Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Clarify the Application of the Fee Schedule to Certain Transactions of, and Services to, CHX Participants and Make Certain Rate Changes, 45626-45629 [2011-19189]
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45626
Federal Register / Vol. 76, No. 146 / Friday, July 29, 2011 / Notices
2. Any responsive pleading by the
Postal Service to this notice is due no
later than August 5, 2011.
3. The procedural schedule listed
below is hereby adopted.
4. Pursuant to 39 U.S.C. 505,
Cassandra L. Hicks 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 in
the Federal Register.
PROCEDURAL SCHEDULE
July 21, 2011 ......................
August 5, 2011 ...................
August 5, 2011 ...................
August 16, 2011 .................
August 25, 2011 .................
September 14, 2011 ...........
September 29, 2011 ...........
October 6, 2011 .................
November 10, 2011 ............
Filing of Appeal.
Deadline for the Postal Service to file the applicable administrative record in this appeal.
Deadline for the Postal Service to file any responsive pleading.
Deadline for notices to intervene (see 39 CFR 3001.111(b)).
Deadline for Petitioners’ 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.
[FR Doc. 2011–19176 Filed 7–28–11; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64953; File No. SR–CHX–
2011–19]
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change To Clarify
the Application of the Fee Schedule to
Certain Transactions of, and Services
to, CHX Participants and Make Certain
Rate Changes
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The CHX proposes to amend its
Schedule of Participant Fees and
Assessments (the ‘‘Fee Schedule’’),
effective July 25, 2011, to amend its Fee
Schedule to clarify the application of
the Fee Schedule to certain transactions
of, and services to, CHX Participants
and make certain rate changes. The text
of this proposed rule change is available
on the Exchange’s Web site at https://
www.chx.com/rules/proposed_rules.htm
and in the Commission’s Public
Reference Room.
mstockstill on DSK4VPTVN1PROD with NOTICES
July 25, 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 20,
2011, 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 Exchange. CHX has
filed the proposal pursuant to Section
19(b)(3)(A) of the Act 3 and Rule 19b–
4(f)(2) thereunder,4 which renders the
proposal effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
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 15
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(2).
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1. Purpose
Through this filing, the Exchange is
proposing to amend its Schedule of Fees
and Assessments (‘‘Fee Schedule’’) to
clarify the application of the Fee
Schedule to various transactions
consummated on or through the
Exchange and to certain services
provided by the Exchange to its
Participants. The proposed changes
accurately describe the manner in
which the Exchange has and will
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continue to apply the Fee Schedule to
such transactions and services.
Currently, the Fee Schedule provides
for Processing Fees for fingerprinting,
background checks and the provision of
access badges by the Exchange.5 The
Exchange no longer provides either
fingerprinting or background checking
services for current or prospective CHX
Participants, and we no longer wish to
impose a fee for access badges.
Therefore, the Exchange proposes to
eliminate the fees for these services.
The Exchange is also clarifying the
application of Section E.1. (Matching
System single-sided order executions
(one-sided orders of 100+ shares)) of the
Fee Schedule to note that the Average
Daily Volume (‘‘ADV’’) calculations
performed by the Exchange to determine
the amount of provide credit paid to a
Participant are not being performed
when the Regular Trading Session
closes early.6 Trade volume on days on
which the Late Trading Sessions close
early, however, would continue to be
counted towards the ADV calculation.
In addition, we are eliminating the
provide credit paid to Exchangeregistered Institutional Brokers
(‘‘Institutional Brokers’’) in transactions
in securities priced less than one dollar.
As noted in the discussion of the
changes to Section E.3. of the Fee
Schedule, supra, we are proposing to
eliminate the charge in transactions in
securities priced less than one dollar to
Participants which submit orders
through an Institutional Broker. It
would not be economically feasible for
the Exchange to continue to pay a
provide credit to Institutional Brokers in
transactions in which the Exchange
5 Section C. (Registration Fees) of the Fee
Schedule.
6 The Exchange proposes to change the phrase
‘‘single order executions’’ in the caption to Section
E.1, to ‘‘single-sided order executions’’ to clarify
that this section does not apply to cross orders.
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does not earn any transaction revenue.
