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]

Download as PDF 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 http:// 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). VerDate Mar<15>2010 16:17 Jul 28, 2011 Jkt 223001 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 PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 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. E:\FR\FM\29JYN1.SGM 29JYN1 Federal Register / Vol. 76, No. 146 / Friday, July 29, 2011 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES 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. VerDate Mar<15>2010 16:17 Jul 28, 2011 Jkt 223001 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’’). PO 00000 Frm 00124 Fmt 4703 Sfmt 4703 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. E:\FR\FM\29JYN1.SGM 29JYN1 45628 Federal Register / Vol. 76, No. 146 / Friday, July 29, 2011 / Notices 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). VerDate Mar<15>2010 16:17 Jul 28, 2011 Jkt 223001 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 PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 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 E:\FR\FM\29JYN1.SGM 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 (http://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 (http://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 http:// 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 VerDate Mar<15>2010 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. PO 00000 15 17 1 15 Frm 00126 Fmt 4703 Sfmt 4703 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]


=======================================================================
-----------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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 http://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.
---------------------------------------------------------------------------

    \5\ Section C. (Registration Fees) of the Fee Schedule.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \9\ The revised fee rate conforms to the proscriptions of the 
Reg NMS Rule 610 (the ``Access Rule'').
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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-2011-19 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 (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 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\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-19189 Filed 7-28-11; 8:45 am]
BILLING CODE 8011-01-P