Document ID: SEC-2008-0512-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2008-04-04T04:00Z

[Federal Register: April 4, 2008 (Volume 73, Number 66)]
[Notices]               
[Page 18598-18599]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04ap08-121]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57587; File No. SR-CHX-2007-21]

 
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Order Granting Approval of Proposed Rule Change, as Modified by 
Amendment No. 1, To Amend Rules Relating to Registration Requirements

 March 31, 2008.

I. Introduction

    On October 9, 2007, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange''), filed with the Securities and Exchange Commission 
(``Commission'') pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend rules relating to registration 
requirements. On February 14, 2008, CHX filed Amendment No. 1 to the 
proposed rule change. The proposed rule change, as amended by Amendment 
No. 1, was published for comment in the Federal Register on February 
28, 2008.\3\ The Commission received no comments on the proposal. This 
order approves the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(l)
    \2\ 17 CFR 240.19B-4.
    \3\ See Securities Exchange Act Release No. 57363 (February 20, 
2008), 73 FR 10846 (February 28, 2008).
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II. Description of the Proposal

    The Financial Industry Regulatory Authority, Inc.'s (``FINRA'') Web 
Central Registration Depository (``Web CRD'') system is a centralized, 
web-based system used by securities exchanges and broker-dealers across 
the country to track registration and qualification information about 
firms and the individuals who work for those firms. CHX entered into an 
agreement with FINRA to allow the Exchange's participants to use Web 
CRD to register certain of its associated persons. Therefore, the 
Exchange proposes to amend its registration rules relating to 
registration requirements and to adopt related fees and to delete an 
outdated provision in its rules.
    First, the Exchange proposes to require Exchange participants to 
use Web CRD to register their associated persons who are required to 
register with the Exchange under CHX rules.\4\ Similarly, the Exchange 
also seeks to require participants to submit a Form U-5 to the Web CRD 
following the termination of the associated person.\5\
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    \4\ See proposed Article 6, Rule 2, Interpretation and Policy 
.01.
    \5\ See proposed Article 6, Rule 2, Interpretation and Policy 
.02.
    The Exchange plans to allow its participants to transition to 
the use of the Web CRD system over the course of a six to nine-month 
period. At the end of this period, CHX participants would be 
required to use Web CRD for submitting any registration materials 
required by CHX rules.
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    Second, the Exchange proposes that it be allowed to direct its 
participants to submit fingerprint cards to the Exchange or to FINRA 
for processing during the registration process.\6\ Current CHX rules 
require participants to submit fingerprints to the Exchange. The 
Exchange seeks flexibility so that it could determine, from time to 
time, which fingerprint processing method would be most efficient for 
the Exchange and for its participants.
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    \6\ See proposed Article 6, Rule 10, Interpretation and Policy 
.01.
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    Because FINRA would assess charges to CHX participants for using 
the Web CRD system and for processing any fingerprints that are 
submitted, the Exchange also is amending its Fee Schedule to include 
applicable registration, processing and termination fees, as well as 
various fingerprint charges.\7\
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    \7\ 7 These charges include an $85 registration fee; a $95 
disclosure processing fee; a $30 annual processing fee; and 
termination fees of $40 and $80. Fingerprint processing fees would 
be $30.25 per card for an initial submission; $13 per card for a 
second submission; and $30.25 per card for a third submission. These 
fees reflect the charges assessed by FINRA for these services; CHX 
would not be charging any additional fees of its own.
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    Finally, CHX proposes to delete Interpretation and Policy .03 of 
Article 6, Rule 2 that requires firms to notify CHX of the termination 
of any non-registered, associated person's employment. CHX believes 
that this requirement has become somewhat obsolete with the elimination 
of its physical trading floor because the requirement had been largely 
focused on the employment status of clerks working on the Exchange's 
trading floor.\8\
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    \8\ Moreover, CHX regularly receives an updated list of a firm's 
associated persons when it conducts its annual examinations.
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III. Discussion and Commission Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\9\ In particular, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act,\10\ which, among 
other things, requires that the rules of a national securities exchange 
be designed to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating 
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.
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    \9\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that Exchange's proposal to require its 
participant firms to use Web CRD system to register certain associated 
persons and to submit a Form U-5 following the termination of the 
associated person would eliminate the need for manual processing 
currently performed by Exchange staff. Significantly, it would also 
allow for the

[[Page 18599]]

compilation of information related to the registration of associated 
persons in one central repository for access by regulators and broker-
dealers, and could allow the Exchange's regulatory group, as well as 
the firms themselves, to better determine whether a registrant has met 
applicable continuing education requirements. The Commission believes 
this should increase regulatory efficiency and capabilities without 
imposing an undue burden on participants.
    The Commission also believes that it is reasonable to provide the 
Exchange with the flexibility to determine whether it, or FINRA, would 
be best suited to process fingerprint cards, while participants would 
continue to have the obligation to submit fingerprints.
    Furthermore, the Commission believes that it is appropriate for the 
Exchange to amend its Fee Schedule to reflect fees that FINRA would 
charge for services rendered in connection with the use of Web CRD and 
the fingerprinting services set forth in the proposal. The Commission 
notes that CHX would not be charging any additional fees of its own.
    Finally, the Commission agrees that it is appropriate for CHX to 
delete Interpretation and Policy .03 of Article 6, Rule 2 relating to 
the firms' requirement to notify the Exchange of the termination of any 
non-registered, associated person's employment, since it has become 
obsolete given CHX's new trading model and since CHX regularly receives 
an updated list of a firm's associated persons when it conducts its 
annual examinations.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-CHX-2007-21), as amended, 
be, and hereby is, approved.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-7029 Filed 4-3-08; 8:45 am]

BILLING CODE 8011-01-P