[Federal Register: November 29, 2007 (Volume 72, Number 229)]
[Notices]
[Page 67616-67618]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29no07-43]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56833; File No. SR-CHX-2007-26]
Self-Regulatory Organizations; The Chicago Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
and Amendment Number 1 Thereto Relating to Participant Fees and Credits
November 21, 2007.
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 October 31, 2007, The Chicago Stock Exchange, Inc. (``CHX'' or
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been substantially prepared by the
Exchange. On November 19, 2007, CHX filed Amendment No. 1 to the
proposed rule change. The Exchange has designated this proposal as one
establishing or changing a due, fee, or other charge imposed by the
Exchange under Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(2)
thereunder,\4\ which renders it effective upon filing with the
Commission. 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\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CHX proposes to amend its Schedule of Participant Fees and
Credits (the ``Fee Schedule'') to: (a) Provide that port fees would not
be charged to participant firms that provide a certain amount of
liquidity to the ``Matching System'' \5\; (b) modify the ``provide''
credits associated with trades in Tape B securities to create an
incentive to send orders in these and other securities to the Matching
System; (c) modify the fees for the receipt of orders through the CHX
Connect network; and (d) add new fees in connection with the processing
of away-market trades that are sent to clearing through the Exchange's
facilities. The text of the proposed rule change is available at the
Exchange's Web site, http://www.chx.com/rules/proposed_rules.htm, the
Exchange, and the Commission's Public Reference Room.
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\5\ See generally, CHX Rules, Article 20.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, CHX 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. 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 would amend its Fee Schedule in
several ways. First, the Exchange would amend the Fee Schedule to
provide that port fees would not be charged to participant firms that
provide a certain amount of liquidity to the Matching System.\6\
Specifically, port fees would not be charged to a participant firm for
any month in which that firm executes an average daily volume of 5
million or more provide shares in the Matching
[[Page 67617]]
System.\7\ The Exchange believes that it is appropriate to eliminate
the port fees charged to participant firms that send a high level of
volume to the Matching System because the Exchange's costs of providing
services to these firms are offset by the revenues produced by the
firms' trading activity on the Exchange.
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\6\ Under the Exchange's Fee Schedule, port charges of $400 per
month currently are assessed for each participant give-up that has
access through a participant connection to the Matching System. Port
charges are not assessed for access to the Matching System through
the Exchange's Brokerplex system.
\7\ A ``provide'' share is one that is given a provide credit
under the take/provide provisions of the Exchange's Fee Schedule.
See Fee Schedule, Section E(1). In calculating a firm's average
daily volume, the Exchange would not count activity on days when the
Exchange closes early.
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As its second Fee Schedule change, the Exchange would modify the
provide credits associated with trades in Tape B securities to create
an incentive for CHX participants to send orders in these and other
securities to the Matching System. Under the current Fee Schedule, the
Exchange charges a $.0029/share take fee and pays a $.0026/share credit
in connection with the execution of single-sided orders of 100 or more
shares in the Exchange's Matching System. The Exchange proposes to
increase, to $.0036/share, the credit paid for trades in Tape B
securities, for any participant firm that executes an average daily
volume of 5 million or more provide shares in Tape A and/or C
securities in the Exchange's Matching System. The Exchange also
proposes to increase, to $.0032/share, the credit paid for trades in
Tape B securities, for any participant firm that executes an average
daily volume of fewer than 5 million provide shares in Tape A and/or C
securities.\8\ These increases in the credit paid for trades in Tape B
securities are in direct response to price changes announced by other
market centers and are designed to create an incentive for CHX
participants to send orders in Tape B securities to the CHX, rather
than to other markets.\9\
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\8\ In calculating a firm's average daily volume, the Exchange
would not count trading activity on days when the Exchange closes
early. The Exchange calculates a firm's ADV based on the total
number of provide shares executed in the Exchange's Matching System
for each full trading day in a month, divided by the number of full
trading days.
\9\ The Exchange's proposal to make the top tier of the credit
available to firms that execute at least a certain number of shares
in Tape A and C securities similarly is designed to create an
incentive for firms to send orders in these securities to the
Exchange.
