Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding the Obligations of Exchange-Registered Institutional Brokers, 44386-44387 [2011-18684]

Download as PDF 44386 Federal Register / Vol. 76, No. 142 / Monday, July 25, 2011 / Notices personal information which may infringe on an individual’s privacy rights from documents filed in this proceeding. Intervention. Those persons, other than the Petitioner and respondent, wishing to be heard in this matter are directed to file a notice of intervention. See 39 CFR 3001.111(b). Notices of intervention in this case are to be filed on or before August 15, 2011. A notice of intervention shall be filed using the Internet (Filing Online) at the Commission’s Web site, http:// www.prc.gov, unless a waiver is obtained for hardcopy filing. See 39 CFR 3001.9(a) and 3001.10(a). Further procedures. By statute, the Commission is required to issue its decision within 120 days from the date it receives the appeal. See 39 U.S.C. 404(d)(5). A procedural schedule has been developed to accommodate this statutory deadline. In the interest of expedition, in light of the 120-day decision schedule, the Commission may request the Postal Service or other participants to submit information or memoranda of law on any appropriate issue. As required by Commission rules, if any motions are filed, responses are due 7 days after any such motion is filed. See 39 CFR 3001.21. It is ordered: 1. The Postal Service shall file the applicable administrative record regarding this appeal no later than July 29, 2011. 2. Any responsive pleading by the Postal Service to this Notice is due no later than July 29, 2011. 3. The procedural schedule listed below is hereby adopted. 4. Pursuant to 39 U.S.C. 505, Tracy N. Ferguson is designated officer of the Commission (Public Representative) to represent the interests of the general public. 5. The Secretary shall arrange for publication of this notice and order and procedural schedule in the Federal Register. PROCEDURAL SCHEDULE July 14, 2011 ........................ July 29, 2011 ........................ July 29, 2011 ........................ August 15, 2011 ................... August 18, 2011 ................... September 7, 2011 .............. September 22, 2011 ............ September 29, 2011 ............ November 4, 2011 ............... Filing of Appeal. Deadline for the Postal Service to file the administrative record in this appeal. Deadline for the Postal Service to file an answer responding to the application for suspension. Deadline for notices to intervene (see 39 CFR 3001.111(b)). Deadline for Petitioner’s Form 61 or initial brief in support of petition (see 39 CFR 3001.115(a) and (b)). Deadline for answering brief in support of the Postal Service (see 39 CFR 3001.115(c)). Deadline for reply briefs in response to answering briefs (see 39 CFR 3001.115(d)). Deadline for motions by any party requesting oral argument; the Commission will schedule oral argument only when it is a necessary addition to the written filings (see 39 CFR 3001.116). Expiration of the Commission’s 120-day decisional schedule (see 39 U.S.C. 404(d)(5)). By the Commission. Shoshana M. Grove, Secretary. Act Rule 19b–4(f)(6) 3 which is effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. [FR Doc. 2011–18611 Filed 7–22–11; 8:45 am] BILLING CODE 7710–FW–P I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64915; File No. SR–CHX– 2011–13] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding the Obligations of ExchangeRegistered Institutional Brokers jlentini on DSK4TPTVN1PROD with NOTICES July 19, 2011. 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 July 12, 2011, the Chicago Stock Exchange, Inc. (‘‘CHX’’ or the ‘‘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 CHX. CHX has filed this proposal pursuant to Exchange 1 15 2 17 CHX proposes to add Interpretation and Policy .04 to Article 17, Rule 3 (Institutional Broker Responsibilities) to include an explicit reference to the obligation of Exchange-registered to seek execution of orders which they handle in a prompt and timely manner. The text of this proposed rule change is available on the Exchange’s Web site at (http://www.chx.com) and in 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 changes and discussed any comments it received regarding the proposal. 