Finally, the provide credit paid to
Institutional Brokers in transactions in
securities at or above one dollar during
the Regular Trading Session is being
reduced to $0.0027/share in Tape A and
C securities and $0.0028/share in Tape
B securities from $0.0029/share. This
reduction reflects the lower amount of
revenue generated in such transactions
due to the rate changes for agency
executions submitted through an
Institutional Broker.7 The Exchange is
also lowering the rate of the provide
credit paid to Institutional Brokers
representing the Participant which
originated the order (regardless of the
ADV attributable to either firm) for
trades executed in the Early and Late
Trading Sessions to $0.0022/share in
Tape A, B and C securities priced $1.00/
share.
The Exchange believes that it would
be beneficial to clarify the application of
the Fee Schedule to certain cross
transactions by modifying the text of
Section E.2. (Matching System crosses
(All Sessions)) of the Fee Schedule. The
Exchange proposes to move the
reference to proprietary trades by an
Institutional Broker from Section E.2. to
Section E.3. (Executions through an
Institutional Broker Registered with the
Exchange Under Article 17 (All
Sessions)). The Exchange believes that
Section E.2. is properly construed to
apply solely to cross transactions
entered directly by a Participant firm to
the Matching System by electronic
means, and without the involvement of
an Institutional Broker. Unlike
transactions (including cross trades)
handled by an Institutional Broker,
cross transactions entered directly into
the Matching System by a CHX
Participant and executed there are not
assessed any charge. The removal of the
language regarding proprietary cross
trades executed by an Institutional
Broker from this section should help to
eliminate any potential ambiguity on
this treatment. To reinforce this point,
we are adding a clause to the last
sentence in this section which states
that these provisions do not apply to
cross orders submitted by an
Institutional Broker registered with the
Exchange.8
7 These rate changes are discussed infra as part of
the modifications to Section E.3. of the Fee
Schedule.
8 Throughout the proposal, the Exchange
proposes to modify references to ‘‘institutional
brokers’’ to clarify that such references are limited
to Institutional Brokers registered with the
Exchange pursuant to Article 17 of our rules, and
not to institutional brokers as colloquially referred
to in the securities industry.
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The Exchange is modifying Section
E.3. of the Fee Schedule to clarify the
proper application of the Fee Schedule
to transactions handled by an
Institutional Broker. We propose to
move the charge relating to proprietary
crosses of an Institutional Broker
formerly reflected in Section E.2 to new
Section E.3.b. (Proprietary Executions).
The new language clarifies that the fee
assessed to the Institutional Broker of
$.0007/share also applies to any odd lot
component of the cross trade. The new
text also explicitly provides that the
Participant on the other side of the
transaction is to be assessed the fee
normally assessed to a Participant
whose order is handled by an
Institutional Broker, as set forth in
proposed new Section E.3.a. of the Fee
Schedule. Current Section E.3. has been
renumbered as Proposed Section E.3.a.
Proposed Section E.3.a. sets forth a
revised fee rate of $.003/share for all
trades (regardless of whether the
security is a Tape A, B or C security)
handled through an Institutional
Broker.9 The revised text makes explicit
that the fees pursuant to both Section
3.a. of the Fee Schedule are charged to
the Participant Firm in which name the
transaction is submitted for clearance
and settlement (including both singlesided and cross orders) through an
Institutional Broker. The Exchange
proposes to add text excluding odd-lot
orders from these provisions, as those
orders are assessed the Odd Lot fee
pursuant to Section E.4. (Odd-lot
Matching System fee (single-sided
orders of less than 100 shares) (All
Sessions)) of the Fee Schedule. The
Exchange also proposes to eliminate the
reference to trades executed by an
Institutional Broker ‘‘in another
market,’’ since the Exchange does not
impose the transaction fee under
Section E.3. for non-CHX executions.
The Exchange further proposes to clarify
that the maximum charge per side shall
be computed for each Participant firm
on a side (buy or sell) of a execution and
separately for a Participant which is
represented by more than one
Institutional Broker Representative (as
defined in Article 17, Rule 1 of the
Exchange’s rules). Finally, the Exchange
proposes to add a provision setting the
fees at zero for Institutional Brokerhandled transactions in securities
priced under $1.
The Exchange proposes to modify the
text of Section E.4. of the Fee Schedule
relating to transactions in odd lots. The
proposed new language would clarify
9 The revised fee rate conforms to the
proscriptions of the Reg NMS Rule 610 (the ‘‘Access
Rule’’).
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45627
that the odd lot fees apply to orders
submitted to the Matching System
(whether electronically by the
Participant or through an Institutional
Broker) as an odd-lot order. The revised
text reflects CHX’s current practice of
not applying odd lot fees to orders not
entered into the Matching System as an
odd-lot order, but which become odd
lots due to partial executions.
