Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to Participant Fees and Credits, 64590-64594 [E6-18481]

Download as PDF 64590 Federal Register / Vol. 71, No. 212 / Thursday, November 2, 2006 / Notices purchases and paired optional redemptions of the MACRO Holding Shares held in the MACRO Tradeable Trusts, which may only be effected in MACRO Units by Authorized Participants. The Information Circular will advise members of their suitability obligations with respect to recommended transactions to customers in the MACRO Tradeable Shares. The Information Circular will also discuss any relief, if granted, by the Commission or the staff from any rules under the Act. Surveillance Exchange surveillance procedures applicable to trading in the proposed MACRO Tradeable Shares will be similar to those applicable to trust issued receipts, Portfolio Depository Receipts and Index Fund Shares currently trading on the Exchange. The AMEX surveillance systems use data published over CTS (e.g., the IIVs) in its normal course of business. In the event this group needs additional information to audit transactions in MACRO Tradeable Shares, the NYMEX and Amex have executed an information sharing agreement to support the surveillance responsibilities of the two exchanges. 2. Statutory Basis The Amex believes that the proposed rule change, as amended, is consistent with the requirements of Section 6(b) of the Act 45 in general, and furthers the objectives of Section 6(b)(5),46 of the Act in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. mstockstill on PROD1PC61 with NOTICES B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change, as amended, 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 written comments on the proposed rule change, as amended. 45 15 46 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). VerDate Aug<31>2005 14:49 Nov 01, 2006 Jkt 211001 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 which the self-regulatory organization consents, the Commission will: (A) By order approve such proposed rule change, as amended, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. The Commission is considering granting accelerated approval of the proposed rule change at the end of a 15-day comment period.47 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 Exchange 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 rulecomments@sec.gov. Please include File Number SR–Amex–2006–82 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–Amex–2006–82. 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 47 The Amex has requested accelerated approval of this proposed rule change prior to the 30th day after the date of publication of the notice of the filing thereof, following the conclusion of a 15-day comment period. Telephone conference among Brian Trackman and Michou H.M. Nguyen, Special Counsels, Division of Market Regulation, Commission, and William Love, Associate General Counsel, Exchange, on October 25, 2006. PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 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 Amex. 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–Amex–2006–82 and should be submitted on or before November 17, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.48 Jill M. Peterson, Assistant Secretary. [FR Doc. E6–18478 Filed 11–1–06; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54657; File No. SR–CHX– 2006–29] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to Participant Fees and Credits October 26, 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 September 29, 2006, the Chicago Stock Exchange, Inc. (‘‘CHX’’ 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 CHX. On October 20, 2006, the CHX filed Amendment No. 1 to the proposed rule change.3 The CHX has designated this 48 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Amendment No. 1 made technical changes to correct the marking of the proposed rule text and made clarifying changes to the discussion in the purpose section. Amendment No. 1 made no changes to the proposed fees as set forth in the original filing. 1 15 E:\FR\FM\02NON1.SGM 02NON1 Federal Register / Vol. 71, No. 212 / Thursday, November 2, 2006 / Notices proposal as one establishing or changing a member due, fee, or other charge imposed by the CHX under Section 19(b)(3)(A)(ii) of the Act,4 and Rule 19b–4(f)(2) thereunder,5 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The CHX proposes to revise its Schedule of Participant Fees and Credits (‘‘Fee Schedule’’) to provide for fees, charges and credits contemplated by the Exchange’s new trading model being implemented by the CHX this fall. The text of the proposed rule change is available on the CHX’s Web site (http://www.chx.com/rules/ proposed_rules.htm), at the principal office of the CHX, and at the Commission’s Public Reference Room. 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 CHX 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 CHX has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. mstockstill on PROD1PC61 with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Throughout 2006, the Exchange has been working on the design and development of a new trading model centered around a core matching system that will provide for fully automated electronic matching of orders (‘‘Matching System’’), as well as corresponding rules and regulatory initiatives. On September 29, 2006, the Exchange’s proposed rules relating to the new trading model were approved by the Commission.6 The Exchange anticipates making the transition to its new trading model commencing the 4 15 U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). 6 See Securities Exchange Act Release No. 54550 (September 29, 2006); 71 FR 59563 (October 10, 2006) (SR–CHX–2006–05) (referred to as the ‘‘NTM Approval Order’’). 5 17 VerDate Aug<31>2005 14:49 Nov 01, 2006 Jkt 211001 week of October 23, 2006. As further detailed in SR–CHX–2006–05, the Exchange’s new trading model differs from the current CHX structure in several notable ways. First, the CHX will no longer operate from a traditional physical exchange floor, but rather will operate an entirely electronic facility. Second, the CHX will no longer maintain a specialist program, in which specialists maintain books of orders in designated issues.7 Finally, as noted above, orders will be matched by a fully automated Matching System.8 This fundamental shift in the Exchange’s trading model necessitates certain changes in the Exchange’s business model, including the fees, charges and credits that it assesses its participants (‘‘Participants’’). After significant deliberation, including a comprehensive review of other selfregulatory organizations and their respective billing structures, the Exchange has formulated a revised Fee Schedule that the Exchange believes more closely resembles the fee structures that have been implemented in connection with other electronic trading facilities. Summarized below are the provisions of the Fee Schedule that will change from the previous version. To facilitate an orderly transition to the new trading model, the Fee Schedule contemplates charging Participants under current rates, with new Fee Schedule provisions to become applicable as issues are transitioned to the new trading model and become eligible for trading in the Matching System. The Fee Schedule delineates which fees will be ‘‘phased out’’ during and after the transition to the new trading model. Participant Access & Registration (Sections A–D) • Permit Fees: In connection with the Exchange’s demutualization on February 9, 2005, the Exchange’s rules were amended to require that each Participant hold at least one Trading Permit in order to access the CHX.9 The 7 In the new trading model, Participants may register as either market makers or institutional brokers (formerly known as floor brokers), or may simply operate as unregistered order-sending firms that route orders to the CHX for execution. 