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, U.S.C.78s(b)(1). CFR 240.19b–4. VerDate Mar<15>2010 16:15 Jul 22, 2011 3 17 Jkt 223001 PO 00000 CFR 240.19b–4(f)(6). Frm 00088 Fmt 4703 Sfmt 4703 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 Through this proposal, the Exchange seeks to add Interpretations and Policies .04 to Article 17, Rule 3 (Responsibilities of Institutional Brokers) to make explicit the obligation of Institutional Brokers registered with the Exchange to handle orders in a prompt and timely manner. The obligation to handle orders in a prompt and timely manner is part of the existing responsibility of a broker dealer to seek best execution when handling or executing an order on behalf of a customer.4 The Exchange’s Market Regulation Department conducts routine automated surveillance for compliance by Institutional Brokers with the requirement to handle and execute orders in a timely manner. The explicit 4 See, e.g., NASD Rule 2320. (Best Execution and Interpositioning), ‘‘In any transaction for or with a customer or a customer of another broker-dealer, a member and persons associated with a member shall use reasonable diligence to ascertain the best market for the subject security and buy or sell in such market so that the resultant price to the customer is as favorable as possible under prevailing market conditions.’’ E:\FR\FM\25JYN1.SGM 25JYN1 Federal Register / Vol. 76, No. 142 / Monday, July 25, 2011 / Notices reference in the Interpretations and Policies to our rules to the requirement of Institutional Brokers to handle orders in a prompt and timely manner would reinforce this duty to the Institutional Brokers operating on the Exchange, and clarify the nature and scope of this obligation. The requirement to handle orders in a prompt and timely manner would be subject to the existing provisions of that rule relating to ‘‘not held’’ orders. Not held orders involve price and time discretion and an Institutional Broker is permitted to delay the execution of a not held order if it believes that such action is in the best interests of the customer. Thus, the requirement to handle orders in a prompt and timely manner, while still applicable to not held orders, must allow for the legitimate application of price and time discretion by the Institutional Broker.5 jlentini on DSK4TPTVN1PROD with NOTICES 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act in general,6 and furthers the objectives of Section 6(b)(5) in particular,7 in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transaction in securities, to remove impediments and perfect the mechanisms of a free and open market, and, in general, to protect investors and the public interest by reinforcing the duties of best execution and the requirement to handle orders in a prompt and timely manner to the Institutional Brokers operating on the Exchange, and clarify the nature and scope of this obligation. In addition, the Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act 8 in general, and furthers the objectives of Section 6(b)(1) of the Act 9 in particular, in that it allows the Exchange to be organized and have the capacity to be able to carry out the purposes of the Act and to comply, and (subject to any rule or order of the Commission pursuant to section 17(d) or 19(g)(2) of the Act) to enforce compliance by its members and persons associated with such members, with the provisions of the Act, the rules and regulations thereunder, and the rules of the exchange. As noted above, the 5 If an Institutional Broker neglected to take any action on a not held order for an improper purpose, e.g., inattention to or forgetting about the order, however, it could still be charged for failure to comply with these provisions. 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(5). 8 15 U.S.C. 78f. 9 15 U.S.C. 78f(b)(1). VerDate Mar<15>2010 16:15 Jul 22, 2011 Jkt 223001 44387 Exchange believes that by adding an Interpretation and Policy to make explicit the obligation to handle orders in a prompt and timely manner, this proposal advances the purposes of the Exchange Act by providing added clarity about the nature and extent of the duties owed by Exchange Participants, and contributes to the ability of the CHX to effectively enforce compliance with those requirements. Electronic Comments B. Self-Regulatory Organization’s Statement on Burden on Competition • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. The Exchange does not believe that the proposed rule change 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 Regarding 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 does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and Rule 19b– 4(f)(6) thereunder.11 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend 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. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. PO 00000 10 15 11 17 Frm 00089 Fmt 4703 Sfmt 9990 • 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–CHX–2011–13 on the subject line. Paper Comments All submissions should refer to File Number SR–CHX–2011–13. 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 website viewing and printing in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CHX– 2011–13 and should be submitted on or before August 15, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Elizabeth M. Murphy, Secretary. [FR Doc. 2011–18684 Filed 7–22–11; 8:45 am] BILLING CODE 8011–01–P 12 17 E:\FR\FM\25JYN1.SGM CFR 200.30–3(a)(12). 25JYN1

