Document ID: SEC-2009-0960-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Reallocation of Credits Paid to Institutional Brokers
Posted Date: 2009-07-14T04:00Z

[Federal Register Volume 74, Number 133 (Tuesday, July 14, 2009)]
[Notices]
[Pages 34062-34063]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-16582]

[[Page 34062]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60259; File No. SR-CHX-2009-08]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Reallocation of Credits Paid to Institutional Brokers

 July 7, 2009.
    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 June 29, 2009, 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 prepared by the Exchange. CHX 
filed the proposal pursuant to Section 19(b)(3)(A) 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 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 
Assessments (the ``Fee Schedule''), effective July 1, 2009, to change 
the manner in which CHX-registered Institutional Brokers are paid a 
credit based upon (1) Transaction Fees generated by Agency orders 
executed by them on the Exchange's trading facilities and (2) Trade 
Processing Fees generated by transactions executed on another trading 
center, but submitted to clearing via the Exchange's systems. The text 
of this proposed rule change is available on the Exchange's Web site at 
http://www.chx.com/rules/proposed_rules.htm and in the Commission's 
Public Reference Room, 100 F Street, NE., Washington, DC 20549.

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, 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 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
    Through this filing, the Exchange would amend its Fee Schedule, 
effective July 1, 2009, to change the manner in which CHX-registered 
Institutional Brokers are paid credits based on both Transaction Fees 
generated by Agency orders executed by them on the Exchange's trading 
facilities and on Trade Processing Fees generated by orders executed on 
away markets, but submitted to clearing by them via the Exchange's 
systems.
    CHX-registered Institutional Brokers are paid a Credit which is 
based upon a percentage of the fees derived from transactions handled 
by them for other Exchange Participants.\5\ Pursuant to this filing, 
the Fee Schedule would be amended to reduce the overall Credit paid to 
Institutional Brokers (``Credit'') from 18% to 16% of the Fees charged 
to Participants in transactions in which the Institutional Brokers are 
involved in either the execution or clearance thereof. The amended Fee 
Schedule would also alter the manner in which such credits are 
distributed to Institutional Brokers involved in such transactions. 
Currently, the Institutional Broker representing the ultimate clearing 
participant in transactions executed on the Exchange receives the full 
Credit. For transactions executed on another trading center and 
reported to clearing via the Exchange's systems, however, the Credit is 
divided between the Originating Broker (defined as the Institutional 
Broker which executed the trade) and the Broker of Credit (defined as 
the Institutional Broker that acted as the broker for the ultimate 
Exchange clearing participant).
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    \5\ These fees are set forth in Sections E.3. (Agency executions 
through an institutional broker) and E.7. (Trade Processing Fees) of 
the Fee Schedule.
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    Under the proposed changes, the Fee Schedule would be modified to 
harmonize the allocation of Credits paid to Institutional Brokers 
derived from Transaction Fees with those paid based upon Trade 
Processing Fees. In each case, the Credits would be divided between the 
Originating Broker and the Broker of Credit and would be paid at the 
same rates.\6\ Pursuant to the revised Fee Schedule, the Broker of 
Credit would receive three-quarters (3/4) of the total Credit paid to 
Institutional Brokers in the relevant transactions, or 12%. The 
Originating Broker would receive the remaining 4% of the Credit for the 
initial execution of the trade, whether on our trading facilities or in 
an away market. An Institutional Broker could act as both the 
Originating Broker and the Broker of Credit in any given transaction, 
in which case it would earn Credits in both capacities.
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    \6\ In order to accommodate this change, the definition of 
``Originating Broker'' would be modified to delete the reference to 
executions ``on an away market.''
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    The Exchange believes that the harmonization of the manner of 
payment and rates for Transaction Fee Credits with those for Trade 
Processing Fee Credits is sensible and will serve to eliminate 
potential confusion concerning the nature and amount of Credits paid in 
Institutional Broker-handled transactions. Moreover, the transactions 
handled by Institutional Brokers frequently are complicated and involve 
numerous counterparties. Originating Brokers typically retain 
additional clerical and operational staff to process and reconcile all 
of the terms of and parties to these transactions. The payment of a 
portion of the Credit to the Originating Broker recognizes the 
additional costs borne by them and the Exchange hopes that it will also 
incent Institutional Brokers to execute additional fee-generating 
orders.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \7\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \8\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among its members. The Exchange believes that the 
proposed changes to the allocation of Institutional Broker credits is 
fair and reasonable in that it provides for additional compensation to 
Originating Brokers in circumstances where they did not previously 
receive any portion of the Credit. While the overall amount of Credits 
is being reduced for transactions consummated on our trading 
facilities, this reduction is offset by an increase in the amount of 
Credits paid based upon away market trades.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4).

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[[Page 34063]]

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

    The foregoing proposed rule change is effective upon filing 
pursuant to Section 19(b)(3)(A)(ii) of the Act \9\ and Rule 19b-4(f)(2) 
thereunder.\10\ 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f)(2).
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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
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-CHX-2009-08 on the subject line.

Paper Comments

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

    All submissions should refer to File Number SR-CHX-2009-08. 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 Room, on official 
business days between the hours of 10 a.m. and 3 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 No. SR-CHX-2009-08 and should be submitted on or before August 4, 
2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
 [FR Doc. E9-16582 Filed 7-13-09; 8:45 am]
BILLING CODE 8010-01-P