Transactions in odd-lot remainders
would be charged the fee rate set forth
in Section E.1. of the Fee Schedule.
The Exchange is proposing to delete
Section E.6. of the Fee Schedule relating
to Matching System routing fees, since
the CHX does not currently offer
automated routing services. This
Section will be reserved for future use
in the event that the Exchange decides
to offer such services, or for other
purposes.
The Exchange is proposing certain
changes to the trade processing fees to
clarify that such fees are charged to CHX
Participants for cross transactions that
are executed in the over-the-counter
(‘‘OTC’’) marketplace and are reported
to clearing by the Exchange’s systems,
pursuant to Section E.7. (Trade
Processing Fees) of the Fee Schedule.
The Exchange is also modifying the
types of transactions subject to the
Trade Processing Fee to eliminate
transaction executed directly in the OTC
marketplace by an Institutional Broker
and in its place substitute executed
cross trades which originated with an
Institutional Broker and were
transmitted to and executed by another
broker-dealer (which is not an
Institutional Broker) in the OTC
marketplace and which were submitted
to clearing by the Exchange’s systems.10
This amendment reflects ongoing
discussions between the Exchange and
the staff of the Commission regarding
limitations on the ability of Institutional
Brokers to directly execute trades in the
OTC marketplace. The Exchange also
proposes to modify the current fee rate
and maximum charge for trade
processing fees to conform to the rates
charged for transactions submitted
through an Institutional Broker pursuant
to Section E.3. of the Fee Schedule. In
such transactions, the Exchange
currently charges $.0035/share, up to a
maximum of $100 per side for Tape A
and B securities, and $.0025/share, up
to a maximum of $100 per side for Tape
C securities. By this proposal, we would
change these rates to $.003/share, up to
10 In such transactions, the third-party brokerdealer would report the transaction to the
appropriate Trade Reporting Facility, and provide
an execution report to the Institutional Broker,
which in turn would enter the information into the
Exchange’s systems for submission to clearing.
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mstockstill on DSK4VPTVN1PROD with NOTICES
a maximum of $100 per side for all
securities. We are also proposing to
define ‘‘per side’’ in the same manner as
in Section E.3. These changes would
maintain the current state under which
the fees charged pursuant to Sections
E.3. and E.7. are identical.
The Exchange is proposing to
eliminate the Clearing Support Fees
currently set forth in Section H of the
Fee Schedule. The CHX no longer
performs the services described in
Section H and has no present intention
of doing so in the future. The
elimination of these fees would clarify
to CHX Participants that the Exchange
does not provide clearing support
services.
Finally, the Exchange proposes to
eliminate the fees for CCH Rulebooks
(which the Exchange no longer provides
to Participants) and monthly Brokerplex
reports (which the Exchange will
provide at no cost) pursuant to Section
L.2. and 3. (Supplies and Reports),
respectively.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act 11 in general, and
furthers the objectives of Section 6(b)(4)
of the Act 12 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among members and other persons
using any facility or system which the
Exchange operates or controls. The
Exchange is proposing to eliminate
certain fees in their entirety which
would reduce the financial obligation of
Participants to the CHX. The fees to be
eliminated include certain processing
fees for fingerprints, background checks
and badges (Section C of the Fee
Schedule), Matching System routing
fees (Section E.6. of the Fee Schedule),
Clearing Support Fees (Section H of the
Fee Schedule), and fees for rulebooks
and certain reports (Section L of the Fee
Schedule). In Section E.1., the Exchange
is reducing the provide credit paid to
Institutional Brokers in Regular Trading
Hours session transaction from $0.0029/
share in Tape A and C securities to
$0.0027/share and from transaction
from $0.0031/share in Tape B securities
to $0.0028/share. In this same Section,
the Exchange is further proposing a
provide credit be paid to Institutional
Brokers of $0.0022/share in securities
priced greater than $1.00/share for
trades in the Early and Late Trading
Sessions. The Exchange also proposes
that no provide credit shall be paid to
Institutional Brokers in transactions in
11 15
12 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
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securities priced less than $1.00/share.
The Exchange believes that the
reduction in provide credits paid to
Institutional Brokers for trades during
the Regular Trading Session, as well as
the elimination of the provide credit
paid to Institutional Brokers in
transactions in all trading sessions in
securities priced less than $1.00, are
appropriate because they will enable the
Exchange to retain a greater amount of
the revenue associated with such
transactions, which in turn will assist
the CHX in funding its internal
operations including the oversight of
Institutional Brokers. The Exchange
further believes that the rate changes in
Section E.1. as to the Early and Late
Trading Sessions are appropriate
because the proposed rates corresponds
to the provide credit generally paid to
Participants for trades in the Early and
Late Trading Sessions.
