated ("CBOE" 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 CBOE. On May 31, 2005, the Exchange filed Amendment No. 1 to the proposed rule change.3The Exchange designated the proposed rule change, as amended, as establishing or changing a due, fee, or other charge imposed by the Exchange under Section 19(b)(3)(A)(ii) of the Act,4and Rule 19b-4(f)(2) thereunder,5which 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 parties.
Footnotes:
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b-4.
3 In Amendment No. 1, the Exchange replaced the first paragraph under Item 3 of the Form 19b-4 to correct a formatting error that appeared in the original filing.
4 15 U.S.C. 78s(b)(3)(A)(ii).
5 17 CFR 240.19b-4(f)(2).
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend its Fee Schedule to adopt a fee cap on merger spread transactions. The text of the proposed rule change is available on the Exchange's Web site ( http://www.cboe.com ), at the Office of the Secretary, CBOE, and at the Commission.
II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, CBOE 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. CBOE 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, Proposed Rule Change
1. Purpose
The Exchange currently caps market-maker, firm, and broker-dealer transaction fees associated with "dividend spread" transactions at $2,000 for all dividend spread transactions executed on the same trading day in the same options class.6According to the Exchange, a dividend spread is defined as any trade done to achieve a dividend arbitrage between any two deep-in-the-money options.
Footnotes:
6 See Securities Exchange Act Release No. 51468 (April 1, 2005), 70 FR 17742 (April 7, 2005) (SR-CBOE-2005-18). The dividend spread fee cap program is in effect as a pilot program that will expire on September 1, 2005.
The Exchange proposes to amend its Fee Schedule to adopt a similar fee cap for "merger spread" transactions.7Specifically, the Exchange proposes to cap market-maker, firm, and broker-dealer transaction fees at $2,000 for all merger spread transactions executed on the same trading day in the same options class. Because the Exchange believes that merger spread transactions have similar economic risks and are executed in similar ways as dividend spread transactions, the Exchange believes adopting this fee cap would attract additional liquidity and should permit the Exchange to remain competitive.
Footnotes:
7 According to the Exchange, a merger spread transaction is defined as a transaction executed pursuant to a strategy involving the simultaneous purchase and sale of options of the same class and expiration date, but with different strike prices, followed by the exercise of the resulting long options position, each executed prior to the date on which shareholders of record are required to elect their respective form of consideration, i.e. , cash or stock.
Similar to the dividend spread fee cap program, the merger spread fee cap would be in effect as a pilot program that would expire on September 1, 2005. The Exchange represents that the proposed fee cap is similar to merger spread fee caps adopted by other exchanges.8
Footnotes:
8 See Securities Exchange Act Release Nos. 51596 (April 21, 2005), 70 FR 22381 (April 29, 2005) (SR-PHLX-2005-19) and 51787 (June 6, 2005), 70 FR 34174 (June 13, 2005) (SR-PCX-2005-65).
As is done under the current dividend spread fee cap program, the Exchange would rebate transaction fees for qualifying merger spread transactions. To qualify transactions for the cap, a rebate request form, along with supporting documentation ( e.g. , clearing firm transaction data), must be submitted to the Exchange within 30 days of the transactions.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,9in general, and Section 6(b)(4) of the Act,10in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among CBOE members and other persons using its facilities.
Footnotes:
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(4).
B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act11and subparagraph (f)(2) of Rule 19b-4 thereunder12because it establishes or changes a due, fee, or other charge imposed by the Exchange. 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.13
Footnotes:
11 15 U.S.C. 78s(b)(3)(A).
12 17 CFR 240.19b-4(f)(2).
13 The effective date of the original proposed rule change is May 23, 2005, the date of the original filing, and the effective date of the amendment is May 31, 2005, the date of filing of Amendment No. 1. For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change, as amended, under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on May 31, 2005, the date on which the Exchange submitted Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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 Number SR-CBOE-2005-42 on the subject line.
Paper Comments
• Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303.
All submissions should refer to File Number SR-CBOE-2005-42. 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 Exchange. 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-CBOE-2005-42 and should be submitted on or before July 11, 2005.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.14
Footnotes:
14 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-3158 Filed 6-17-05; 8:45 am]
BILLING CODE 8010-01-P