Federal Register / Vol. 72, No. 10 / Wednesday, January 17, 2007 / Notices 2049 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(ii). 

4 17 CFR 240.19b–4(f)(2). 

5See Securities Exchange Act Release No. 54657 

(October 26, 2006), 71 FR 64590 (November 2, 2006) 

(SR–CHX–2006–29). 

6The specialist fixed fee is a long-standing fee 

that is allocated on a monthly basis among CHX 

specialist firms. It provides the CHX with a means 

of allocating certain expenses, relating to systems 

and infrastructure, that support the CHX specialist 

system. 

7To determine the amount of the fixed fee during 

each month of this transition period, the Exchange 

will calculate the aggregate fixed fees for the month 

based on the total number of issues traded by 

specialists as of the day before the Exchange begins 

to trade the first specialist-traded security in the 

new model. The Exchange then will only charge a 

specialist firm the fixed fees associated with the 

securities that it traded as specialist during each 

month, prorating the fee based on the date that an 

issue makes its transition to the Matching System 

for trading, as applicable. 

8The CHX has given considerable thought to 

establishing an implementation schedule that 

minimizes the risks associated with implementing 

significant new technology. Generally speaking, this 

schedule involves first migrating issues that 

customarily have lower trading volumes, followed 

by issues with higher trading volumes, so that 

technology staff can assess the impact of gradual 

increases in trading volumes and more readily 

identify problems. The CHX believes that this 

strategy is more prudent than a ‘‘hard cutover,’’

which would involve simultaneous migration of all 

issues to the new trading model technology. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55070; File No. SR–CHX–

2006–37] 

Self-Regulatory Organizations; 

Chicago Stock Exchange, Inc.; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change and 

Amendment No. 1 Thereto Relating to 

Participant Fees and Credits 

January 9, 2007. 

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 November 

21, 2006, 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 substantially prepared by the 

CHX. On December 21, 2006, the CHX 

filed Amendment No. 1 to the proposed 

rule change. The CHX has designated 

this proposal as one establishing or 

changing a member due, fee, or other 

charge imposed by the CHX pursuant to 

Section 19(b)(3)(A)(ii) 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, as amended, from interested 

persons. 

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 reduce 

specialist fixed fees that are applicable 

during the period when the CHX 

transitions to its new trading model. 

The text of this proposed rule change is 

available at the CHX, 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 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 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 

As part of the Exchange’s new trading 

model, the CHX is transitioning from a 

floor-based exchange, with a single 

specialist firm assigned to trade 

designated issues, to a fully-automated 

electronic facility, with issues eligible 

for trading by multiple market makers 

and other eligible CHX participants. 

This transition commenced during the 

week of October 23, 2006, and is 

expected to be completed by midJanuary. The CHX’s transition to its new 

trading model is structured on an issueby-issue basis. Once an issue is 

‘‘converted,’’ it is then eligible for 

trading in the CHX electronic matching 

engine and is no longer traded by a CHX 

specialist. 

In connection with this transition, the 

CHX previously submitted a series of 

comprehensive revisions to its Fee 

Schedule to address various aspects of 

the new trading model, including the 

transition away from a specialist 

system.5 The initial revision to the Fee 

Schedule provided that, with respect to 

the specialist fixed fee,6 during the 

transition period, such transitional fixed 

fees will continue to be charged on 

securities traded by specialists as the 

Exchange transitions to its new trading 

model, on a prorated basis.7 The 

proration provision was intended to 

eliminate the fixed fee as soon as an 

issue makes the transition to the new 

trading model and is no longer traded 

by the CHX specialist. 

After further consideration and 

additional dialogue with CHX 

participants, the Exchange believes that 

further refinement of this provision is 

appropriate. Specifically, the Exchange 

proposes to modify Section K of the Fee 

Schedule to provide for a monthly 

credit of $25,000 per specialist firm, to 

be applied against each firm’s monthly 

transitional fixed fee. The $25,000 

monthly credit would be applied against 

the first $25,000 in monthly specialist 

fixed fees otherwise due to the CHX 

from a participant firm. If the 

participant firm’s fixed fee liability is 

less than $25,000, the CHX would apply 

a credit equal to the amount of the fixed 

fee liability, but would not issue a 

refund to such participant firm for the 

remaining balance of the credit, nor 

would the CHX carry forward the 

balance of the credit for application to 

future fixed fee liabilities. 