The Exchange believes that the rate
changes for CHX-executed transactions
entered through an Institutional Broker
are fair and appropriate (Section E.3. of
the Fee Schedule). The Exchange hopes
that these rate changes will help it
attract additional order flow to the
Exchange, as well as be consistent with
the limitations on fees charged by
exchanges for access to quotations as set
forth in Rule 610(c) of Regulation NMS.
The Exchange is making parallel
changes to the Trade Processing Fees set
forth in Section E.7. of the Fee Schedule
charged in connection with the
submission to clearing by the CHX of
non-Exchange trades handled by an
Institutional Broker in order to maintain
the current level of parity in such fees
with the fees charged pursuant to
Section E.3. of the Fee Schedule. The
Exchange is also adding to the types of
transactions subject to the Trade
Processing Fee any executed trades
submitted to Clearing by the Exchange’s
systems which originated with an
Institutional Broker and were
transmitted to and executed by another
broker-dealer in the over-the-counter
market. This addition reflects ongoing
discussions between the Exchange and
the staff of the Commission regarding
limitations on the ability of Institutional
Brokers to directly execute trades in the
over-the-counter marketplace.
The Exchange further believes that the
proposed rule change is consistent with
Section 6(b) of the Act in general, and
furthers the objectives of Section 6(b)(1)
of the Act 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
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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. The proposed clarifying
changes to the Fee Schedule would
establish the fees as they were approved
by the Exchange and would contribute
to the ability of its Participants to
comply with the provisions of the Fee
Schedule by clarifying to such
Participants the basis upon which the
Exchange charges for various of its fees
and services. The proposed clarifying
changes include the following: (1) The
limitation of Section E.1. to single-sided
orders (2) that the Average Daily
Trading volume calculation for
purposes of applying the tiered rate
schedule of Section E.1. does not
include days when the Regular Trading
Session closes early; (3) that the phrase
‘‘institutional broker’’ be capitalized to
reflect the intention to limit it to
Institutional Brokers registered with the
CHX pursuant to Article 17 of our rules;
(4) that the provisions of Section E.2.
apply only to crosses executed in the
Matching System and which were not
entered through an Institutional Broker;
(5) the manner in which the CHX
imposes fees on Institutional Brokers for
proprietary trades executed in the
Matching System; (6) the manner in
which the CHX imposes fees on
Participants for Exchange transactions
entered through an Institutional Broker;
(7) the application of the $100
maximum charge in the transactions
noted in (6); and (8) the imposition of
fees on odd-lot orders.
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 on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act 13 and
subparagraph (f)(2) of Rule 19b–4
thereunder 14 because it establishes or
changes a due, fee or other charge
13 15
14 17
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U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
29JYN1
Federal Register / Vol. 76, No. 146 / Friday, July 29, 2011 / Notices
applicable to the Exchange’s members,
which renders the proposed rule change
effective upon filing.
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.
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File No. SR–CHX–2011–
19 and should be submitted on or before
August 19, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–19189 Filed 7–28–11; 8:45 am]
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–CHX–2011–19 on the
subject line.
mstockstill on DSK4VPTVN1PROD with NOTICES
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:
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to the
Proprietary Trader Examination
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64958; File No. SR–
NASDAQ–2011–095]
July 25, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
Paper Comments
(‘‘Act’’) 1, and Rule 19b–4 2 thereunder,
notice is hereby given that on July 12,
• Send paper comments in triplicate
2011, The NASDAQ Stock Market LLC
to Elizabeth M. Murphy, Secretary,
(the ‘‘Exchange’’ or ‘‘NASDAQ’’) filed
Securities and Exchange Commission,
with the Securities and Exchange
100 F Street, NE., Washington, DC
Commission (‘‘SEC’’ or ‘‘Commission’’)
20549–1090.
the proposed rule change as described
All submissions should refer to File
in Items I, II, and III, below, which Items
Number SR–CHX–2011–19. This file
have been prepared by the Exchange.
number should be included on the
subject line if e-mail is used. To help the The Commission is publishing this
notice to solicit comments on the
Commission process and review your
proposed rule change from interested
comments more efficiently, please use
only one method. The Commission will persons.