8 The CHX new trading model does contemplate special handling of orders by CHX institutional brokers, but all such orders must be entered by institutional brokers into an electronic functionality known as Brokerplex. Brokered orders must clear the Matching System prior to execution and must otherwise be executed in accordance with the rules set forth in new CHX Article 17, which governs institutional brokers, as well as applicable law, including Regulation NMS. 9 See Securities Exchange Act Release No. 51149 (February 8, 2005), 70 FR 7531 (February 14, 2005) (SR–CHX–2004–26). Prior to demutualization, the Exchange’s rules provided for access by ‘‘members’’ PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 64591 Exchange’s Fee Schedule was amended to provide for annual Trading Permit fees in lieu of annual member dues; the amount of the Trading Permit Annual Fee ($6,000) was identical to the amount of member dues immediately prior to demutualization. Trading Permit fees have not increased for nearly two years, since the demutualization transaction. Pursuant to a recent proposed rule change (the ‘‘Trading Permit Rule Changes’’), each Participant Firm will be required to hold only one Trading Permit per firm, regardless of the number of its registered representatives.10 These rule changes reflect the Exchange’s transition from a floor-based exchange (where it was appropriate to require multiple Trading Permits if a Participant Firm had multiple representatives on the CHX floor) to an electronic facility (where all Participant Firms have equivalent electronic access to the Exchange’s facilities). The revised proposed Fee Schedule provides that the annual fee for each Trading Permit will increase from $6,000 to $7,200 for each Trading Permit purchased or renewed after October 1, 2006. The Trading Permit cancellation fee will increase to the lesser of $2,400 or $600 per month for the remainder of the one-year term of the permit, effective with the renewal of each Trading Permit after October 1, 2006.11 The CHX believes that these changes to the Trading Permit fee structure are reasonable under the circumstances. The Trading Permit Annual Fee has not increased for some time, warranting a modest increase. Moreover, the Trading Permit Rule Changes will result in aggregate savings to CHX Participants.12 With respect to the Trading Permit cancellation fee, as set forth in previous proposed rule changes relating to charges for cancellation of Trading who owned or leased CHX ‘‘seats.’’ The demutualization rule changes provide for access by ‘‘Participants’’ who hold ‘‘trading permits.’’ 10 See Securities Exchange Act Release No. 54494 (September 25, 2006); 71 FR 58023 (October 2, 2006) (SR–CHX–2006–23). The Exchange believes that the Trading Permit Rule Changes will provide for an even more equitable allocation of fees among Exchange Participants, because no firm will be required to bear a disproportionate share of total Trading Permit fees by holding multiple Trading Permits. Instead, each Participant’s Trading Permit fee will be identical, because each Participant will only hold one Trading Permit. 11 See Section A of the Fee Schedule. 12 Although not all CHX Participant firms will realize savings due to a reduction in the number of Trading Permits, total Trading Permit fees will be reduced substantially. In order to offset a portion of this aggregate reduction, the Exchange believes that the proposed modest increase in annual Trading Permit fees is appropriate. E:\FR\FM\02NON1.SGM 02NON1 64592 Federal Register / Vol. 71, No. 212 / Thursday, November 2, 2006 / Notices Permits,13 the CHX believes that it is reasonable to provide for some fee relief for Participants whose trading permits are cancelled intrayear. The Exchange also believes, however, that it is necessary for the Exchange to have an adequate basis on which to budget and project annual revenues. Accordingly, the Exchange believes that a Trading Permit cancellation fee, including a modest increase thereof, remains appropriate. • SRO Fee: This fee will increase from $100/month to $250/month. This fee will be assessed per Trading Permit.14 As set forth above with respect to Trading Permit fees, this slight increase in the per permit fee is offset by the aggregate savings that will be achieved by CHX Participants due to the new ‘‘one firm, one permit’’ rule made effective by the Trading Permit Rule Changes. • Registration Fees: The CHX will continue to assess a $500 annual fee for each trader who is engaged in proprietary securities trading for an offExchange Participant Firm that is solely a CHX Participant and for which the CHX is the Designated Examining Authority (‘‘DEA’’).15 This fee will be pro-rated in the first year of a trader’s registration, based on the quarter in which that registration occurs.16 Other changes to Section C of the Fee Schedule reflect the transition away from a floor-based trading environment, with references to the floor modified to reflect access to the Exchange’s facilities. The fee for floor clerks has also been eliminated. • Matching System Port Charges: The revised proposed Fee Schedule provides for a port charge of $400 per month for each Participant connection to the Matching System, other than connections through the Brokerplex functionality that is used by CHX institutional brokers.17 This fee is a new Transaction and Order Routing Fees (Section E) Transaction fees will be modified in several ways as the Exchange transitions to its new trading model.19 • Matching System: Section E of the Fee Schedule sets forth the transaction fees that will be charged for executions in the Matching System once it is operative, including Matching System routing fees. This section also contains an odd-lot Matching System transaction fee, which is charged to the Participant that submits the odd-lot order to the Matching System. The Exchange believes that the new transaction fees for the Matching System are fair and reasonable, particularly in light of the fee structures implemented in connection with other electronic facilities. The Exchange believes that the ‘‘take/provide’’ model has become a widely-recognized industry model, and the Exchange’s rates are in line with other similarly-situated market centers. To facilitate an orderly transition, Section E.7 of the Fee Schedule preserves the pre- new trading model fee structure, which will continue to provide the basis for transaction and order processing fees if an issue is not yet traded in the Matching System, but will no longer be applicable once an issue transitions to the new trading model and is available for trading in the Matching System. Section E.7 of the Fee Schedule also contains a new provision establishing a charge for outbound ITS or NMS Linkage Plan orders.20 13 See mstockstill on PROD1PC61 with NOTICES Securities Exchange Act Release No. 52815 (November 21, 2005), 70 FR 71572 (November 29, 2005) (SR–CHX 2005–31); Securities Exchange Act Release No. 54495 (September 25, 2006), 71 FR 58025 (October 2, 2006) (SR–CHX–2006–27) (providing for a cancellation fee in the event a Trading Permit is cancelled intrayear). 14 See Section B of the Fee Schedule. 15 See Section C of the Fee Schedule. 