# Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Chicago Board Options Exchange, Inc. Relating to Trading Floor Booth Policy and Fee Changes > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A94-6037 ## Record - **Collection:** Federal Register - **Document type:** Uncategorized Document - **Published:** March 16, 1994 ## Text SECURITIES AND EXCHANGE COMMISSION [Release No. 34-33745; File No SR-CBOE-94-03] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Chicago Board Options Exchange, Inc. Relating to Trading Floor Booth Policy and Fee Changes March 9, 1994. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on February 2, 1994, the Chicago Board Options Exchange, Inc. (``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 the CBOE. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to set forth formally the Exchange's current policy regarding the rental of booths on the CBOE trading floor (``Policy''). The CBOE has included with the filing, for informational purposes, a copy of the CBOE Trading Floor Booth Rental Agreement (``Agreement''), which has been reformulated in conjunction with the formalization of this Policy. That Agreement sets forth the contractual terms, conditions, and restrictions governing rental and use of the booths. As part of its filing, the CBOE also proposes amending its current Fee Schedule as such pertains to Facility Fees for rental of Exchange trading floor booths. The text of the proposed rule change is available at the Office of the Secretary, the 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, the 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. The 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 the Statutory Basis for, the Proposed Rule Change The purpose of the proposed rule change is to memorialize for distribution to the CBOE membership the Exchange's policy regarding the rental and use of booth space on the CBOE trading floor by member organizations. The rule change also is intended to amend the existing fee structure with respect to the rental of trading floor booths to reflect the Exchange's elimination of a practice called ``joint leasing.'' The elimination of this practice is the only major change in current policy with respect to booth rental. The CBOE currently has certain space located on its trading floor which it makes available for rental to qualified member organizations. These ``booths'' are located at various points on the floor adjacent to the trading ``pits'' or ``crowds'' where the actual CBOE trading activity takes place. They generally are used by member organizations to perform various functions in support of their CBOE trading activities. Over the years, the CBOE has developed certain policies and practices with regard to the rental and use of these trading floor booths by member organizations. The Exchange has determined that it would benefit both the CBOE and their membership to memorialize the Exchange's current policies for distribution to the members. Although the Policy itself addresses several issues pertaining to booth rental, it deals primarily with eligibility. Specifically, it sets forth the four broad categories of member organizations that, in accordance with current policy, may rent booth space on the floor. These categories were formulated so as to accommodate member organizations having the greatest need of working space in close proximity to CBOE trading activity, and they encompass almost all major types of CBOE member organizations. Market-maker organizations, the only major category that would not obtain a booth under the Policy, customarily obtain boot space through their clearing firms. The Exchange's experience confirms that this practice has worked well. The Policy also addresses the potential future need for the adoption of allocation and assignment guidelines with respect to booth space. The CBOE has no such guidelines in effect today and currently does not envision implementing any in the foreseeable future. In the event that demand for booth space at some point exceeds availability, the CBOE would establish allocation guidelines.\1\ The CBOE thought it advisable to inform the membership of the possibility and to identify the general nature of the criteria upon which such guidelines would be based. --------------------------------------------------------------------------- \1\Such guidelines would have to be filed with the Commission as a rule change and approved pursuant to section 19(b) of the Act. --------------------------------------------------------------------------- Finally, the Policy sets forth the requirement that all member organizations renting booths execute a ``Trading Floor Booth Rental Agreement'' which sets forth the contractual terms governing the rental and use of the booths by the member organization. Although the Exchange in the past has used a standard form agreement regarding booth rental, that agreement is brief and contains little detail regarding the nature of the contractual relationship between the parties. The revised Agreement specifically sets forth the details of the parties' contractual relationship regarding rental and use of the booths as they have been established by custom and usage in the past. Among other provisions, the Agreement includes specific provisions delineating the termination rights of both the member organization and the Exchange and establishes a formal procedure for adding booths to and deleting booths from the Agreement. Such booth changes, which are common, previously have been handled informally, ad hoc. The Agreement also imposes an obligation on the member to indemnify the Exchange for any claims, liabilities, or other losses the Exchange may incur as a result of the use of the booth by the member, and it spells out requirements respecting the member's use of the booths, such as those governing the installation of equipment, the conduct of business, and access of persons to the booths. Apart from the addition of detail to the Agreement, the only principal change in current Exchange practice embodied in the Policy and the Agreement is the elimination of a practice called ``joint leasing.'' Previously, the Exchange has permitted two different member organizations to occupy jointly a single trading floor booth and to share the costs associated therewith. The Exchange believed that joint leasing would make it easier (i.e., less costly) for smaller member organizations to have access to multiple locations adjacent to the trading floor. In practice, however, joint leasing has been used by non-transaction producing members solely to reduce their booth fees and not to facilitate trading activity. Therefore, the Exchange has determined that joint leasing should be eliminated and replaced with a variable fee arrangement that will soften the economic impact on small member organizations that the elimination of joint leasing might otherwise have. Under the proposed fee change included in this filing, current booth fees have been reduced in two respects: First, the $1,250 per booth variable monthly fee has been eliminated for the second booth leased by a member organization. Second, the $1,250 per booth variable monthly fee on a member firm's third booth has been reduced by fifty percent (50%) to $625. The full variable fee will continue to be applicable to any booths leased by the firm beyond the third booth. The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act in general, and furthers the objectives of section 6(b)(5) in particular, in that it is designed to codify Exchange policy and procedures with respect to the rental of trading floor booths by CBOE members in a manner that promotes just and equitable principles of trade, fosters cooperation and coordination with persons engaged in regulating, clearing, settling, and processing information with respect to and facilitating transactions in securities, and protects investors and the public interest. (B) Self-Regulatory Organization's Statement on Burden on Competition The CBOE does not believe that the proposed rule change will impose any burden on competition. (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 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 the self-regulatory organization consents, the Commission will: (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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 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 Section, 450 Fifth Street, NW., Washington, DC. Copies of such filing also will be available for inspection and copying at the principal office of the CBOE. All submissions should refer to File No. SR-CBOE-94-03 and should be submitted by April 6, 1994. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\2\ --------------------------------------------------------------------------- \2\17 CFR 200.30-3(a)(12) (1993). --------------------------------------------------------------------------- Margaret H. McFarland, Deputy Secretary. [FR Doc. 94-6037 Filed 3-15-94; 8:45 am] BILLING CODE 8010-01-M --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A94-6037. Public record. Not legal advice.