post all comments on the Commission’s I. Self-Regulatory Organization’s
Internet Web site (https://www.sec.gov/
Statement of the Terms of Substance of
rules/sro/shtml). Copies of the
the Proposed Rule Change
submission, all subsequent
NASDAQ is filing with the Securities
amendments, all written statements
and Exchange Commission
with respect to the proposed rule
(‘‘Commission’’) a proposal for the
change that are filed with the
NASDAQ Options Market (‘‘NOM’’) to
Commission, and all written
amend its Rule 1032, Categories of
communications relating to the
Representative Registration, to adopt a
proposed rule change between the
Commission and any person, other than new limited category of representative
registration for proprietary traders, as
those that may be withheld from the
described further below. NASDAQ
public in accordance with the
intends to implement the proposal upon
provisions of 5 U.S.C. 552, will be
Commission approval 3 and availability
available for Web site viewing and
in WebCRD; NASDAQ will
printing in the Commission’s Public
communicate the applicable dates to
Reference Room, 100 F Street, NE.,
NASDAQ members.
Washington, DC 20549, on official
The text of the proposed rule change
business days between the hours of
is available at https://
10 a.m. and 3 p.m. Copies of such filing
will also 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
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16:17 Jul 28, 2011
Jkt 223001
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The Commission notes that this filing is
effective on filing.
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15 17
1 15
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45629
nasdaq.cchwallstreet.com/, at
NASDAQ’s principal office, 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 purpose of the proposed rule
change is to recognize a new category of
limited representative registration for
proprietary traders. Currently, under
NASDAQ rules, persons performing
proprietary trading functions fall within
the definition of representative in Rule
1011, because Rule 1011 includes
persons who are engaged in the
investment banking or securities
business of a member. Specifically, a
‘‘Representative’’ means an Associated
Person 4 of a registered broker or dealer
who is engaged in the investment
banking or securities business for the
member including the functions of
supervision, solicitation or conduct of
business in securities or who is engaged
in the training of persons associated
with a broker or dealer for any of these
functions are designated as
representatives. As provided in Rule
1031, all Representatives of NASDAQ
Members are required to be registered
with NASDAQ, and Representatives that
are so registered are referred to as
‘‘Registered Representatives.’’
NASDAQ has been working with
FINRA and certain other exchanges,
many of which have recently enhanced
their registration requirements to
4 Pursuant to Rule 1011(b), the term ‘‘Associated
Person’’ means any partner, officer, director, or
branch manager of a NASDAQ member or
Applicant (or person occupying a similar status or
performing similar functions), any person directly
or indirectly controlling, controlled by, or under
common control with such NASDAQ member or
Applicant, or any employee of such NASDAQ
member or Applicant, except that any person
associated with a NASDAQ member or Applicant
whose functions are solely clerical or ministerial
shall not be included in the meaning of such term
for purposes of the NASDAQ Rules.
E:\FR\FM\29JYN1.SGM
29JYN1
]]>Agencies
[Federal Register Volume 76, Number 146 (Friday, July 29, 2011)]
[Notices]
[Pages 45626-45629]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-19189]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64953; File No. SR-CHX-2011-19]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Clarify the Application of the Fee Schedule to Certain Transactions of,
and Services to, CHX Participants and Make Certain Rate Changes
July 25, 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 20, 2011, 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 Exchange. CHX has
filed the proposal pursuant to Section 19(b)(3)(A) of the Act \3\ and
Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal 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\ 15 U.S.C. 78s(b)(3)(A).
\4\ 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 amend its Schedule of Participant Fees and
Assessments (the ``Fee Schedule''), effective July 25, 2011, to amend
its Fee Schedule to clarify the application of the Fee Schedule to
certain transactions of, and services to, CHX Participants and make
certain rate changes. The text of this proposed rule change is
available on the Exchange's Web site at https://www.chx.com/rules/proposed_rules.htm 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 filing, the Exchange is proposing to amend its
Schedule of Fees and Assessments (``Fee Schedule'') to clarify the
application of the Fee Schedule to various transactions consummated on
or through the Exchange and to certain services provided by the
Exchange to its Participants. The proposed changes accurately describe
the manner in which the Exchange has and will continue to apply the Fee
Schedule to such transactions and services.
Currently, the Fee Schedule provides for Processing Fees for
fingerprinting, background checks and the provision of access badges by
the Exchange.\5\ The Exchange no longer provides either fingerprinting
or background checking services for current or prospective CHX
Participants, and we no longer wish to impose a fee for access badges.