16 This provision formerly provided for a $500 initial registration fee and $500 annual fee (with no proration for partial years) for each off-floor trader who was engaged in proprietary securities trading for a Participant Firm for which the CHX is the DEA. Given the elimination of the $500 initial registration fee and the addition of the proration language, the changes to this provision will result in net savings by affected Participant Firms. 17 See Section D of the Fee Schedule. Section D formerly contained provisions relating to assignment of issues to CHX specialists. This process will no longer occur because all specialist issues are being migrated to the new trading model. addition to the Fee Schedule and reflects the Exchange’s transition to a fully-electronic trading platform instead of a floor-based market. The Exchange believes that, in the new trading model, the port charge provides a reasonable means of allocating a portion of Matching System expenses to those Participant Firms that maintain connectivity to the Matching System.18 VerDate Aug<31>2005 14:49 Nov 01, 2006 Jkt 211001 Accordingly, all former text of Section D has been deleted in its entirety. 18 The former Fee Schedule allocated a portion of these costs by means of various MAX-related connectivity charges, which will be eliminated for issues as they migrate from MAX (the Exchange’s current semi-automated execution platform) to the new trading model. 19 See Section E of the Fee Schedule. 20 This provision is necessary in order to implement the CHX’s participation in the exchangeto-exchange billing arrangement associated with the ‘‘Plan for the Purpose of Creating and Operating an Intermarket Communications Linkage Pursuant to Section 11A(a)(3)(B) of the Securities Exchange Act of 1934’’ (‘‘Linkage Plan’’), which took effect on October 1, 2006. See Securities Exchange Act Release No. 54548 (September 29, 2008), 71 FR 59159 (October 6, 2006) (SR–CHX–2006–28) (approving Linkage Plan exchange-to-exchange billing procedures); Securities Exchange Act Release No. 54551 (September, 2006), 71 FR 59148 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 • Institutional Broker Agency Fees: Section E.3 of the Fee Schedule outlines the fees that will be charged to the Participant Firm that executes an order through an institutional broker, if the broker facilitates the execution of the order on the Exchange or in another market over ITS or any later linkage plan. These fees have not changed from the fees set forth in Section F.4(e) and (f) of the previous Fee Schedule; only their location within the Fee Schedule has changed.21 Credits (Section F) The Exchange’s credit structure has been revised to adjust for the new trading model as well as Regulation NMS, which impacts allocation and payment of market data fees.22 • Institutional Brokers: In lieu of the previous formula used for floor broker credits, which incorporated significant variables including market data fees, each institutional broker will be eligible for a monthly transaction fee credit equal to 18% of the transaction fees received by the Exchange each month for agency trades executed through the institutional broker.23 • Specialist Credits: These credits will continue to be available to specialists in issues that they trade as specialist during the transition to the new trading model.24 As an issue moves into the Matching System for trading, specialist credits will be pro-rated or eliminated for that issue, based on the date that the issue becomes eligible for trading in the Matching System. Specialists (or other eligible Participants) who elect to register as market makers in the new trading model may then earn market data rebates for liquidity-providing trades or crosses submitted to the Matching System. • Market Data Rebates for Matching System Trades: Each Participant Firm 25 (October 6, 2006) (approving Linkage Plan). When an outbound Linkage Plan commitment is executed on another Linkage Participant market, such market will directly invoice the CHX for a transaction fee equal to the transaction fee that it would charge its own member for such an execution. The CHX is then responsible for payment of such invoice. The new CHX Fee Schedule provision permits the CHX to collect a corresponding fee from the Participant who generated the outbound Linkage Plan commitment. 21 Reference to ‘‘floor’’ broker also has changed to ‘‘institutional’’ broker. 22 See Section F of the Fee Schedule. 23 This new institutional broker credit replaces the former floor broker credit provision set forth in Section M.2 of the previous Fee Schedule. 24 Formerly set forth in Section M.1, the specialist credit provisions are unchanged and will remain in place until an issue migrates to the new trading model. 25 Institutional brokers are not eligible to receive tape credits; they are instead eligible for the transaction fee credits previously described. E:\FR\FM\02NON1.SGM 02NON1 Federal Register / Vol. 71, No. 212 / Thursday, November 2, 2006 / Notices will be eligible for a tape credit, applied on a quarterly basis, equal to 50% of monthly tape revenue from the Consolidated Tape Association (less all direct CTA costs) generated by liquidityproviding trades or crosses submitted to the Matching System by a Participant Firm in a particular Tape A or Tape B security. By its terms, this credit is not available unless an issue has migrated to the Matching System. The terms of this credit are identical to the terms of the Specialist Credit discussed above. However, the CHX has added a provision indicating that tape credits will be applied on a quarterly basis, after the Exchange receives its payments from the reporting plans.26 The identical nature of the credits is intentional. As set forth above, the Specialist Credit is available until an issue migrates to the CHX Matching System, at which point Specialist Credits will no longer be available,27 but the former specialist (or another eligible Participant) may receive a Market Data Rebate in lieu of the Specialist Credit, on account of liquidity-providing trades or crosses submitted to the Matching System. • Other Credit Provisions: Section F.4 of the Fee Schedule, relating to TwoSided Quote Providers, remains unchanged but has been relocated from former Section M.4. Section F.5 of the Fee Schedule, governing unavailability of credits if a Participant’s payment to the Exchange is more than 60 days past due, also is unchanged from the version that became effective shortly before this Fee Schedule was submitted.28 Co-Location Fees (Section G) These provisions have not changed; they merely have been relocated from former Section H to current Section G of the Fee Schedule. Clearing Support Fees (Section H) mstockstill on PROD1PC61 with NOTICES There are no changes to this section, which formerly was Section I of the Fee Schedule, except that the Exchange is deleting provisions relating to CUSIP fees. 26 The Exchange has also added a provision indicating that the tape credit will be based on the tape revenue generated by liquidity-providing trades or Crosses submitted to the Matching System by the Participant Firm. (emphasis added). Telephone conversation between Kathleen Boege, Vice President and Associate General Counsel, CHX, Joseph Morra, Special Counsel, Division of Market Regulation (‘‘Division’’), Commission, and Sara Gillis, Attorney, Division, Commission, on October 24, 2006. 27 There will no longer be a specialist assigned to such issue. 