Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Eliminate Certain References to the Exchange Acting as the Designated Examining Authority, 62126-62128 [2011-25795]
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62126
Federal Register / Vol. 76, No. 194 / Thursday, October 6, 2011 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
regulating, clearing, settling, and
processing information with respect to,
and facilitating transactions in
securities; to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system; and, in general, to protect
investors and the public interest.
Section 6(b)(5) also requires that the
rules of an exchange not be designed to
permit unfair discrimination among
customers, issuers, brokers, or dealers.
Recognizing that the Commission has
expressed concern regarding the
potential for conflicts of interest in
instances where a member firm is
affiliated with an exchange to which it
is routing orders, the Exchange
previously implemented limitations and
conditions to Arca Securities’s
affiliation with the Exchange to permit
the Exchange to accept orders routed
inbound to NYSE Amex by Arca
Securities from its affiliates, NYSE and
NYSE Arca, on a pilot basis.11 The
Exchange now seeks to make this pilot
permanent, and to more accurately
reflect in its rule text its RSA with
FINRA. Specifically, the Exchange states
it is in compliance with the following
obligations and conditions: 12
• First, the Exchange will maintain an
agreement pursuant to Rule 17d–2
under the Exchange Act with FINRA to
relieve the Exchange of regulatory
responsibilities for Arca Securities with
respect to rules that are common rules
between the Exchange and FINRA, and
maintain an RSA with FINRA to
perform regulatory responsibilities for
Arca Securities for unique Exchange
rules.
• Second, the RSA will require the
Exchange to provide FINRA with
information, in an easily accessible
manner, regarding all exception reports,
alerts, complaints, trading errors,
cancellations, investigations, and
enforcement matters (collectively
‘‘Exceptions’’) in which Arca Securities
is identified as a participant that has
potentially violated Exchange or
Commission Rules and of which the
Exchange becomes aware, and shall
require that FINRA provide a report, at
least quarterly, to the Exchange
quantifying all Exceptions in which
Arca Securities is identified as a
participant that has potentially violated
Exchange or Commission Rules; 13
11 See Routing Pilot Release. See also supra note
6 and accompanying text.
12 See Notice, 76 FR at 53517.
13 See Notice, 76 FR at 53517, n.7 and
accompanying text. The Exchange proposed to
modify this provision, as set forth in NYSE Amex
Options Rule 993NY(b)(1)(B) to more accurately
reflect its RSA with FINRA and specify that the
quarterly report of Exceptions shall be provided to
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• Third, the Exchange, on behalf of its
parent, NYSE Euronext, will establish
and maintain procedures and internal
controls reasonably designed to prevent
Arca Securities from receiving any
benefit, taking any action or engaging in
any activity based on non-public
information regarding planned changes
to Exchange systems, obtained as a
result of its affiliation with the
Exchange, until such information is
available generally to similarly situated
ATP Holders of the Exchange in
connection with the provision of
inbound order routing to the Exchange;
and
• Fourth, the Exchange may furnish
to Arca Securities the same information
on the same terms that the Exchange
makes available in the normal course of
business to any other ATP Holder.14
The Exchange believes that by meeting
the above-listed conditions it has set up
mechanisms that protect the
independence of the Exchange’s
regulatory responsibility with respect to
Arca Securities, and has demonstrated
that Arca Securities cannot use any
information it may have because of its
affiliation with the Exchange to its
advantage.15
In the past, the Commission has
expressed concern that the affiliation of
an exchange with one of its members
raises potential conflicts of interest, and
the potential for unfair competitive
advantage.16 Although the Commission
continues to be concerned about
potential unfair competition and
conflicts of interest between an
exchange’s self-regulatory obligations
and its commercial interest when the
exchange is affiliated with one of its
members, for the reasons discussed
the Exchange’s Chief Regulatory Officer (‘‘CRO’’).
The Exchange states that upon approval of this
change, it will continue to comply with the
obligations and conditions as set forth in NYSE
Amex Options Rule 993NY(b). See Notice, 76 FR at
53517.
14 See NYSE Amex Options Rule 993NY(b). See
also Notice, 76 FR at 53517.