Therefore, the Exchange proposes to eliminate the fees for these
services.
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\5\ Section C. (Registration Fees) of the Fee Schedule.
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The Exchange is also clarifying the application of Section E.1.
(Matching System single-sided order executions (one-sided orders of
100+ shares)) of the Fee Schedule to note that the Average Daily Volume
(``ADV'') calculations performed by the Exchange to determine the
amount of provide credit paid to a Participant are not being performed
when the Regular Trading Session closes early.\6\ Trade volume on days
on which the Late Trading Sessions close early, however, would continue
to be counted towards the ADV calculation. In addition, we are
eliminating the provide credit paid to Exchange-registered
Institutional Brokers (``Institutional Brokers'') in transactions in
securities priced less than one dollar. As noted in the discussion of
the changes to Section E.3. of the Fee Schedule, supra, we are
proposing to eliminate the charge in transactions in securities priced
less than one dollar to Participants which submit orders through an
Institutional Broker. It would not be economically feasible for the
Exchange to continue to pay a provide credit to Institutional Brokers
in transactions in which the Exchange
[[Page 45627]]
does not earn any transaction revenue. Finally, the provide credit paid
to Institutional Brokers in transactions in securities at or above one
dollar during the Regular Trading Session is being reduced to $0.0027/
share in Tape A and C securities and $0.0028/share in Tape B securities
from $0.0029/share. This reduction reflects the lower amount of revenue
generated in such transactions due to the rate changes for agency
executions submitted through an Institutional Broker.\7\ The Exchange
is also lowering the rate of the provide credit paid to Institutional
Brokers representing the Participant which originated the order
(regardless of the ADV attributable to either firm) for trades executed
in the Early and Late Trading Sessions to $0.0022/share in Tape A, B
and C securities priced $1.00/share.
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\6\ The Exchange proposes to change the phrase ``single order
executions'' in the caption to Section E.1, to ``single-sided order
executions'' to clarify that this section does not apply to cross
orders.
\7\ These rate changes are discussed infra as part of the
modifications to Section E.3. of the Fee Schedule.
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The Exchange believes that it would be beneficial to clarify the
application of the Fee Schedule to certain cross transactions by
modifying the text of Section E.2. (Matching System crosses (All
Sessions)) of the Fee Schedule. The Exchange proposes to move the
reference to proprietary trades by an Institutional Broker from Section
E.2. to Section E.3. (Executions through an Institutional Broker
Registered with the Exchange Under Article 17 (All Sessions)). The
Exchange believes that Section E.2. is properly construed to apply
solely to cross transactions entered directly by a Participant firm to
the Matching System by electronic means, and without the involvement of
an Institutional Broker. Unlike transactions (including cross trades)
handled by an Institutional Broker, cross transactions entered directly
into the Matching System by a CHX Participant and executed there are
not assessed any charge. The removal of the language regarding
proprietary cross trades executed by an Institutional Broker from this
section should help to eliminate any potential ambiguity on this
treatment. To reinforce this point, we are adding a clause to the last
sentence in this section which states that these provisions do not
apply to cross orders submitted by an Institutional Broker registered
with the Exchange.\8\
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\8\ Throughout the proposal, the Exchange proposes to modify
references to ``institutional brokers'' to clarify that such
references are limited to Institutional Brokers registered with the
Exchange pursuant to Article 17 of our rules, and not to
institutional brokers as colloquially referred to in the securities
industry.
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The Exchange is modifying Section E.3. of the Fee Schedule to
clarify the proper application of the Fee Schedule to transactions
handled by an Institutional Broker. We propose to move the charge
relating to proprietary crosses of an Institutional Broker formerly
reflected in Section E.2 to new Section E.3.b. (Proprietary
Executions). The new language clarifies that the fee assessed to the
Institutional Broker of $.0007/share also applies to any odd lot
component of the cross trade. The new text also explicitly provides
that the Participant on the other side of the transaction is to be
assessed the fee normally assessed to a Participant whose order is
handled by an Institutional Broker, as set forth in proposed new
Section E.3.a. of the Fee Schedule. Current Section E.3. has been
renumbered as Proposed Section E.3.a. Proposed Section E.3.a. sets
forth a revised fee rate of $.003/share for all trades (regardless of
whether the security is a Tape A, B or C security) handled through an
Institutional Broker.\9\ The revised text makes explicit that the fees
pursuant to both Section 3.a. of the Fee Schedule are charged to the
Participant Firm in which name the transaction is submitted for
clearance and settlement (including both single-sided and cross orders)
through an Institutional Broker. The Exchange proposes to add text
excluding odd-lot orders from these provisions, as those orders are
assessed the Odd Lot fee pursuant to Section E.4. (Odd-lot Matching
System fee (single-sided orders of less than 100 shares) (All
Sessions)) of the Fee Schedule. The Exchange also proposes to eliminate
the reference to trades executed by an Institutional Broker ``in
another market,'' since the Exchange does not impose the transaction
fee under Section E.3. for non-CHX executions. The Exchange further
proposes to clarify that the maximum charge per side shall be computed
for each Participant firm on a side (buy or sell) of a execution and
separately for a Participant which is represented by more than one
Institutional Broker Representative (as defined in Article 17, Rule 1
of the Exchange's rules). Finally, the Exchange proposes to add a
provision setting the fees at zero for Institutional Broker-handled
transactions in securities priced under $1.