28 See Securities Exchange Act Release No. 54522 (September 27, 2006), 71 FR 58456 (October 3, 2006) (SR–CHX–2006–26). VerDate Aug<31>2005 14:49 Nov 01, 2006 Jkt 211001 Listing Fees (Section I) There are no substantive changes to this section, which formerly was Section J. Market Regulation and Market Surveillance Fees (Section J) There are no changes to this section, which formerly was Section K of the Fee Schedule, except that the provision relating to DEA Examination Fees has been modified to delete a footnote relating to exemptions and to clarify that the charge is assessed per Participant Firm. Specialist Fixed Fees (Section K) These provisions have not changed with respect to calculation of the aggregate fixed fees; they merely have been relocated from former Section E to current Section K of the Fee Schedule. This provision has also been modified to reflect the transition to the new trading model and to provide a basis for pro rating the fixed fees as issues migrate to the new trading model over the next several months. Fixed fees will continue to be charged for issues traded by CHX specialists; once an issue migrates to the new trading model and is no longer traded by a CHX specialist, the fixed fee due from the specialist for that month will be prorated based on the transition date. Space Charges (Section L) The rule changes relating to the new trading model provide that the Exchange will no longer be considered to have a physical trading floor from a regulatory perspective, although the current trading floor space will remain available for leasing by Participants (and ultimately perhaps by non-Participants). During the transitional period this fall, the existing billing structure for booth space, post space and electrical or structural modifications to such space will remain in place, through December 31, 2006. After that date, any applicable space charges will be incorporated into separate lease agreements between the Exchange and entities that lease space on the Exchange’s former trading floor.29 The Exchange is in the process of finalizing its comprehensive space plan for the former trading floor, including the terms under which it will offer space for lease to Participants. These terms, and corresponding lease documentation, will be available for consideration by Participants later this fall. 29 See PO 00000 Section L of the Fee Schedule. Frm 00085 Fmt 4703 Sfmt 4703 64593 Equipment, Information Services & Technology Charges (Section M) As with space charges, these fees will remain in place until December 31, 2006. Except as set forth below, there are no substantive changes to this section. Most changes are intended to delete obsolete provisions relating to the Exchange’s former OTC specialist program. • Broker Connectivity Charge/Credit: All network and connectivity charges are rebilled monthly to institutional brokers that access the network, based on the proportion of each firm’s use of the network during the month.30 Until completion of the new trading model rollout, institutional brokers will be eligible for a monthly network/ connectivity fee credit, equal to a total monthly credit of $15,000, allocated among institutional broker firms based on each firm’s respective percentage of total monthly transaction fee credits.31 Supplies, Rulebooks and Reports (Section N) This section includes two new charges: • Brokerplex Report Charge: There will be a charge of $50 per month to provide reports of Participant Firm activity, by trader.32 • Trade and order data: This charge is intended to help the Exchange defray the expenses of responding to Participants’ data requests, which often require significant customization and other accommodation of specific requests.33 Late Fees (Section O) These provisions have not changed; they merely have been relocated from former Section N to current Section O of the Fee Schedule. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b)(4) of the Act 34 in that it provides for the equitable allocation of reasonable dues, fees and other charges among its members and is in line with other self-regulatory organizations that have implemented trading platforms similar to the CHX new trading model. 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. 30 See Section M of the Fee Schedule. Section F.2 of the Fee Schedule for a description of this credit. 32 See Section N.3 of the Fee Schedule. 33 See Section N.4 of the Fee Schedule. 34 15 U.S.C. 78f(b)(4). 31 See E:\FR\FM\02NON1.SGM 02NON1 64594 Federal Register / Vol. 71, No. 212 / Thursday, November 2, 2006 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change establishes or changes a member due, fee, or other charge imposed by the Exchange, it has become effective pursuant to Section 19(b)(3)(A) of the Act 35 and Rule 19b–4(f)(2) 36 thereunder. 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.37 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: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File No. SR–CHX–2006–29 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–CHX–2006–29. 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 mstockstill on PROD1PC61 with NOTICES 35 15 U.S.C. 78s(b)(3)(A). CFR 19b–4(f)(2). 37 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 October 20, 2006, the date on which the CHX filed Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C). 36 17 VerDate Aug<31>2005 14:49 Nov 01, 2006 Jkt 211001 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 CHX. 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–CHX–2006–29 and should be submitted on or before November 24, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.38 Jill M. Peterson, Assistant Secretary. [FR Doc. E6–18481 Filed 11–1–06; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54653; File No. SR–NYSE– 2006–94] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Rule 122 (Orders With More Than One Broker) Until the Availability of Full d-Quote Functionality in a Particular Security or February 5, 2007, Whichever Comes First October 26, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on October 25, 2006, the New York Stock Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. NYSE filed the proposed rule change pursuant to Section 19(b)(3) of the Act 3 and Rule 38 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 1 15 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 19b–4(f)(6) thereunder,4 which renders the proposed rule change effective upon filing with the Commission. 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 NYSE seeks to amend Exchange Rule 122 (Orders with More than One Broker) for a period of time commencing from the operative date of this proposed rule change until the availability of full d-Quoting 5 functionality in a particular security or February 5, 2007, whichever comes first. The proposed rule change would permit Floor brokers to maintain discretionary e-Quotes (‘‘d-Quotes’’) and CAP–DI orders 6 in a security on the same side of the market for the same order that are capable of trading at the same price. The text of the proposed rule change is available on the Exchange’s Web site (http:// www.nyse.com), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. 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 Exchange 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 Exchange 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 Exchange proposes to permit Floor brokers to enter discretionary e-Quotes and CAP–DI orders in a security on the same side of the market for the same order that are capable of trading at the same price for a limited 4 17 CFR 240.19b–4(f)(6). Securities Exchange Act Release No. 54577 (October 5, 2006), 71 FR 60208 (October 12, 2006). 6 See Exchange Rules 13 and 123A.30(a). Exchange Rule 123A.30(a) describes a CAP–DI order as: ‘‘The elected or converted portion of a ‘percentage order that is convertible on a destabilizing tick and designated immediate execution or cancel election’ (‘‘CAP–DI order’’) may be automatically executed and may participate in a sweep.’’ 5 See E:\FR\FM\02NON1.SGM 02NON1