Agencies

[Federal Register Volume 76, Number 142 (Monday, July 25, 2011)]
[Notices]
[Pages 44386-44387]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-18684]



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SECURITIES AND EXCHANGE COMMISSION



[Release No. 34-64915; File No. SR-CHX-2011-13]




Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 

Notice of Filing and Immediate Effectiveness of Proposed Rule Change 

Regarding the Obligations of Exchange-Registered Institutional Brokers



 July 19, 2011.

    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 July 12, 2011, the Chicago Stock Exchange, Inc. (``CHX'' or 

the ``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 CHX. CHX has filed this 

proposal pursuant to Exchange Act Rule 19b-4(f)(6) \3\ which is 

effective upon filing with the Commission. The Commission is publishing 

this notice to solicit comments on the proposed rule change from 

interested persons.

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    \1\ 15 U.S.C.78s(b)(1).

    \2\ 17 CFR 240.19b-4.

    \3\ 17 CFR 240.19b-4(f)(6).

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I. Self-Regulatory Organization's Statement of the Terms of Substance 

of the Proposed Rule Change



    CHX proposes to add Interpretation and Policy .04 to Article 17, 

Rule 3 (Institutional Broker Responsibilities) to include an explicit 

reference to the obligation of Exchange-registered to seek execution of 

orders which they handle in a prompt and timely manner. The text of 

this proposed rule change is available on the Exchange's Web site at 

(http://www.chx.com) and in 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 changes and 

discussed any comments it received regarding the proposal. 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

    Through this proposal, the Exchange seeks to add Interpretations 

and Policies .04 to Article 17, Rule 3 (Responsibilities of 

Institutional Brokers) to make explicit the obligation of Institutional 

Brokers registered with the Exchange to handle orders in a prompt and 

timely manner. The obligation to handle orders in a prompt and timely 

manner is part of the existing responsibility of a broker dealer to 

seek best execution when handling or executing an order on behalf of a 

customer.\4\ The Exchange's Market Regulation Department conducts 

routine automated surveillance for compliance by Institutional Brokers 

with the requirement to handle and execute orders in a timely manner. 

The explicit



[[Page 44387]]



reference in the Interpretations and Policies to our rules to the 

requirement of Institutional Brokers to handle orders in a prompt and 

timely manner would reinforce this duty to the Institutional Brokers 

operating on the Exchange, and clarify the nature and scope of this 

obligation.

---------------------------------------------------------------------------



    \4\ See, e.g., NASD Rule 2320. (Best Execution and 

Interpositioning), ``In any transaction for or with a customer or a 

customer of another broker-dealer, a member and persons associated 

with a member shall use reasonable diligence to ascertain the best 

market for the subject security and buy or sell in such market so 

that the resultant price to the customer is as favorable as possible 

under prevailing market conditions.''

---------------------------------------------------------------------------



    The requirement to handle orders in a prompt and timely manner 

would be subject to the existing provisions of that rule relating to 

``not held'' orders. Not held orders involve price and time discretion 

and an Institutional Broker is permitted to delay the execution of a 

not held order if it believes that such action is in the best interests 

of the customer. Thus, the requirement to handle orders in a prompt and 

timely manner, while still applicable to not held orders, must allow 

for the legitimate application of price and time discretion by the 

Institutional Broker.\5\

---------------------------------------------------------------------------



    \5\ If an Institutional Broker neglected to take any action on a 

not held order for an improper purpose, e.g., inattention to or 

forgetting about the order, however, it could still be charged for 

failure to comply with these provisions.