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\9\ The revised fee rate conforms to the proscriptions of the
Reg NMS Rule 610 (the ``Access Rule'').
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The Exchange proposes to modify the text of Section E.4. of the Fee
Schedule relating to transactions in odd lots. The proposed new
language would clarify that the odd lot fees apply to orders submitted
to the Matching System (whether electronically by the Participant or
through an Institutional Broker) as an odd-lot order. The revised text
reflects CHX's current practice of not applying odd lot fees to orders
not entered into the Matching System as an odd-lot order, but which
become odd lots due to partial executions. Transactions in odd-lot
remainders would be charged the fee rate set forth in Section E.1. of
the Fee Schedule.
The Exchange is proposing to delete Section E.6. of the Fee
Schedule relating to Matching System routing fees, since the CHX does
not currently offer automated routing services. This Section will be
reserved for future use in the event that the Exchange decides to offer
such services, or for other purposes.
The Exchange is proposing certain changes to the trade processing
fees to clarify that such fees are charged to CHX Participants for
cross transactions that are executed in the over-the-counter (``OTC'')
marketplace and are reported to clearing by the Exchange's systems,
pursuant to Section E.7. (Trade Processing Fees) of the Fee Schedule.
The Exchange is also modifying the types of transactions subject to the
Trade Processing Fee to eliminate transaction executed directly in the
OTC marketplace by an Institutional Broker and in its place substitute
executed cross trades which originated with an Institutional Broker and
were transmitted to and executed by another broker-dealer (which is not
an Institutional Broker) in the OTC marketplace and which were
submitted to clearing by the Exchange's systems.\10\ This amendment
reflects ongoing discussions between the Exchange and the staff of the
Commission regarding limitations on the ability of Institutional
Brokers to directly execute trades in the OTC marketplace. The Exchange
also proposes to modify the current fee rate and maximum charge for
trade processing fees to conform to the rates charged for transactions
submitted through an Institutional Broker pursuant to Section E.3. of
the Fee Schedule. In such transactions, the Exchange currently charges
$.0035/share, up to a maximum of $100 per side for Tape A and B
securities, and $.0025/share, up to a maximum of $100 per side for Tape
C securities. By this proposal, we would change these rates to $.003/
share, up to
[[Page 45628]]
a maximum of $100 per side for all securities. We are also proposing to
define ``per side'' in the same manner as in Section E.3. These changes
would maintain the current state under which the fees charged pursuant
to Sections E.3. and E.7. are identical.
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\10\ In such transactions, the third-party broker-dealer would
report the transaction to the appropriate Trade Reporting Facility,
and provide an execution report to the Institutional Broker, which
in turn would enter the information into the Exchange's systems for
submission to clearing.
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The Exchange is proposing to eliminate the Clearing Support Fees
currently set forth in Section H of the Fee Schedule. The CHX no longer
performs the services described in Section H and has no present
intention of doing so in the future. The elimination of these fees
would clarify to CHX Participants that the Exchange does not provide
clearing support services.