15 See Notice, 76 FR at 53517.
16 See, e.g., Securities Exchange Act Release Nos.
54170 (July 18, 2006), 71 FR 42149 (July 25, 2006)
(SR–NASDAQ–2006–006) (order approving
Nasdaq’s proposal to adopt Nasdaq Rule 2140,
restricting affiliations between Nasdaq and its
members); 53382 (February 27, 2006), 71 FR 11251
(March 6, 2006) (SR–NYSE–2005–77) (order
approving the combination of the New York Stock
Exchange, Inc. and Archipelago Holdings, Inc.);
58673 (September 29, 2008), 73 FR 57707 (October
8, 2008) (SR–Amex–2008–62) (order approving the
combination of NYSE Euronext and the American
Stock Exchange LLC); 59135 (December 22, 2008),
73 FR 79954 (December 30, 2008) (SR–ISE–2009–
85) (order approving the purchase by ISE Holdings
of an ownership interest in DirectEdge Holdings
LLC); and 59281 (January 22, 2009), 74 FR 5014
(January 28, 2009) (SR–NYSE–2008–120) (order
approving a joint venture between NYSE and BIDS
Holdings L.P.).
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below, the Commission believes that it
is consistent with the Act to permit Arca
Securities to provide inbound routing to
the Exchange on a permanent basis
instead of a pilot basis, subject to the
other conditions described above.
The Exchange has proposed four
ongoing conditions applicable to Arca
Securities’s routing activities, which are
enumerated above. The Commission
believes that these conditions mitigate
its concerns about potential conflicts of
interest and unfair competitive
advantage. In particular, the
Commission believes that FINRA’s
oversight of Arca Securities,17 combined
with FINRA’s monitoring of Arca
Securities’s compliance with the
Exchange’s rules and quarterly reporting
to NYSE Amex’s CRO, will help to
protect the independence of the
Exchange’s regulatory responsibilities
with respect to Arca Securities.
V. Conclusion
It Is Therefore Ordered, pursuant to
Section 19(b)(2) of the Act,18 that the
proposed rule change (SR–NYSEAmex–
2011–64) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–25822 Filed 10–5–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65444; File No. SR–CHX–
2011–27
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change To Eliminate
Certain References to the Exchange
Acting as the Designated Examining
Authority
September 30, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’ or ‘‘Act’’),1 and Rule
19b–4 2 thereunder, notice is hereby
given that on September 22, 2011, the
Chicago Stock Exchange, Inc. (‘‘CHX’’ or
the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
17 This oversight will be accomplished through
the Regulatory Contract between the Exchange and
FINRA and a 17d–2 Agreement.
18 15 U.S.C. 78s(b)(2).
19 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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Federal Register / Vol. 76, No. 194 / Thursday, October 6, 2011 / Notices
change as described in Items I and II
below, which Items have been prepared
by the CHX. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(6) 4 thereunder. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CHX proposes to amend its rules to
eliminate certain references to the
Exchange acting as the Designated
Examining Authority. The text of this
proposed rule change is available on the
Exchange’s Web site at (https://
www.chx.com) and in the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
CHX included statements concerning
the purpose of and basis for the
proposed rule changes and discussed
any comments it received regarding the
proposal. The text of these statements
may be examined at the places specified
in Item IV below. The CHX has prepared
summaries, set forth in sections A, B
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange is proposing to delete
certain references in its rules to its
status as the Designated Examining
Authority (‘‘DEA’’).5 In the impacted
rules, the DEA references generally act
to limit the scope and applicability of
those rules to firms for which the
Exchange acts as the DEA. While this
limitation may be appropriate in some
contexts, for example the Rules in
Article 7 regarding Financial
Responsibility and Reporting
Requirements, the Exchange no longer
believes that these provisions are
appropriate in certain other contexts.6
3 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
5 Although not a defined term in our rules, the
DEA is the Self-Regulatory Organization (‘‘SRO’’)
with the responsibility for examining a member for
compliance with applicable financial responsibility
rules pursuant to Exchange Act Rule 17d–1. 17 CFR
240.17d–1.
6 For example, Participants for which the
Exchange is the DEA are required by Article 7, Rule
4 17
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The Exchange is therefore submitting
this rule proposal to delete certain of
those references and make appropriate
changes to the remaining provisions.7
In Article 6, Rule 5(a), (Supervision of
Registered Persons and Branch and
Resident Offices), the Exchange
proposes to delete the limiting reference
to Participants Firms for which the
Exchange acts as the DEA. The
Exchange proposes that the provisions
of Rule 5(a) will apply equally to all
Participant Firms.
