Document ID: SEC-2016-1106-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2016-06-28T04:00Z

[Federal Register Volume 81, Number 124 (Tuesday, June 28, 2016)]
[Notices]
[Pages 42022-42024]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15176]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78126; File No. SR-CHX-2016-10]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Institutional Broker Fee Cap and Credit

June 22, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on June 16, 2016, the Chicago Stock Exchange, Inc. (``CHX'' or the 
``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. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CHX proposes to amend its Schedule of Fees and Assessments (the 
``Fee Schedule'') to modify certain fees and

[[Page 42023]]

credits applicable to CHX Institutional Brokers. The text of this 
proposed rule change is available on the Exchange's Web site at 
(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 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 Changes

1. Purpose
    The Exchange proposes to amend the Fee Schedule to modify certain 
fees and credits applicable to CHX Institutional Brokers 
(``Institutional Brokers'').\3\ Specifically, the Exchange proposes to 
amend Sections E.3(a) and E.7 to decrease the respective fee caps \4\ 
from $100 each to $75 each and to amend Section F.2 to decrease the 
Transaction Fee Credit and Clearing Submission Fee Credit (collectively 
``Institutional Broker credits'') from 10% each to 5% each.\5\
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    \3\ See CHX Article 1, Rule 1(n) defining ``Institutional 
Broker''; see also generally CHX Article 17.
    \4\ The Exchange recently amended the process through which the 
Sections E.3(a) and E.7 fee caps are applied. See Exchange Act 
Release No. 77785 (May 9, 2016), 81 FR 29936 (May 13, 2016) (SR-CHX-
2016-06).
    \5\ Section E.3(a) and E.7 fees are virtually identical as both 
apply to executions effected through Institutional Brokers that are 
cleared through the Exchange's clearing systems, except that Section 
E.3(a) applies to executions within the Matching System, whereas 
Section E.7 applies to qualified away executions pursuant to CHX 
Article 21, Rule 6(a).
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Sections E.3(a) and E.7
    Current Section E.3(a) assesses a fee of $0.0030 per share, capped 
at $100 per Clearing Side,\6\ for an execution within the Matching 
System in a security priced at $1.00 per share or more that results 
from an agency order submitted by an Institutional Broker. Current 
Section E.7 assesses a similar fee of $0.0030 per share, capped at $100 
per Clearing Side, for an away execution in a security priced at $1.00 
per share or more that is cleared through the Exchange's clearing 
systems by an Institutional Broker.\7\
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    \6\ Section E.3(a)(3) of the Fee Schedule defines ``Clearing 
Side,'' in pertinent part, as the buy or sell side of a clearing 
submission that is relate to a Section E.3(a) or Section E.7 
execution.
    \7\ See supra note 5.
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    The Exchange now proposes to decrease the Sections E.3(a) and E.7 
caps from $100 each to $75 each. The Exchange believes that the [sic] 
reducing Sections E.3(a) and E.7 caps would further incentivize market 
participants to utilize Institutional Brokers to submit orders to the 
Matching System.
Section F.2
    Current Section F.2 provides for Institutional Broker credits and 
generally states that the total monthly fees owed by an Institutional 
Broker to the Exchange will be reduced (and Institutional Brokers will 
be paid for any unused credits) by the application of a Transaction Fee 
Credit and a Clearing Submission Fee Credit. Specifically, a Clearing 
Broker \8\ receives a ``Transaction Fee Credit'' equal to 10% of the 
transaction fees received by the Exchange for agency trades executed 
through the Institutional Broker (i.e., Section E.3(a) fees) for the 
portion(s) of the transaction handled by the Clearing Broker. 
Similarly, a Clearing Broker receives a ``Clearing Submission Fee 
Credit'' equal to 10% of the Clearing Submission Fees received by the 
Exchange pursuant to Section E.7 of the Fee Schedule for the portion(s) 
of the transaction handled by the Clearing Broker. Also, only 
Institutional Brokers which are members of the Financial Industry 
Regulatory Authority, Inc. are eligible for the Clearing Submission Fee 
Credit.
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    \8\ Section F.2 of the Fee Schedule defines ``Clearing Broker'' 
as the Exchange-registered Institutional Broker that did not execute 
the trade, but acted as the broker for the ultimate Clearing 
Participant. The Exchange notes that the Institutional Broker that 
executed the trade may also be a Clearing Broker for the purposes of 
Section F.2 if the Institutional Broker acted as the broker for one 
or more of the Clearing Participants allocated positions to the 
trade.
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    The Exchange now proposes to decrease both Institutional Broker 
credits from 10% each to 5% each so as to help offset lost revenue that 
may result from the proposed fee cap decreases. The Exchange also 
proposes to eliminate the phrase ``per side'' under the first sentence 
of the current definition of ``Clearing Submission Fee Credit'' as the 
definition already provides that the Clearing Submission Fee Credit is 
paid to a Clearing Broker for the portion of the transaction handled by 
the Clearing Broker. The Exchange believes that the current reference 
to ``per side'' is duplicative and non-substantive.
Operative Date
    The proposed rule change is effective upon filing, but will be 
operative on July 1, 2016.
 2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \9\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \10\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and other persons using its facilities. 
Specifically, Sections E.3(a) and E.7 fees and respective fee caps will 
continue to be equitably allocated among all Clearing Participants. 
Also, the Section F.2 Institutional Broker credits will continue to be 
equitably allocated among all Clearing Brokers based on attributed 
activity in qualified executions.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
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    Moreover, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(1) of the Act \11\ in particular in that 
the proposed deletion of the words ``per side'' under the definition of 
``Clearing Submission Fee Credit'' clarifies the applicability of the 
credit, which would further enable the Exchange to be so organized as 
to have the capacity to be able to carry out the purposes of the Act 
and to comply, and to enforce compliance by its Participants and 
persons associated with its Participants, with the provisions of the 
Act, the rules and regulations thereunder, and the rules of the 
Exchange.
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    \11\ 15 U.S.C. 78f(b)(1).
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    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues. In such an environment, the Exchange must continually 
review, and consider adjusting, its fees and credits to remain 
competitive with other exchanges. For the reasons described above, the 
Exchange believes that the proposed decreases in the Sections E.3(a) 
and E.7 fee caps and the Institutional Broker credits reflects this 
competitive environment.

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

[[Page 42024]]

of the purposes of the Act. The Exchange operates in a highly 
competitive market in which market participants can readily direct 
order flow to competing venues if they deem fee levels set by the 
Exchange to be excessive. The Exchange believes that the proposed rule 
change will further encourage market participants to submit orders to 
the Exchange through Institutional Brokers, which will enhance 
competition in the national market system.

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

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A)(ii) of the Act \12\ and subparagraph(f)(2) of Rule 
19b-4 thereunder \13\ because it establishes or changes a due, fee or 
other charge imposed by the Exchange.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
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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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or 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 email to rule-comments@sec.gov. Please include 
File Number SR-CHX-2016-10 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CHX-2016-10. This file 
number should be included on the subject line if email 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 
10:00 a.m. and 3:00 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 Number SR-CHX-2016-10 and should be 
submitted on or before July 19, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-15176 Filed 6-27-16; 8:45 am]
 BILLING CODE 8011-01-P