Agencies

[Federal Register Volume 71, Number 212 (Thursday, November 2, 2006)]
[Notices]
[Pages 64590-64594]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-18481]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54657; File No. SR-CHX-2006-29]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment No. 1 Thereto Relating to Participant Fees and Credits

 October 26, 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 September 29, 2006, the Chicago Stock Exchange, Inc. (``CHX'' 
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 CHX. On October 
20, 2006, the CHX filed Amendment No. 1 to the proposed rule change.\3\ 
The CHX has designated this

[[Page 64591]]

proposal as one establishing or changing a member due, fee, or other 
charge imposed by the CHX under Section 19(b)(3)(A)(ii) of the Act,\4\ 
and Rule 19b-4(f)(2) thereunder,\5\ 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 made technical changes to correct the 
marking of the proposed rule text and made clarifying changes to the 
discussion in the purpose section. Amendment No. 1 made no changes 
to the proposed fees as set forth in the original filing.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 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 CHX proposes to revise its Schedule of Participant Fees and 
Credits (``Fee Schedule'') to provide for fees, charges and credits 
contemplated by the Exchange's new trading model being implemented by 
the CHX this fall. The text of the proposed rule change is available on 
the CHX's Web site (http://www.chx.com/rules/proposed_rules.htm), at 
the principal office of the CHX, and at the Commission's Public 
Reference Room.

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 CHX 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 CHX 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
    Throughout 2006, the Exchange has been working on the design and 
development of a new trading model centered around a core matching 
system that will provide for fully automated electronic matching of 
orders (``Matching System''), as well as corresponding rules and 
regulatory initiatives. On September 29, 2006, the Exchange's proposed 
rules relating to the new trading model were approved by the 
Commission.\6\ The Exchange anticipates making the transition to its 
new trading model commencing the week of October 23, 2006. As further 
detailed in SR-CHX-2006-05, the Exchange's new trading model differs 
from the current CHX structure in several notable ways. First, the CHX 
will no longer operate from a traditional physical exchange floor, but 
rather will operate an entirely electronic facility. Second, the CHX 
will no longer maintain a specialist program, in which specialists 
maintain books of orders in designated issues.\7\ Finally, as noted 
above, orders will be matched by a fully automated Matching System.\8\
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    \6\ See Securities Exchange Act Release No. 54550 (September 29, 
2006); 71 FR 59563 (October 10, 2006) (SR-CHX-2006-05) (referred to 
as the ``NTM Approval Order'').
    \7\ In the new trading model, Participants may register as 
either market makers or institutional brokers (formerly known as 
floor brokers), or may simply operate as unregistered order-sending 
firms that route orders to the CHX for execution.
    \8\ The CHX new trading model does contemplate special handling 
of orders by CHX institutional brokers, but all such orders must be 
entered by institutional brokers into an electronic functionality 
known as Brokerplex. Brokered orders must clear the Matching System 
prior to execution and must otherwise be executed in accordance with 
the rules set forth in new CHX Article 17, which governs 
institutional brokers, as well as applicable law, including 
Regulation NMS.
---------------------------------------------------------------------------

    This fundamental shift in the Exchange's trading model necessitates 
certain changes in the Exchange's business model, including the fees, 
charges and credits that it assesses its participants 
(``Participants''). After significant deliberation, including a 
comprehensive review of other self-regulatory organizations and their 
respective billing structures, the Exchange has formulated a revised 
Fee Schedule that the Exchange believes more closely resembles the fee 
structures that have been implemented in connection with other 
electronic trading facilities.
    Summarized below are the provisions of the Fee Schedule that will 
change from the previous version. To facilitate an orderly transition 
to the new trading model, the Fee Schedule contemplates charging 
Participants under current rates, with new Fee Schedule provisions to 
become applicable as issues are transitioned to the new trading model 
and become eligible for trading in the Matching System. The Fee 
Schedule delineates which fees will be ``phased out'' during and after 
the transition to the new trading model.
    Participant Access & Registration (Sections A-D)
     Permit Fees: In connection with the Exchange's 
demutualization on February 9, 2005, the Exchange's rules were amended 
to require that each Participant hold at least one Trading Permit in 
order to access the CHX.\9\ The Exchange's Fee Schedule was amended to 
provide for annual Trading Permit fees in lieu of annual member dues; 
the amount of the Trading Permit Annual Fee ($6,000) was identical to 
the amount of member dues immediately prior to demutualization. Trading 
Permit fees have not increased for nearly two years, since the 
demutualization transaction.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 51149 (February 8, 
2005), 70 FR 7531 (February 14, 2005) (SR-CHX-2004-26). Prior to 
demutualization, the Exchange's rules provided for access by 
``members'' who owned or leased CHX ``seats.'' The demutualization 
rule changes provide for access by ``Participants'' who hold 
``trading permits.''
---------------------------------------------------------------------------