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Another proposed change to the Fee Schedule would modify the fees
for the receipt of orders through the CHX Connect network.\10\ Under
the current Fee Schedule, the Exchange charges a $5,000 per month fee
to any participant firm that receives orders through the CHX Connect
network. The Exchange proposes to increase this fee to $10,000/month
and charge an additional fee of $.0004/share for executions that are
processed by the network. These changes are designed to help cover the
costs of providing the network. The Exchange, however, proposes to
reduce the base fee from $10,000 per month to as low as $5,000 per
month, by applying a credit of $.0004 for each provide share executed
in the Exchange's Matching System.\11\ This credit would create an
incentive for users of the CHX Connect network to send orders to the
Exchange's Matching System.
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\10\ The Exchange's CHX Connect system is a communications
service that allows its participants to route orders to any
destination connected to the CHX's network, including (1) the CHX
Matching System; (2) CHX institutional brokers; (3) market makers or
other broker-dealers connected to the CHX's network, which provide
order handling and execution services in the over-the-counter
market; and (4) other destinations (including order-routing vendors)
that are connected to the CHX's network. See Securities Exchange Act
Release No. 54846 (November 30, 2006), 71 FR 71003 (December 7,
2006) (SR-CHX-2006-34). Fees are charged under the Fee Schedule to
participants that receive orders through this service.
\11\ No credits will be carried over from month to month.
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The last proposed change to the Fee Schedule would add new fees in
connection with the processing of certain away-market trades that are
sent to clearing through the Exchange's facilities. Under the
Exchange's existing Fee Schedule, the Exchange charges a $.0015/share
fee for the clearing-related processing of away-market trades in
securities that are not listed or traded pursuant to unlisted trading
privileges on the Exchange. The Exchange proposes to increase this fee
to $.0035/share for clearing reports in Tape A and B securities and to
$.0025/share for clearing reports in Tape C securities up to a maximum
of $100 per side.\12\ The Exchange also proposes to apply the fees to
trades in all securities, instead of limiting the fee to securities
that are not listed or traded on the Exchange, to better allocate the
Exchange's costs across all of these clearing-only reports.\13\ These
fee changes are designed to help offset the Exchange's costs of
processing these transactions for clearing.
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\12\ These fees would be assessed only on away-market trades
that are reported to the tape, but not to clearing, in another
market. The fees would be charged for each report that is submitted
to clearing through the Exchange's systems.
\13\ With the introduction of the Exchange's electronic book and
its move to its new trading model, the Exchange has begun trading
more securities pursuant to unlisted trading privileges, leaving
fewer issues that are neither listed nor traded on the Exchange. The
Exchange believes it is no longer appropriate to assess these
processing fees only on a subset of the reports that are sent to
clearing.
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All of the proposed fee changes, except the change to the CHX
Connect fees, would take effect November 1, 2007. The proposed changes
to the CHX Connect fees would take effect December 1, 2007.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b)(4) of the
Act \14\ in that it provides for the equitable allocation of reasonable
dues, fees and other charges among its members.
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\14\ 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 changes will
impose any 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
The foregoing proposed rule change is filed pursuant to Section
19(b)(3)(A)(ii) of the Act \15\ and subparagraph (f)(2) of Rule 19b-4
thereunder \16\ because it establishes or changes a due, fee, or other
charge applicable only to a member imposed by a self-regulatory
organization. Accordingly, the proposal is effective upon Commission
receipt of the filing. At any time within 60 days of the filing of the
proposed rule change, the Commission may summarily abrogate 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.\17\
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\15\ 15 U.S.C. 78s(b)(3)(A)(ii).
\16\ 17 CFR 240.19b-4(f)(2).
\17\ For purposes of calculating the 60-day period within which
the Commission may summarily abrogate the proposed rule change under
Section 19(b)(3)(C) of the Act, the Commission considers the period
to commence on November 19, 2007, the date on which CHX filed
Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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
[[Page 67618]]
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-CHX-2007-26 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-CHX-2007-26. 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 Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of 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-2007-26 and should be
submitted on or before December 20, 2007.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E7-23170 Filed 11-28-07; 8:45 am]
BILLING CODE 8011-01-P