[Federal Register: June 2, 2004 (Volume 69, Number 106)]
[Notices]
[Page 31147-31148]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02jn04-94]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-49772; File No. SR-CHX-2004-08]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment No. 1 by the Chicago Stock Exchange, Incorporated
To Amend the CHX Membership Dues and Fees Schedule To Provide a Tape
Credit of 50% to Specialists Trading Tape A and Tape B Securities
May 26, 2004.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 30, 2004, the Chicago Stock Exchange, Incorporated
(``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. On May 18, 2004, the CHX filed Amendment No. 1 to the
proposed rule change.\3\ The Commission is publishing this notice to
solicit comments on the proposed rule change, as amended, from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 completely replaced and superseded the
original proposed rule change.
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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 membership dues and fees schedule
(the ``Fee Schedule''), effective February 1, 2004, to provide a tape
credit of 50% to specialists trading Tape A and Tape B securities. The
text of the proposed rule change is available at the CHX and at the
Commission.
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 its proposal and discussed any
comments it received regarding the proposal. The text of these
statements
[[Page 31148]]
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
Under the Exchange's current Fee Schedule, the Exchange provides
tape credits to specialists trading Tape A and Tape B securities.\4\
Specifically, under the Tape A credit program, the Exchange provides
credits of 18% (for market share less than 7%), 45% (for market share
between 7 and 12%) and 70% (for market share above 12%). A similar
structure applies to the Tape B credit program, where the Exchange
provides credits of 18% (for market share less than or equal to 5.75%)
and 50% (for market share greater than 5.75%). These credits are
expressed in marginal rates, however, so that no specialist receives
the top level of credit for all trading in a particular security.\5\
Specialists may also receive additional transaction credits under the
Fee Schedule.\6\
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\4\ ``Tape A Securities'' are securities reported on Tape A of
the Consolidated Tape Association. ``Tape B Securities'' are
securities reported on Tape B of the Consolidated Tape Association.
\5\ For example, if a specialist trades a Tape A security and
had a 15% market share in that security, the Exchange would provide
a credit of 18% on the trades that make up the first 7% of that
market share, a credit of 45% on the trades that make up between 7
and 12% of that market share and a credit of 70% only on those
trades that exceed 12% of market share.
\6\ The Exchange implemented a program, effective May 1, 2003,
to provide additional tape revenue to specialists from certain
incremental increases in the Exchange's share of Tape A and Tape B
volume. See Securities Exchange Act Release No. 48477 (September 4,
2003), 68 FR 53625 (September 11, 2003)(SR-CHX-2003-15).
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The Exchange now proposes to amend the Fee Schedule, effective
February 1, 2004, by providing a flat, not marginal, 50% tape credit to
specialists trading Tape A and Tape B securities.\7\ This tape credit
program is designed to provide credits to specialist firms that trade
Tape A and Tape B securities in a manner that rewards them for their
trading on the Exchange.
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\7\ In the instant filing, the Exchange also (a) confirms that
the specialist tape credits do not include any tape credits that
might be paid to the Exchange's floor brokers under a separate tape
program; and (b) deletes the provision currently in the Fee Schedule
that relates to specialist credits available for trading that occurs
during the E-Session, a trading session that no longer is held.
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The Exchange's proposal is substantially similar to tape credit or
rebate programs that have been approved for other market centers.\8\ As
a result, the Exchange believes that the Commission would not be
breaking new ground in approving this proposal; instead, it would only
be allowing the Exchange to operate a market data revenue-sharing
program that could compete on substantially similar footing with
programs of other markets.
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\8\ See e.g., Securities Exchange Act Release Nos. 46911
(November 26, 2002), 67 FR 72251 (December 4, 2002)(SR-BSE-2002-
10)(approving proposal to (a) share 50% of Tape A revenues, in
excess of a threshold amount, with eligible member firms; and (b)
share 50% of net Tape B revenue per trade with member firms that
route business to the BSE); 48106 (June 27, 2003), 68 FR 40318 (July
7, 2003)(SR-PCX-2002-62)(approving an ArcaEx revenue sharing program
that shared 50% of gross Tape A revenues with eligible users of the
ArcaEx facility); and 46938 (December 3, 2002), 67 FR 72993
(December 9, 2002)(SR-NASD-2002-149)(approving a transaction credit
program for the Nasdaq InterMarket that shared 50% of Tape A and
Tape B revenues with eligible members, based on the members' pro
rata share of transactions in those securities).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b)(4) of the Act \9\ in that it provides for the
equitable allocation of reasonable dues, fees and other charges among
its members.
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\9\ 15 U.S.C. 78(f)(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the CHX consents, the Commission will:
(A) By order approve the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
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-2004-08 on the subject line.
Paper comments:
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number SR-CHX-2004-08. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Section, 450 Fifth
Street, NW., Washington, DC 20549. Copies of such filing also will be
available for inspection and copying at the principal office of the
CHX. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-CHX-
2004-08 and should be submitted on or before June 23, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-12429 Filed 6-1-04; 8:45 am]
BILLING CODE 8010-01-P