    Pursuant to a recent proposed rule change (the ``Trading Permit 
Rule Changes''), each Participant Firm will be required to hold only 
one Trading Permit per firm, regardless of the number of its registered 
representatives.\10\ These rule changes reflect the Exchange's 
transition from a floor-based exchange (where it was appropriate to 
require multiple Trading Permits if a Participant Firm had multiple 
representatives on the CHX floor) to an electronic facility (where all 
Participant Firms have equivalent electronic access to the Exchange's 
facilities).
---------------------------------------------------------------------------

    \10\ See Securities Exchange Act Release No. 54494 (September 
25, 2006); 71 FR 58023 (October 2, 2006) (SR-CHX-2006-23). The 
Exchange believes that the Trading Permit Rule Changes will provide 
for an even more equitable allocation of fees among Exchange 
Participants, because no firm will be required to bear a 
disproportionate share of total Trading Permit fees by holding 
multiple Trading Permits. Instead, each Participant's Trading Permit 
fee will be identical, because each Participant will only hold one 
Trading Permit.
---------------------------------------------------------------------------

    The revised proposed Fee Schedule provides that the annual fee for 
each Trading Permit will increase from $6,000 to $7,200 for each 
Trading Permit purchased or renewed after October 1, 2006. The Trading 
Permit cancellation fee will increase to the lesser of $2,400 or $600 
per month for the remainder of the one-year term of the permit, 
effective with the renewal of each Trading Permit after October 1, 
2006.\11\
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    \11\ See Section A of the Fee Schedule.
---------------------------------------------------------------------------

    The CHX believes that these changes to the Trading Permit fee 
structure are reasonable under the circumstances. The Trading Permit 
Annual Fee has not increased for some time, warranting a modest 
increase. Moreover, the Trading Permit Rule Changes will result in 
aggregate savings to CHX Participants.\12\
---------------------------------------------------------------------------

    \12\ Although not all CHX Participant firms will realize savings 
due to a reduction in the number of Trading Permits, total Trading 
Permit fees will be reduced substantially. In order to offset a 
portion of this aggregate reduction, the Exchange believes that the 
proposed modest increase in annual Trading Permit fees is 
appropriate.
---------------------------------------------------------------------------

    With respect to the Trading Permit cancellation fee, as set forth 
in previous proposed rule changes relating to charges for cancellation 
of Trading

[[Page 64592]]

Permits,\13\ the CHX believes that it is reasonable to provide for some 
fee relief for Participants whose trading permits are cancelled 
intrayear. The Exchange also believes, however, that it is necessary 
for the Exchange to have an adequate basis on which to budget and 
project annual revenues. Accordingly, the Exchange believes that a 
Trading Permit cancellation fee, including a modest increase thereof, 
remains appropriate.
---------------------------------------------------------------------------

    \13\ See Securities Exchange Act Release No. 52815 (November 21, 
2005), 70 FR 71572 (November 29, 2005) (SR-CHX 2005-31); Securities 
Exchange Act Release No. 54495 (September 25, 2006), 71 FR 58025 
(October 2, 2006) (SR-CHX-2006-27) (providing for a cancellation fee 
in the event a Trading Permit is cancelled intrayear).
---------------------------------------------------------------------------

     SRO Fee: This fee will increase from $100/month to $250/
month. This fee will be assessed per Trading Permit.\14\ As set forth 
above with respect to Trading Permit fees, this slight increase in the 
per permit fee is offset by the aggregate savings that will be achieved 
by CHX Participants due to the new ``one firm, one permit'' rule made 
effective by the Trading Permit Rule Changes.
---------------------------------------------------------------------------

    \14\ See Section B of the Fee Schedule.
---------------------------------------------------------------------------

     Registration Fees: The CHX will continue to assess a $500 
annual fee for each trader who is engaged in proprietary securities 
trading for an off-Exchange Participant Firm that is solely a CHX 
Participant and for which the CHX is the Designated Examining Authority 
(``DEA'').\15\ This fee will be pro-rated in the first year of a 
trader's registration, based on the quarter in which that registration 
occurs.\16\
---------------------------------------------------------------------------

    \15\ See Section C of the Fee Schedule.
    \16\ This provision formerly provided for a $500 initial 
registration fee and $500 annual fee (with no proration for partial 
years) for each off-floor trader who was engaged in proprietary 
securities trading for a Participant Firm for which the CHX is the 
DEA. Given the elimination of the $500 initial registration fee and 
the addition of the proration language, the changes to this 
provision will result in net savings by affected Participant Firms.
---------------------------------------------------------------------------

    Other changes to Section C of the Fee Schedule reflect the 
transition away from a floor-based trading environment, with references 
to the floor modified to reflect access to the Exchange's facilities. 
The fee for floor clerks has also been eliminated.
     Matching System Port Charges: The revised proposed Fee 
Schedule provides for a port charge of $400 per month for each 
Participant connection to the Matching System, other than connections 
through the Brokerplex functionality that is used by CHX institutional 
brokers.\17\ This fee is a new addition to the Fee Schedule and 
reflects the Exchange's transition to a fully-electronic trading 
platform instead of a floor-based market. The Exchange believes that, 
in the new trading model, the port charge provides a reasonable means 
of allocating a portion of Matching System expenses to those 
Participant Firms that maintain connectivity to the Matching 
System.\18\
---------------------------------------------------------------------------

    \17\ See Section D of the Fee Schedule. Section D formerly 
contained provisions relating to assignment of issues to CHX 
specialists. This process will no longer occur because all 
specialist issues are being migrated to the new trading model. 
Accordingly, all former text of Section D has been deleted in its 
entirety.
    \18\ The former Fee Schedule allocated a portion of these costs 
by means of various MAX-related connectivity charges, which will be 
eliminated for issues as they migrate from MAX (the Exchange's 
current semi-automated execution platform) to the new trading model.
---------------------------------------------------------------------------