For example, if a specialist firm’s 

monthly fixed fee liability was $32,000, 

the CHX would apply the $25,000 credit 

and the firm would be billed for the 

remaining balance of $7,000 in net fixed 

fees. If a specialist firm’s monthly fixed 

fee liability was $10,000, the CHX 

would apply a credit of $10,000, 

offsetting the entire liability, and the 

CHX would not bill the specialist firm 

for any fixed fees that month. The CHX 

would not issue a refund of $15,000 to 

the specialist firm on account of the 

unused portion of the available credit, 

and the unused portion would not be 

available to offset fixed fee liabilities in 

future months. 

The CHX believes that this credit, 

which was negotiated after substantial 

discussion with its specialist 

community, is warranted under the 

circumstances. The credit addresses the 

contention of certain specialists that 

specialist fixed fees should be 

eliminated more quickly, because legacy 

technology and other pre-new trading 

model systems (which are funded in 

part by the specialist fixed fee) are not 

as useful to them. More significantly, it 

permits the Exchange to roll out its new 

trading model on terms that the 

Exchange believes to be most prudent 

from a technology perspective,8 while 

reducing the costs that must continue to 

be borne by specialist firms as a result 

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2050 Federal Register / Vol. 72, No. 10 / Wednesday, January 17, 2007 / Notices 

9Certain issues have higher fixed fees relative to 

other issues. Accordingly, the new trading model 

rollout schedule has economic consequences for 

CHX specialist firms, because specialist fixed fees 

are eliminated entirely once an issue transitions to 

the CHX new trading model and is no longer traded 

by a specialist. Absent the credit described in this 

submission, therefore, a specialist firm likely would 

request immediate transition of issues with the 

highest fixed fees to the new trading model, 

whereas the CHX might prefer to delay transition 

of such issues until later in the overall new trading 

model implementation process, in order to better 

manage the overall implementation plan. 

10 15 U.S.C. 78f(b)(4). 

11 15 U.S.C. 78s(b)(3)(A). 

12 17 CFR 240.19b–4(f)(2). 

13For 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 December 21, 2006, the 

date on which the CHX filed Amendment No. 1. See 

15 U.S.C. 78s(b)(3)(C). 14 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(iii). 

4 17 CFR 240.19b–4(f)(6). 

5The Exchange has asked the Commission to 

waive the 30-day operative delay required by Rule 

19b–4(f)(6)(iii), 17 CFR 240.19b–4(f)(6)(iii). See 

discussion infra Section III. 

of the rollout schedule.9 Moreover, the 

proposed credit would provide 

specialist firms with a specified 

reduction in their fixed fees during the 

transition period, permitting them to 

budget accordingly. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b)(4) of the 

Act 10 in that it provides for the 

equitable allocation of reasonable dues, 

fees and other charges among its 

members. 

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. 

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 

Because the foregoing proposed rule 

change establishes or changes a member 

due, fee or other charge imposed by the 

Exchange, it has become effective 

pursuant to Section 19(b)(3)(A) of the 

Act 11 and subparagraph (f)(2) of Rule 

19b–4 thereunder.12 At any time within 

60 days of the filing of such 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.13

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 rulecomments@sec.gov. Please include File 

Number SR–CHX–2006–37 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–CHX–2006–37. 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. 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–2006–37 and should 

be submitted on or before February 7, 

2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–536 Filed 1–16–07; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55060; File No. SR–ISE–

2006–72] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Relating to Special Order Fees 

January 8, 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 December 

1, 2006, the International Securities 

Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’ or ‘‘SEC’’) 

the proposed rule change as described 

in Items I and II below, which Items 

have been substantially prepared by ISE. 

The Exchange filed the proposal as a 

‘‘non-controversial’’ proposed rule 

change pursuant to Section 

19(b)(3)(A)(iii) of the Act 3 and Rule 

19b–4(f)(6) thereunder,4 which renders 

it effective upon filing with the 

Commission.5 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 

The ISE is proposing to amend its 

Schedule of Fees to adopt a customer 

fee for special orders. The text of the 

proposed rule change is available at ISE, 

the Commission’s Public Reference 

Room, and http://www.iseoptions.com. 

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 

ISE included statements concerning the 

purpose of, and basis for, the proposed 

rule change and discussed any 

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