On July 22, 2002, The Boston Stock Exchange, Inc. (“BSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) a proposed rule change to eliminate its existing revenue sharing program and to establish two market data revenue sharing programs. The BSE amended the proposed rule change on August 2, 2002 and on August 20, 2002. The proposed rule change, as amended, was published for notice and comment in the Federal Register on September 19, 2002. The Commission received two comments on the proposal. On October 28, 2002, the BSE responded to the NYSE Letter.
See Securities Exchange Act Release No. 46496 (September 13, 2002), 67 FR 59084.
See October 21, 2002 letter from Meyer S. Frucher, Chairman and Chief Executive Officer, The Philadelphia Stock Exchange, Inc., to Jonathan G. Katz, Secretary, Commission (“Phlx Letter”); and October 21, 2002 letter from Darla C. Stuckey, Corporate Secretary, New York Stock Exchange, Inc. (“NYSE”), to Jonathan G. Katz, Secretary, Commission (“NYSE Letter”). The Phlx Letter took no position on the BSE proposal, but instead spoke generally about the regulation of market data fees and revenues. The NYSE Letter asked the Commission to institute disapproval proceedings “as a first step in eradicating all such [market data] rebate programs.” Because neither letter specifically addresses the BSE proposed rule change, the Commission has not included a summary of comments in this order. The letters are available for review in the Public Reference Room at the Commission.
See October 28, 2002 letter from John A. Boese, Assistant Vice President, Legal and Regulatory, BSE, to Jonathan Katz, Secretary, Commission (“BSE Response Letter”). The BSE did not respond to the Phlx Letter because it did not receive the Phlx letter until after the BSE submitted its response to the NYSE Letter. The Commission did not require the BSE to submit an additional response letter to address the comments in the Phlx Letter, because the Phlx Letter “expresses no view” on the BSE's proposed rule change. See Phlx Letter at p. 1. The BSE Response Letter is available for review in the Public Reference Room at the Commission.
The BSE proposes to operate market data revenue sharing programs that are substantially similar to existing programs at other self-regulatory organizations. As set forth in its July 2, 2002 Order of Summary Abrogation (“Abrogation Order”), the Commission will continue to examine the issues surrounding market data fees, the distribution of market data rebates, and the impact of market data revenue sharing programs on both the accuracy of market data and on the regulatory functions of self-regulatory organizations. In the interim, the Commission believes it is reasonable to allow the BSE to operate market data revenue sharing programs that place the BSE on substantially similar footing as other self-regulatory organizations.
See e.g., Securities Exchange Act Release No. 41238 (March 31, 1999), 64 FR 17204 (April 8, 1999)(SR-CSE-99-03).
Securities Exchange Act Release No. 46159 (July 2, 2002), 67 FR 45775 (July 10, 2002)(File Nos. SR-NASD-2002-61, SR-NASD-2002-68, SR-CSE-2002-06, and SR-PCX-2002-37)(Order of Summary Abrogation).
Thus, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange and, in particular, the requirements of Section 6 of the Act and the rules and regulations thereunder. The Commission finds specifically that the proposed rule change is consistent with Section 6(b)(5) of the Act, in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating securities transactions, and to remove impediments to and perfect the mechanism of a free and open market and a national market system.
In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
15 U.S.C. 78f.
The decision to allow the BSE to establish the market data revenue sharing programs described in this proposed rule change, however, is narrowly drawn, and should not be construed as resolving the issues raised in the Abrogation Order, and does not suggest what, if any, future actions the Commission may take with regard to market data revenue sharing programs.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR-BSE-2002-10), as amended, be, and it hereby is, approved.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-30671 Filed 12-3-02; 8:45 am]
BILLING CODE 8010-01-P