Transaction and Order Routing Fees (Section E)

    Transaction fees will be modified in several ways as the Exchange 
transitions to its new trading model.\19\
---------------------------------------------------------------------------

    \19\ See Section E of the Fee Schedule.
---------------------------------------------------------------------------

     Matching System: Section E of the Fee Schedule sets forth 
the transaction fees that will be charged for executions in the 
Matching System once it is operative, including Matching System routing 
fees. This section also contains an odd-lot Matching System transaction 
fee, which is charged to the Participant that submits the odd-lot order 
to the Matching System. The Exchange believes that the new transaction 
fees for the Matching System are fair and reasonable, particularly in 
light of the fee structures implemented in connection with other 
electronic facilities. The Exchange believes that the ``take/provide'' 
model has become a widely-recognized industry model, and the Exchange's 
rates are in line with other similarly-situated market centers.
    To facilitate an orderly transition, Section E.7 of the Fee 
Schedule preserves the pre- new trading model fee structure, which will 
continue to provide the basis for transaction and order processing fees 
if an issue is not yet traded in the Matching System, but will no 
longer be applicable once an issue transitions to the new trading model 
and is available for trading in the Matching System. Section E.7 of the 
Fee Schedule also contains a new provision establishing a charge for 
outbound ITS or NMS Linkage Plan orders.\20\
---------------------------------------------------------------------------

    \20\ This provision is necessary in order to implement the CHX's 
participation in the exchange-to-exchange billing arrangement 
associated with the ``Plan for the Purpose of Creating and Operating 
an Intermarket Communications Linkage Pursuant to Section 
11A(a)(3)(B) of the Securities Exchange Act of 1934'' (``Linkage 
Plan''), which took effect on October 1, 2006. See Securities 
Exchange Act Release No. 54548 (September 29, 2008), 71 FR 59159 
(October 6, 2006) (SR-CHX-2006-28) (approving Linkage Plan exchange-
to-exchange billing procedures); Securities Exchange Act Release No. 
54551 (September, 2006), 71 FR 59148 (October 6, 2006) (approving 
Linkage Plan). When an outbound Linkage Plan commitment is executed 
on another Linkage Participant market, such market will directly 
invoice the CHX for a transaction fee equal to the transaction fee 
that it would charge its own member for such an execution. The CHX 
is then responsible for payment of such invoice. The new CHX Fee 
Schedule provision permits the CHX to collect a corresponding fee 
from the Participant who generated the outbound Linkage Plan 
commitment.
---------------------------------------------------------------------------

     Institutional Broker Agency Fees: Section E.3 of the Fee 
Schedule outlines the fees that will be charged to the Participant Firm 
that executes an order through an institutional broker, if the broker 
facilitates the execution of the order on the Exchange or in another 
market over ITS or any later linkage plan. These fees have not changed 
from the fees set forth in Section F.4(e) and (f) of the previous Fee 
Schedule; only their location within the Fee Schedule has changed.\21\
---------------------------------------------------------------------------

    \21\ Reference to ``floor'' broker also has changed to 
``institutional'' broker.
---------------------------------------------------------------------------

Credits (Section F)

    The Exchange's credit structure has been revised to adjust for the 
new trading model as well as Regulation NMS, which impacts allocation 
and payment of market data fees.\22\
---------------------------------------------------------------------------

    \22\ See Section F of the Fee Schedule.
---------------------------------------------------------------------------

     Institutional Brokers: In lieu of the previous formula 
used for floor broker credits, which incorporated significant variables 
including market data fees, each institutional broker will be eligible 
for a monthly transaction fee credit equal to 18% of the transaction 
fees received by the Exchange each month for agency trades executed 
through the institutional broker.\23\
---------------------------------------------------------------------------

    \23\ This new institutional broker credit replaces the former 
floor broker credit provision set forth in Section M.2 of the 
previous Fee Schedule.
---------------------------------------------------------------------------

     Specialist Credits: These credits will continue to be 
available to specialists in issues that they trade as specialist during 
the transition to the new trading model.\24\ As an issue moves into the 
Matching System for trading, specialist credits will be pro-rated or 
eliminated for that issue, based on the date that the issue becomes 
eligible for trading in the Matching System. Specialists (or other 
eligible Participants) who elect to register as market makers in the 
new trading model may then earn market data rebates for liquidity-
providing trades or crosses submitted to the Matching System.
---------------------------------------------------------------------------

    \24\ Formerly set forth in Section M.1, the specialist credit 
provisions are unchanged and will remain in place until an issue 
migrates to the new trading model.
---------------------------------------------------------------------------

     Market Data Rebates for Matching System Trades: Each 
Participant Firm \25\

[[Page 64593]]

will be eligible for a tape credit, applied on a quarterly basis, equal 
to 50% of monthly tape revenue from the Consolidated Tape Association 
(less all direct CTA costs) generated by liquidity-providing trades or 
crosses submitted to the Matching System by a Participant Firm in a 
particular Tape A or Tape B security. By its terms, this credit is not 
available unless an issue has migrated to the Matching System.
---------------------------------------------------------------------------

    \25\ Institutional brokers are not eligible to receive tape 
credits; they are instead eligible for the transaction fee credits 
previously described.
---------------------------------------------------------------------------

    The terms of this credit are identical to the terms of the 
Specialist Credit discussed above. However, the CHX has added a 
provision indicating that tape credits will be applied on a quarterly 
basis, after the Exchange receives its payments from the reporting 
plans.\26\ The identical nature of the credits is intentional. As set 
forth above, the Specialist Credit is available until an issue migrates 
to the CHX Matching System, at which point Specialist Credits will no 
longer be available,\27\ but the former specialist (or another eligible 
Participant) may receive a Market Data Rebate in lieu of the Specialist 
Credit, on account of liquidity-providing trades or crosses submitted 
to the Matching System.
---------------------------------------------------------------------------

