Document ID: SEC-2014-1684-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2014-10-06T04:00Z

[Federal Register Volume 79, Number 193 (Monday, October 6, 2014)]
[Notices]
[Pages 60205-60207]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-23705]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73268; File No. SR-CHX-2014-17]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Adopt and Amend Fees for the CHX Routing Services

September 30, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on September 19, 2014, 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 self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 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 adopt and amend fees for the CHX Routing Services. 
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
    On September 8, 2014, the Exchange filed SR-CHX-2014-15 pursuant to 
Section 19(b)(3)(A) of the Act \4\ and Rule 19b-4 thereunder,\5\ to, 
inter alia, adopt the CHX Routing Services.\6\ The filing was 
immediately effective upon filing, but the proposed rule change will be 
implemented upon two weeks' notice from the Exchange to its 
Participants.
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    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ Id.
    \6\ See CHX Article 19.
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    The Exchange now proposes (1) to amend Section E.6 of the Fee 
Schedule to adopt fees for the CHX Routing Services and (2) to amend 
Section E.8(c) of the Fee Schedule to clarify that the Average Daily 
Volume (``ADV'') exemption from the Order Cancellation Fee is based on 
all executions resulting from single-sided orders submitted to the CHX 
Matching System (``Matching System''), which includes executions within 
the Matching System and at away markets pursuant to the CHX Routing 
Services.
Proposed CHX Routing Services Fees
    In sum, the CHX Routing Services will permit Routable Orders \7\ 
submitted to the Matching System to be routed away from the Matching 
System if a Routing Event \8\ is triggered. Orders that are not 
Routable Orders and orders that have either been cancelled from or have 
not been submitted to the Matching System are not eligible for the CHX 
Routing Services.
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    \7\ CHX Article 1, Rule 1(oo) defines ``Routable Order'' as 
``any incoming Limit order, as defined under Article 1, Rule 
2(a)(1), of any size, not marked by any order modifiers or related 
terms listed under Article 1, Rule 2 that prohibit the routing of 
the order to another Trading Center.''
    \8\ See CHX Article 19, Rule 3(a).
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    Proposed Section E.6 of the Fee Schedule, entitled ``CHX Routing 
Services Fees,'' provides that executions that result from orders that 
have been routed away from the Matching System pursuant to the CHX 
Routing Services shall be subject to the following fees:

----------------------------------------------------------------------------------------------------------------
Order size as submitted to the matching
                 system                           Security price                        Routing fee
----------------------------------------------------------------------------------------------------------------
Odd Lots...............................  All Prices.....................  $0.0040/share.
                                                                          <$1.00/share.
Round and Mixed Lots...................  >=$1.00/share..................  $0.0030/share.
                                                                          0.30% of trade value.
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    The proposed CHX Routing Fee for Odd Lots is identical to current 
Section E.4 of the Fee Schedule, which provides that $0.0040/share will 
be charged for all executions resulting from Odd Lot orders \9\ 
submitted to the Matching System. Also, the proposed CHX Routing Fees 
for Round Lot \10\ and Mixed Lot \11\ orders are identical to current 
Section E.1 of the Fee Schedule, which provides that $0.0030/share will 
be charged for any executions resulting from Round Lot or Mixed Lot 
orders where the execution price was at or greater than $1.00/share and 
0.30% of

[[Page 60206]]