In Article 17 (Institutional Brokers),
Rule 1 (Registration and Appointment)
and in Interpretation and Policy .01 of
Article 17, Rule 3 (Responsibilities), the
Exchange proposes to delete the
requirement that Participant Firms
seeking to register as an Institutional
Broker [sic] must have the Exchange act
as the DEA. The Exchange does not
believe that it is necessary that the
Exchange examine a Participant Firm
for its compliance with applicable
financial responsibility rules in order
that it qualify for status as an
Institutional Broker.8 The Exchange
notes that it conducts comprehensive
daily surveillance of Institutional Broker
trading activity on the CHX and
conducts examinations for supervisory
and trading-related issues of all CHXregistered Institutional Brokers,
irrespective of whether it acts as the
DEA. The Exchange also administers a
qualification examination for all
individuals acting as an Institutional
Broker Representative (‘‘IBR’’). Only an
approved IBR may handle and accept
orders from customers of the
Institutional Broker firm. Given this
oversight structure, the requirement that
the CHX act as the DEA for Institutional
Brokers in all cases appears superfluous
and unnecessarily restrictive.
3A to notify the Exchange prior to opening a Joint
Back Office arrangement. Similarly, Article 7, Rule
9 requires firms for which the CHX is the DEA to
file reports of short positions carried by the firm.
7 Certain existing rules regarding the qualification
and examination of individuals associated with a
Participant firm contain references to the CHX
acting as DEA. The Exchange is proposing to delete
those references as part of a separate rule filing
making additional changes to those provisions.
Current Article 8, Rule 13 (Advertising and
Promotion) also contains similar references and the
Exchange plans on eliminating those in a
subsequent proposal to conform our rules with
those of the Financial Industry Regulatory Agency
(‘‘FINRA’’) in order to make them ‘‘common’’ for
purposes of our agreement with FINRA for the
allocation of regulatory responsibility of common
rules for dual members.
8 The elimination of this requirement does not
imply that an Institutional Broker firm will not be
examined for compliance with financial
responsibility rules. It simply means that another
SRO will perform the examination function for
those rules.
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62127
2. Statutory Basis
The Exchange believes that the
proposed rule changes are consistent
with Section 6(b) of the Act in general,9
and furthers [sic] the objectives of
Section 6(b)(5) in particular,10 in that it
is [sic] designed to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transaction in securities, to remove
impediments and perfect the
mechanisms of a free and open market,
and, in general, to protect investors and
the public interest. The proposed
changes will expand the reach of the
Exchange rules in circumstances where
it is appropriate and fair to do so, and
will eliminate outdated limitations of
certain provisions to a subset of
Exchange Participants. The broad
application of Exchange rules to all
Participants should result in the fair and
evenhanded application of such rules to
Participant firms generally.
B. Self-Regulatory Organization’s
Statement of Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments Regarding the
Proposed Rule Changes Received From
Members, Participants or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Changes and Timing for
Commission Action
Pursuant to Section 19(b)(3)(A) of the
Act 11 and Rule 19b–4(f)(6) 12
thereunder, the Exchange has
designated this proposal as one that
effects a change that: (i) Does not
significantly affect the protection of
investors or the public interest; (ii) does
not impose any significant burden on
competition; and (iii) by its terms, does
not become operative for 30 days after
the date of the filing, or such shorter
time as the Commission may designate
if consistent with the protection of
investors and the public interest. Rule
19b–4(f)(6) 13 requires a self-regulatory
organization to give the Commission
written notice of its intent to file the
proposed rule change at least five
business days prior to the date of filing
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
11 15 U.S.C. 78s(b)(3)(A).
12 17 CFR 240.19b–4(f)(6).
13 Id.
10 15
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62128
Federal Register / Vol. 76, No. 194 / Thursday, October 6, 2011 / Notices
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 changes 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 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 CHX. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File No.
SR–CHX–2011–27 and should be
submitted on or before October 27,
2011.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposal is
consistent with the Act. Comments may
be submitted by any of the following
methods:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Elizabeth M. Murphy,
Secretary.
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
No. SR–CHX–2011–27 on the subject
line.
mstockstill on DSK4VPTVN1PROD with NOTICES
of the proposed rule change, or such
shorter time as designated by the
Commission. The Exchange has satisfied
this requirement.
Under Rule 19b–4(f)(6) of the Act,14 a
proposal does not become operative for
30 days after the date of its filing, or
such shorter time as the Commission
may designate if consistent with the
protection of investors and the public
interest. The Commission is waiving the
30-day operative period for this filing so
that it may become effective and
operative upon filing.15 The
Commission believes waiving the 30day operative delay is consistent with
the protection of investors and the
public interest as the waiver will allow
the Exchange to implement the change
right away. The proposed rule change
eliminates references to DEA which
limit the applicability of some rules to
firms for which the CHX serves as DEA.