    \26\ The Exchange has also added a provision indicating that the 
tape credit will be based on the tape revenue generated by 
liquidity-providing trades or Crosses submitted to the Matching 
System by the Participant Firm. (emphasis added). Telephone 
conversation between Kathleen Boege, Vice President and Associate 
General Counsel, CHX, Joseph Morra, Special Counsel, Division of 
Market Regulation (``Division''), Commission, and Sara Gillis, 
Attorney, Division, Commission, on October 24, 2006.
    \27\ There will no longer be a specialist assigned to such 
issue.
---------------------------------------------------------------------------

     Other Credit Provisions: Section F.4 of the Fee Schedule, 
relating to Two-Sided Quote Providers, remains unchanged but has been 
relocated from former Section M.4. Section F.5 of the Fee Schedule, 
governing unavailability of credits if a Participant's payment to the 
Exchange is more than 60 days past due, also is unchanged from the 
version that became effective shortly before this Fee Schedule was 
submitted.\28\
---------------------------------------------------------------------------

    \28\ See Securities Exchange Act Release No. 54522 (September 
27, 2006), 71 FR 58456 (October 3, 2006) (SR-CHX-2006-26).
---------------------------------------------------------------------------

Co-Location Fees (Section G)

    These provisions have not changed; they merely have been relocated 
from former Section H to current Section G of the Fee Schedule.

Clearing Support Fees (Section H)

    There are no changes to this section, which formerly was Section I 
of the Fee Schedule, except that the Exchange is deleting provisions 
relating to CUSIP fees.

Listing Fees (Section I)

    There are no substantive changes to this section, which formerly 
was Section J.

Market Regulation and Market Surveillance Fees (Section J)

    There are no changes to this section, which formerly was Section K 
of the Fee Schedule, except that the provision relating to DEA 
Examination Fees has been modified to delete a footnote relating to 
exemptions and to clarify that the charge is assessed per Participant 
Firm.

Specialist Fixed Fees (Section K)

    These provisions have not changed with respect to calculation of 
the aggregate fixed fees; they merely have been relocated from former 
Section E to current Section K of the Fee Schedule. This provision has 
also been modified to reflect the transition to the new trading model 
and to provide a basis for pro rating the fixed fees as issues migrate 
to the new trading model over the next several months. Fixed fees will 
continue to be charged for issues traded by CHX specialists; once an 
issue migrates to the new trading model and is no longer traded by a 
CHX specialist, the fixed fee due from the specialist for that month 
will be prorated based on the transition date.

Space Charges (Section L)

    The rule changes relating to the new trading model provide that the 
Exchange will no longer be considered to have a physical trading floor 
from a regulatory perspective, although the current trading floor space 
will remain available for leasing by Participants (and ultimately 
perhaps by non-Participants). During the transitional period this fall, 
the existing billing structure for booth space, post space and 
electrical or structural modifications to such space will remain in 
place, through December 31, 2006. After that date, any applicable space 
charges will be incorporated into separate lease agreements between the 
Exchange and entities that lease space on the Exchange's former trading 
floor.\29\ The Exchange is in the process of finalizing its 
comprehensive space plan for the former trading floor, including the 
terms under which it will offer space for lease to Participants. These 
terms, and corresponding lease documentation, will be available for 
consideration by Participants later this fall.
---------------------------------------------------------------------------

    \29\ See Section L of the Fee Schedule.
---------------------------------------------------------------------------

Equipment, Information Services & Technology Charges (Section M)

    As with space charges, these fees will remain in place until 
December 31, 2006. Except as set forth below, there are no substantive 
changes to this section. Most changes are intended to delete obsolete 
provisions relating to the Exchange's former OTC specialist program.
     Broker Connectivity Charge/Credit: All network and 
connectivity charges are rebilled monthly to institutional brokers that 
access the network, based on the proportion of each firm's use of the 
network during the month.\30\ Until completion of the new trading model 
rollout, institutional brokers will be eligible for a monthly network/
connectivity fee credit, equal to a total monthly credit of $15,000, 
allocated among institutional broker firms based on each firm's 
respective percentage of total monthly transaction fee credits.\31\
---------------------------------------------------------------------------

    \30\ See Section M of the Fee Schedule.
    \31\ See Section F.2 of the Fee Schedule for a description of 
this credit.
---------------------------------------------------------------------------

Supplies, Rulebooks and Reports (Section N)

    This section includes two new charges:
     Brokerplex Report Charge: There will be a charge of $50 
per month to provide reports of Participant Firm activity, by 
trader.\32\
---------------------------------------------------------------------------

    \32\ See Section N.3 of the Fee Schedule.
---------------------------------------------------------------------------

     Trade and order data: This charge is intended to help the 
Exchange defray the expenses of responding to Participants' data 
requests, which often require significant customization and other 
accommodation of specific requests.\33\
---------------------------------------------------------------------------

    \33\ See Section N.4 of the Fee Schedule.
---------------------------------------------------------------------------

Late Fees (Section O)

    These provisions have not changed; they merely have been relocated 
from former Section N to current Section O of the Fee Schedule.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(4) of the Act \34\ in that it provides for the 
equitable allocation of reasonable dues, fees and other charges among 
its members and is in line with other self-regulatory organizations 
that have implemented trading platforms similar to the CHX new trading 
model.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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.

[[Page 64594]]

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

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change establishes or changes a 
member due, fee, or other charge imposed by the Exchange, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \35\ and Rule 19b-
4(f)(2) \36\ thereunder. 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.\37\
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78s(b)(3)(A).
    \36\ 17 CFR 19b-4(f)(2).
    \37\ 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 October 20, 2006, the date on which the CHX filed 
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, as amended, 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 No. SR-CHX-2006-29 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-CHX-2006-29. 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 CHX. 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-CHX-2006-29 and should be submitted on or before 
November 24, 2006.
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    \38\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\38\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-18481 Filed 11-1-06; 8:45 am]
BILLING CODE 8011-01-P