the trade value where the execution price was below $1.00/share.
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    \9\ See CHX Article 1, Rule 2(f)(2).
    \10\ See CHX Article 1, Rule 2(f)(3).
    \11\ See CHX Article 1, Rule 2(f)(1).
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Amended ADV Exemption to the Order Cancellation Fee
    Under SR-CHX-2012-15,\12\ the Exchange adopted the current formula-
based Order Cancellation Fee detailed under Section E.8 of the Fee 
Schedule, amended under SR-CHX-2013-11,\13\ SR-CHX-2013-12,\14\ and SR-
CHX-2014-01,\15\ which assesses a daily cancellation fee per account 
symbol \16\ and security, if the order cancellation ratio exceeds a 
designated threshold, which is billed monthly. However, current Section 
E.8(c) provides an ADV exemption from the Order Cancellation Fees per 
account symbol per month if the ADV attributable to an account symbol 
for a given month is at least 100,000 shares from single-sided orders 
executed at or greater than $1.00/share.
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    \12\ See Securities Exchange Act Release No. 68219 (November 13, 
2012), 77 FR 69673 (November 20, 2012) (SR-CHX-2012-15) (``Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Its Order Cancellation Fee'').
    \13\ See Securities Exchange Act Release No. 69701 (June 5, 
2013), 78 FR 35082 (June 11, 2013) (SR-CHX-2013-11) (``Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
the Order Cancellation Fee'').
    \14\ See Securities Exchange Act Release No. 69903 (July 1, 
2013), 78 FR 40788 (July 8, 2013) (SR-CHX-2013-12) (``Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
the Single-Sided Order Fees and Credits and the Order Cancellation 
Fee'').
    \15\ See Securities Exchange Act Release No. 71404 (January 27, 
2014), 79 FR 5476 (January 31, 2014) (SR-CHX-2014-01) (``Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
the Order Cancellation Fee'').
    \16\ An account symbol identifies a specific CHX Trading 
Account. CHX Article 1, Rule 1(ll) defines ``Trading Account,'' in 
pertinent part, as ``an account under a Trading Permit, identified 
by a unique CHX account symbol, from which orders are sent to the 
Exchange's Trading Facilities.''
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    Given that the Exchange does not currently route orders away from 
the Matching System, the only executions that are currently included in 
the ADV calculation are single-sided order executions within the 
Matching System. However, in light of the CHX Routing Services, the 
Exchange now proposes to adopt language that clarifies that eligible 
executions (i.e., executions that are included in the ADV calculation) 
shall only include executions resulting from single-sided orders 
submitted to the Matching System, which will include executions within 
the Matching System and executions at away markets resulting from 
orders routed away from the Matching System pursuant to the CHX Routing 
Services. Executions that result from single-sided orders that were 
never submitted to the Matching System or executions resulting from 
orders routed to away markets outside of the CHX Routing Services will 
continue to not be included in the ADV calculation since such 
executions are never attributed to a Trading Account. As such, the 
Exchange also proposes to adopt language that states that eligible 
executions shall not include away executions effected outside of the 
CHX Routing Services.
    The Exchange notes that current Section E.8(c) already contemplates 
the inclusion of away executions pursuant to the CHX Routing Services 
because such away executions will only result from Routable Orders 
submitted to the Matching System, which will always be attributed to a 
Trading Account. As such, the proposed amendment merely clarifies the 
scope of the current ADV exemption. The Exchange does not propose to 
otherwise amend the operation of the Order Cancellation Fee or the ADV 
exemption.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \17\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \18\ 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.
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    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed CHX Routing Services fees 
equitably allocate fees among Participants in a non-discriminatory 
manner as the fee is assessed according to a Participant's use of the 
CHX Routing Services. Moreover, the CHX Routing Services Fee is 
reasonable in light of the fact that the proposed fees are identical to 
the current liquidity removing fee for single-sided order executions 
within the Matching System detailed under Section E of the Fee Schedule 
and is similar to the routing fees of other exchanges, such as BATS Y-
Exchange (``BYX'').\19\
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    \19\ See BYX Fee Schedule. The BYX Fee Schedule provides 
different fees depending on, inter alia, the type of routing 
destination and/or routing option selected. The proposed CHX Routing 
Fees are most analogous with the BYX routing fees of $0.0029/share 
or $0.0033/share, which are assessed for executions for routed 
orders at venues other than ``dark liquidity'' venues. As currently 
contemplated, the CHX Routing Services will not route orders to dark 
liquidity venues.
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    The Exchange also believes that the proposed amended ADV exemption 
from the Order Cancellation Fee described herein will promote the 
equitable allocation of the Order Cancellation Fee as it will continue 
to fairly allocate costs among Participants according to their 
respective trading activity by clarifying that executions resulting 
from the CHX Routing Services will be included in the ADV calculation. 
Similar to executions within the Matching System, a Participant that 
submits Routable Orders that are executed at away market(s) pursuant to 
the CHX Routing Services will provide additional revenue to the 
Exchange in the form of the proposed CHX Routing Services fees, which 
may be used to recoup some of the costs of administering and processing 
cancelled orders. Thus, the Exchange believes that Participants that 
meet the ADV exemption through executions within the Matching System 
and/or at away markets pursuant to the CHX Routing Services should not 
be billed Order Cancellation Fees assessed to applicable Trading 
Accounts for that month.
    In addition, these changes to the Fee Schedule would equitably 
allocate reasonable fees among Participants in a non-discriminatory 
manner by assessing cancellation fees on all Trading Accounts that 
exceed a fixed Cancellation Ratio and by waiving cancellation fees on 
all Trading Accounts that satisfy the requirements of the amended ADV 
exemption. Since all Participants are subject to the Order Cancellation 
Fee and given that the amended ADV exemption and the CHX Routing 
Services will be available to all Participants, the Exchange submits 
that the amended Order Cancellation Fee is non-discriminatory.

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 of the purposes of the Act. The Exchange does not 
believe that the proposed CHX Routing Services fee and the proposed 
amended ADV exemption from the Order Cancellation Fee will burden 
competition, but instead, enhance competition, as it is intended to 
increase the competitiveness of, and draw additional volume to, the 
Exchange. 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 
proposed CHX Routing Services fee is similar to that of other 
exchanges, such as BYX.\20\ Thus, the proposed rule change is a 
competitive proposal that is intended to add additional liquidity and 
order executions to the Exchange, which will,

[[Page 60207]]

in turn, benefit the Exchange and all Participants.
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    \20\ Id.
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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 Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A)(ii) of the Act \21\ and subparagraph(f)(2) of Rule 
19b-4 thereunder \22\ because it establishes or changes a due, fee or 
other charge imposed by the Exchange.
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    \21\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \22\ 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-2014-17 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-2014-17. 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 the 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-2014-17 and should be submitted on 
or before October 27, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-23705 Filed 10-3-14; 8:45 am]
BILLING CODE 8011-01-P