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2. Statutory Basis

    The Exchange believes that the proposed rule change is consistent 

with Section 6(b) of the Act in general,\6\ and furthers the objectives 

of Section 6(b)(5) in particular,\7\ in that it is designed to promote 

just and equitable principles of trade, to foster cooperation and 

coordination with persons engaged in facilitating transaction in 

securities, to remove impediments and perfect the mechanisms of a free 

and open market, and, in general, to protect investors and the public 

interest by reinforcing the duties of best execution and the 

requirement to handle orders in a prompt and timely manner to the 

Institutional Brokers operating on the Exchange, and clarify the nature 

and scope of this obligation. In addition, the Exchange believes that 

the proposed rule change is consistent with Section 6(b) of the Act \8\ 

in general, and furthers the objectives of Section 6(b)(1) of the Act 

\9\ in particular, in that it allows the Exchange to be organized and 

have the capacity to be able to carry out the purposes of the Act and 

to comply, and (subject to any rule or order of the Commission pursuant 

to section 17(d) or 19(g)(2) of the Act) to enforce compliance by its 

members and persons associated with such members, with the provisions 

of the Act, the rules and regulations thereunder, and the rules of the 

exchange. As noted above, the Exchange believes that by adding an 

Interpretation and Policy to make explicit the obligation to handle 

orders in a prompt and timely manner, this proposal advances the 

purposes of the Exchange Act by providing added clarity about the 

nature and extent of the duties owed by Exchange Participants, and 

contributes to the ability of the CHX to effectively enforce compliance 

with those requirements.

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    \6\ 15 U.S.C. 78f(b).

    \7\ 15 U.S.C. 78f(b)(5).

    \8\ 15 U.S.C. 78f.

    \9\ 15 U.S.C. 78f(b)(1).

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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 that is not necessary or appropriate 

in furtherance of the purposes of the Act.



C. Self-Regulatory Organization's Statement on Comments Regarding 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 does not: (i) 

Significantly affect the protection of investors or the public 

interest; (ii) impose any significant burden on competition; and (iii) 

become operative for 30 days after the date of the filing, or such 

shorter time as the Commission may designate, it has become effective 

pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) 

thereunder.\11\

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    \10\ 15 U.S.C. 78s(b)(3)(A).

    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 

requires a self-regulatory organization to give the Commission 

written notice of its intent to file the proposed rule change at 

least five business days prior to the date of filing of the proposed 

rule change, or such shorter time as designated by the Commission. 

The Exchange has satisfied this requirement.

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    At any time within 60 days of the filing of the proposed rule 

change, the Commission summarily may temporarily suspend 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.



IV. Solicitation of Comments



    Interested persons are invited to submit written data, views, and 

arguments concerning the foregoing, including whether the proposed rule 

change is consistent with the Act. Comments may be submitted by any of 

the following methods:



Electronic Comments



     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or

     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-CHX-2011-13 on the subject line.



Paper Comments



     Send paper comments in triplicate to Elizabeth M. Murphy, 

Secretary, Securities and Exchange Commission, 100 F Street, NE., 

Washington, DC 20549-1090.



All submissions should refer to File Number SR-CHX-2011-13. 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 website viewing and 

printing in the Commission's Public Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official business days between the hours of 10 

a.m. and 3 p.m. Copies of such filing also will be available for 

inspection and copying at the principal office of the Exchange. All 

comments received will be posted without change; the Commission does 

not edit personal identifying information from submissions. You should 

submit only information that you wish to make available publicly. All 

submissions should refer to File Number SR-CHX-2011-13 and should be 

submitted on or before August 15, 2011.



    For the Commission, by the Division of Trading and Markets, 

pursuant to delegated authority.\12\

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    \12\ 17 CFR 200.30-3(a)(12).

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Elizabeth M. Murphy,

Secretary.

[FR Doc. 2011-18684 Filed 7-22-11; 8:45 am]

BILLING CODE 8011-01-P