Finally, the Exchange proposes to eliminate the fees for CCH
Rulebooks (which the Exchange no longer provides to Participants) and
monthly Brokerplex reports (which the Exchange will provide at no cost)
pursuant to Section L.2. and 3. (Supplies and Reports), respectively.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act \11\ in general, and furthers the
objectives of Section 6(b)(4) of the Act \12\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and other persons using any facility or
system which the Exchange operates or controls. The Exchange is
proposing to eliminate certain fees in their entirety which would
reduce the financial obligation of Participants to the CHX. The fees to
be eliminated include certain processing fees for fingerprints,
background checks and badges (Section C of the Fee Schedule), Matching
System routing fees (Section E.6. of the Fee Schedule), Clearing
Support Fees (Section H of the Fee Schedule), and fees for rulebooks
and certain reports (Section L of the Fee Schedule). In Section E.1.,
the Exchange is reducing the provide credit paid to Institutional
Brokers in Regular Trading Hours session transaction from $0.0029/share
in Tape A and C securities to $0.0027/share and from transaction from
$0.0031/share in Tape B securities to $0.0028/share. In this same
Section, the Exchange is further proposing a provide credit be paid to
Institutional Brokers of $0.0022/share in securities priced greater
than $1.00/share for trades in the Early and Late Trading Sessions. The
Exchange also proposes that no provide credit shall be paid to
Institutional Brokers in transactions in securities priced less than
$1.00/share. The Exchange believes that the reduction in provide
credits paid to Institutional Brokers for trades during the Regular
Trading Session, as well as the elimination of the provide credit paid
to Institutional Brokers in transactions in all trading sessions in
securities priced less than $1.00, are appropriate because they will
enable the Exchange to retain a greater amount of the revenue
associated with such transactions, which in turn will assist the CHX in
funding its internal operations including the oversight of
Institutional Brokers. The Exchange further believes that the rate
changes in Section E.1. as to the Early and Late Trading Sessions are
appropriate because the proposed rates corresponds to the provide
credit generally paid to Participants for trades in the Early and Late
Trading Sessions.
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\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the rate changes for CHX-executed
transactions entered through an Institutional Broker are fair and
appropriate (Section E.3. of the Fee Schedule). The Exchange hopes that
these rate changes will help it attract additional order flow to the
Exchange, as well as be consistent with the limitations on fees charged
by exchanges for access to quotations as set forth in Rule 610(c) of
Regulation NMS. The Exchange is making parallel changes to the Trade
Processing Fees set forth in Section E.7. of the Fee Schedule charged
in connection with the submission to clearing by the CHX of non-
Exchange trades handled by an Institutional Broker in order to maintain
the current level of parity in such fees with the fees charged pursuant
to Section E.3. of the Fee Schedule. The Exchange is also adding to the
types of transactions subject to the Trade Processing Fee any executed
trades submitted to Clearing by the Exchange's systems which originated
with an Institutional Broker and were transmitted to and executed by
another broker-dealer in the over-the-counter market. This addition
reflects ongoing discussions between the Exchange and the staff of the
Commission regarding limitations on the ability of Institutional
Brokers to directly execute trades in the over-the-counter marketplace.
The Exchange further believes that the proposed rule change is
consistent with Section 6(b) of the Act in general, and furthers the
objectives of Section 6(b)(1) of the Act 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. The proposed
clarifying changes to the Fee Schedule would establish the fees as they
were approved by the Exchange and would contribute to the ability of
its Participants to comply with the provisions of the Fee Schedule by
clarifying to such Participants the basis upon which the Exchange
charges for various of its fees and services. The proposed clarifying
changes include the following: (1) The limitation of Section E.1. to
single-sided orders (2) that the Average Daily Trading volume
calculation for purposes of applying the tiered rate schedule of
Section E.1. does not include days when the Regular Trading Session
closes early; (3) that the phrase ``institutional broker'' be
capitalized to reflect the intention to limit it to Institutional
Brokers registered with the CHX pursuant to Article 17 of our rules;
(4) that the provisions of Section E.2. apply only to crosses executed
in the Matching System and which were not entered through an
Institutional Broker; (5) the manner in which the CHX imposes fees on
Institutional Brokers for proprietary trades executed in the Matching
System; (6) the manner in which the CHX imposes fees on Participants
for Exchange transactions entered through an Institutional Broker; (7)
the application of the $100 maximum charge in the transactions noted in
(6); and (8) the imposition of fees on odd-lot orders.
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 on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \13\ and subparagraph (f)(2) of Rule 19b-4
thereunder \14\ because it establishes or changes a due, fee or other
charge
[[Page 45629]]
applicable to the Exchange's members, which renders the proposed rule
change effective upon filing.
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\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
\14\ 17 CFR 240.19b-4(f)(2).
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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 (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-CHX-2011-19 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-2011-19. 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 (https://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 Web site 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 will also 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 No. SR-CHX-2011-19 and should be
submitted on or before August 19, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-19189 Filed 7-28-11; 8:45 am]
BILLING CODE 8011-01-P