These rules will now apply to all
member firms.
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.
SECURITIES AND EXCHANGE
COMMISSION
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 No.
SR–CHX–2011–27. This file number
should be included on the subject line
if e-mail is used. To help the
14 Id.
15 For purposes only of waiving the operative
delay of this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f). See also 17 CFR 200.30–3(a)(59).
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16:07 Oct 05, 2011
Jkt 226001
[FR Doc. 2011–25795 Filed 10–5–11; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–65459; File No. SR–FINRA–
2011–053]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Proposed Rule Change to Amend
Certain Trade Reporting and
Compliance Rules
September 30, 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
September 22, 2011, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00094
Fmt 4703
Sfmt 4703
change as described in Items I, II, and
III below, which Items have been
prepared by FINRA. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to amend FINRA
Rule 6730 regarding reporting a
transaction in a TRACE-Eligible
Security, other than a transaction in an
Asset-Backed Security, on a nonbusiness day, and reporting size
(volume), commission and settlement,
in order for FINRA to consolidate all
TRACE-Eligible Securities transaction
processing and data management on a
single technology platform, the Multi
Product Platform (‘‘MPP’’).
The text of the proposed rule change
is available on FINRA’s Web site at
https://www.finra.org, at the principal
office of FINRA, on the Commission’s
Web site at https://www.sec.gov, 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,
FINRA 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. FINRA 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
Currently, TRACE-Eligible Securities
that are Asset-Backed Securities are
processed on FINRA’s enhanced
technology platform, MPP.3 FINRA
proposes certain amendments to the
reporting requirements of Rule 6730 of
the Trade Reporting and Compliance
Engine (TRACE) rules that will permit
FINRA to migrate all other TRACEEligible Securities to MPP. The
proposed amendments are substantially
similar to requirements that currently
apply to transactions in Asset-Backed
Securities, and will simplify reporting a
3 ‘‘TRACE-Eligible Security’’ and ‘‘Asset-Backed
Security’’ are defined in, respectively, Rule 6710(a)
and Rule 6710(m).
E:\FR\FM\06OCN1.SGM
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]]>Agencies
[Federal Register Volume 76, Number 194 (Thursday, October 6, 2011)]
[Notices]
[Pages 62126-62128]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-25795]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65444; File No. SR-CHX-2011-27
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Eliminate Certain References to the Exchange Acting as the Designated
Examining Authority
September 30, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act'' or ``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice
is hereby given that on September 22, 2011, the Chicago Stock Exchange,
Inc. (``CHX'' or the ``Exchange'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule
[[Page 62127]]
change as described in Items I and II below, which Items have been
prepared by the CHX. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 19(b)(3)(A) of
the Act \3\ and Rule 19b-4(f)(6) \4\ thereunder. 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)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CHX proposes to amend its rules to eliminate certain references to
the Exchange acting as the Designated Examining Authority. The text of
this proposed rule change is available on the Exchange's Web site at
(https://www.chx.com) and in the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the CHX included statements
concerning the purpose of and basis for the proposed rule changes and
discussed any comments it received regarding the proposal. The text of
these statements may be examined at the places specified in Item IV
below. The CHX has prepared summaries, set forth in sections A, B and C
below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to delete certain references in its rules
to its status as the Designated Examining Authority (``DEA'').\5\ In
the impacted rules, the DEA references generally act to limit the scope
and applicability of those rules to firms for which the Exchange acts
as the DEA. While this limitation may be appropriate in some contexts,
for example the Rules in Article 7 regarding Financial Responsibility
and Reporting Requirements, the Exchange no longer believes that these
provisions are appropriate in certain other contexts.\6\ The Exchange
is therefore submitting this rule proposal to delete certain of those
references and make appropriate changes to the remaining provisions.\7\
---------------------------------------------------------------------------
\5\ Although not a defined term in our rules, the DEA is the
Self-Regulatory Organization (``SRO'') with the responsibility for
examining a member for compliance with applicable financial
responsibility rules pursuant to Exchange Act Rule 17d-1. 17 CFR
240.17d-1.
\6\ For example, Participants for which the Exchange is the DEA
are required by Article 7, Rule 3A to notify the Exchange prior to
opening a Joint Back Office arrangement. Similarly, Article 7, Rule
9 requires firms for which the CHX is the DEA to file reports of
short positions carried by the firm.
