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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Boston Stock Exchange Amending the Transaction Fee Schedule and the Floor Operations Fee Schedule

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Start Preamble October 23, 2001.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act” or “Exchange Act”),[1] and Rule 19b-4 thereunder,[2] notice is hereby given that on September 29, 2001, the Boston Stock Exchange (“BSE” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by BSE. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

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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 Exchange's Transaction Fee Schedule to revise the monthly transaction related revenue the BSE must generate before it shares excess revenue with eligible firms. Additionally, the Exchange proposes to amend the Exchange's current Floor Operations Fee Schedule to include fees for the trading of securities listed on The Nasdaq Stock Market, Inc. (“Nasdaq”).

II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, BSE included statements concerning the purpose of and the 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. 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 purpose of the proposed rule change is to amend the Revenue Sharing Program highlighted on the BSE's Transaction Fee Schedule. Currently, the minimum amount of monthly transaction related revenue the BSE must generate before it shares excess revenue with eligible member firms is $1,500,000. The BSE proposes to revise this amount to $1,700,000 to meet the budgeted costs of operating the Exchange in the upcoming fiscal year.

The Exchange also proposes to implement a transaction fees schedule for the trading of Nasdaq securities, similar to the transaction fee schedule currently in place for exchange-listed securities. However, three exceptions will apply. First, all Specialist Trade Processing Fees will be capped for all Nasdaq specialists for a period of two years, commencing with the inception of Nasdaq trading on the BSE. Presently, the Exchange caps these fees in instances in which there are competing specialists, under the Exchange's Competing Specialist Initiative, in listed securities. The BSE is not seeking to extend the Competing Specialist Initiative to the trading of Nasdaq securities at this time. Nevertheless, the Exchange proposes to extend similar Specialist Trade Processing Fee caps to Nasdaq specialists to allow the Nasdaq trading program to develop and mature over a two-year period.

The second exception applies to the way in which securities are ranked for transaction fee caps. Presently, the Exchange categorizes listed securities into various tiers for this purpose. The securities are categorized based on Consolidated Tape Association (“CTA”) Trade Rank. Obviously, this measure is not applicable to Nasdaq securities, so the Exchange is proposing to use Nasdaq share volume as an equivalent standard. The Nasdaq share volume will serve the same purposes as the CTA Trade Rankings, and will allow the Exchange to categorize Nasdaq securities in a similar fashion to listed securities, in various tiers.

Lastly, the Exchange proposes to “pass through” all third party fees billed to the Exchange on behalf of the specialists who are trading Nasdaq securities. The fees will pass through on a pro rata basis for all fixed fees, and on an actual basis for all variable fees.

2. Statutory Basis

BSE believes that the proposed rule change is consistent with the provisions of section 6(b)(4) [3] and section 6(b)(5) [4] of the Act, which require, among other things, that the BSE's rules be designed to provide for the equitable allocation of reasonable dues, fees and other charges among the Exchange's members and other persons using its facilities, that the BSE's rules must be designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers.[5]

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

BSE does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others

Written comments were neither solicited nor received.

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) [6] of the Act and Rule 19b-4(f)(2) thereunder [7] as establishing or changing a due, fee, or other charge paid solely by members of the BSE. At any time within 60 days of the filing of such 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.[8]

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. 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-2001-06 and should be submitted by November 19, 2001.

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For the Commission, by the Division of Market Regulation, pursuant to delegated authority.9

Margaret H. McFarland,

Deputy Secretary.

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Footnotes

5.  The Commission added Section 6(b)(4) of the Act to the Statutory Basis Section of the notice at the request of the BSE. Telephone discussion between John Boese, Attorney, BSE, and Christopher B. Stone, Attorney Advisor, Division of Market Regulation, Commission (Oct. 19, 2001).

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8.  See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).

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[FR Doc. 01-27132 Filed 10-26-01; 8:45 am]

BILLING CODE 8010-01-M