\7\ Certain existing rules regarding the qualification and
examination of individuals associated with a Participant firm
contain references to the CHX acting as DEA. The Exchange is
proposing to delete those references as part of a separate rule
filing making additional changes to those provisions. Current
Article 8, Rule 13 (Advertising and Promotion) also contains similar
references and the Exchange plans on eliminating those in a
subsequent proposal to conform our rules with those of the Financial
Industry Regulatory Agency (``FINRA'') in order to make them
``common'' for purposes of our agreement with FINRA for the
allocation of regulatory responsibility of common rules for dual
members.
---------------------------------------------------------------------------
In Article 6, Rule 5(a), (Supervision of Registered Persons and
Branch and Resident Offices), the Exchange proposes to delete the
limiting reference to Participants Firms for which the Exchange acts as
the DEA. The Exchange proposes that the provisions of Rule 5(a) will
apply equally to all Participant Firms.
In Article 17 (Institutional Brokers), Rule 1 (Registration and
Appointment) and in Interpretation and Policy .01 of Article 17, Rule 3
(Responsibilities), the Exchange proposes to delete the requirement
that Participant Firms seeking to register as an Institutional Broker
[sic] must have the Exchange act as the DEA. The Exchange does not
believe that it is necessary that the Exchange examine a Participant
Firm for its compliance with applicable financial responsibility rules
in order that it qualify for status as an Institutional Broker.\8\ The
Exchange notes that it conducts comprehensive daily surveillance of
Institutional Broker trading activity on the CHX and conducts
examinations for supervisory and trading-related issues of all CHX-
registered Institutional Brokers, irrespective of whether it acts as
the DEA. The Exchange also administers a qualification examination for
all individuals acting as an Institutional Broker Representative
(``IBR''). Only an approved IBR may handle and accept orders from
customers of the Institutional Broker firm. Given this oversight
structure, the requirement that the CHX act as the DEA for
Institutional Brokers in all cases appears superfluous and
unnecessarily restrictive.
---------------------------------------------------------------------------
\8\ The elimination of this requirement does not imply that an
Institutional Broker firm will not be examined for compliance with
financial responsibility rules. It simply means that another SRO
will perform the examination function for those rules.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule changes are consistent
with Section 6(b) of the Act in general,\9\ and furthers [sic] the
objectives of Section 6(b)(5) in particular,\10\ in that it is [sic]
designed to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transaction in securities, to remove impediments and perfect the
mechanisms of a free and open market, and, in general, to protect
investors and the public interest. The proposed changes will expand the
reach of the Exchange rules in circumstances where it is appropriate
and fair to do so, and will eliminate outdated limitations of certain
provisions to a subset of Exchange Participants. The broad application
of Exchange rules to all Participants should result in the fair and
evenhanded application of such rules to Participant firms generally.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement of Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments Regarding the
Proposed Rule Changes Received From Members, Participants or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Changes and Timing for
Commission Action
Pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) \12\ thereunder, the Exchange has designated this proposal as
one that effects a change that: (i) Does not significantly affect the
protection of investors or the public interest; (ii) does not impose
any significant burden on competition; and (iii) by its terms, does not
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest. Rule 19b-4(f)(6) \13\
requires a self-regulatory organization to give the Commission written
notice of its intent to file the proposed rule change at least five
business days prior to the date of filing
[[Page 62128]]
of the proposed rule change, or such shorter time as designated by the
Commission. The Exchange has satisfied this requirement.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ Id.
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Under Rule 19b-4(f)(6) of the Act,\14\ a proposal does not become
operative for 30 days after the date of its filing, or such shorter
time as the Commission may designate if consistent with the protection
of investors and the public interest. The Commission is waiving the 30-
day operative period for this filing so that it may become effective
and operative upon filing.\15\ The Commission believes waiving the 30-
day operative delay is consistent with the protection of investors and
the public interest as the waiver will allow the Exchange to implement
the change right away. The proposed rule change eliminates references
to DEA which limit the applicability of some rules to firms for which
the CHX serves as DEA. These rules will now apply to all member firms.
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\14\ Id.
\15\ For purposes only of waiving the operative delay of this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f). See also 17 CFR 200.30-3(a)(59).
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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 proposal 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 No. SR-CHX-2011-27 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 No. SR-CHX-2011-27. 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 changes 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 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 CHX. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File No. SR-CHX-
2011-27 and should be submitted on or before October 27, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-25795 Filed 10-5-11; 8:45 am]
BILLING CODE 8011-01-P
