Document ID: SEC-2006-0980-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Stock Exchange, Inc.
Posted Date: 2006-08-01T04:00Z

[Federal Register: August 1, 2006 (Volume 71, Number 147)]
[Notices]               
[Page 43547-43548]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01au06-99]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54213; File No. SR-CHX-2006-22]

 
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Order Granting Accelerated Approval of a Proposed Rule Change and 
Amendment Nos. 1 and 2 Thereto To Amend the CHX Holdings, Inc. 
Certificate of Incorporation

July 26, 2006.

I. Introduction

    On June 22, 2006, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange''), on behalf of its parent company, CHX Holdings, Inc. 
(``CHX Holdings''), 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 the CHX Holdings Certificate of 
Incorporation (``Charter'') to: (1) Make a change in the ownership 
limitations applicable to CHX participants and other persons or 
entities; and (2) increase the number of shares of common stock that 
CHX Holdings is authorized to issue. On June 30, 2006, the Exchange 
filed Amendment No. 1 to the proposed rule change.\3\ The proposed rule 
change, as amended by Amendment No. 1, was published for comment in the 
Federal Register on July 10, 2006 for a 15-day comment period.\4\ The 
Commission received no comments on the proposal. On July 21, 2006, the 
Exchange filed Amendment No. 2 to the proposed rule change.\5\ This 
order grants accelerated approval of the proposed rule change, as 
amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange made technical changes to 
correct the marking of the proposed rule text.
    \4\ See Securities Exchange Act Release No. 54090 (July 10, 
2006), 71 FR 38915 (``Notice''). The 15-day comment period ended on 
July 25, 2006.
    \5\ In Amendment No. 2, the Exchange confirmed that the 
stockholders of CHX Holdings had approved the proposed changes to 
the CHX Holdings Charter at a meeting held on July 19, 2006. As 
stated in the Notice, stockholder approval of the proposed changes 
was required before they could become effective. Amendment No. 2 was 
a technical amendment and, therefore, not subject to notice and 
comment.
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II. Description of the Proposal

    The CHX Holdings Charter currently imposes ownership limitations 
which prohibit: (i) Any person, either alone or together with its 
related persons, from owning, directly or indirectly, shares 
constituting more than 40% of any class

[[Page 43548]]

of CHX Holdings capital stock; and (ii) any person that holds a CHX 
trading permit, either alone or together with its related persons (an 
``Exchange Participant''), from owning, directly or indirectly, shares 
constituting more than 20% of any class of CHX Holdings capital stock. 
The Exchange proposes to modify these ownership limitations so that 
they refer to shares of stock of CHX Holdings representing in the 
aggregate more than 20% or 40% of ``the then outstanding votes entitled 
to be cast on any matter,'' rather than to the shares of each class of 
stock that a person might own. The Exchange also proposes to increase 
the number of shares of common stock that can by issued by CHX Holdings 
from 750,000 to 900,000. These proposed changes to the CHX Holdings 
Charter were filed in connection with a series of transactions in which 
four firms will invest in CHX Holdings in an exchange for minority 
stakes in the company.

III. Discussion

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\6\ 
In particular, the Commission finds that the proposal is consistent 
with Section 6(b)(1) of the Act,\7\ which requires a national 
securities exchange be so organized and have the capacity to be able to 
carry out the purposes of the Act and to enforce compliance by its 
members and persons associated with its members with the provisions of 
the Act, the rules or regulations thereunder, and the rules of the 
exchange. The Commission also finds the proposal to be consistent with 
Section 6(b)(5) of the Act,\8\ which requires, among other things, that 
the rules of a national securities exchange be designed to promote just 
and equitable principles of trade, 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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    \6\ 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).
    \7\ 15 U.S.C. 78f(b)(1).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that the Exchange proposes to retain the 
current 20% and 40% ownership limitations, as applicable, in the CHX 
Holdings Charter, and to make only minor modifications to the ownership 
limitation provisions to refer to ``the then outstanding votes entitled 
to be cast on any matter,'' rather than to the shares of each class of 
stock that a person might own. The Commission believes that these 
proposed modifications are reasonable and that they preserve the 
adequacy of the ownership limitations to prevent a person's (and, 
specifically, an Exchange Participant's) interest from becoming so 
large as to cast doubt on whether the Exchange can fairly and 
objectively exercise its self-regulatory responsibilities. The 
Exchange's additional proposal to increase the number of shares of 
common stock that can be issued by CHX Holdings is designed, among 
other things, to give CHX Holdings the ability to seek additional 
investors and to have additional shares available should the company 
seek to establish an equity compensation plan. The Commission believes 
this increase in authorized common stock is reasonable and consistent 
with the Act.
    The Commission finds good cause for approving the proposed rule 
change, as amended, prior to the thirtieth day after publishing notice 
thereof in the Federal Register. The CHX has requested that the 
Commission approve the proposal on an accelerated basis upon the 
Exchange's filing of the amendment stating that the shareholders of CHX 
Holdings had approved the proposed changes to the Charter. The 
Commission notes that the new language in the ownership limitation 
provisions proposed by CHX Holdings is nearly identical to language 
included in the recently approved Amended and Restated Certificate of 
Incorporation of NYSE Group, Inc.\9\ and raises no new regulatory 
issues. The Commission further notes that accelerated approval of the 
proposed changes will allow the transactions between CHX Holdings and 
the four investors to proceed without unnecessary delay. Accordingly, 
the Commission finds good cause, consistent with Section 19(b)(2) of 
the Act,\10\ to approve the proposal, as amended, on an accelerated 
basis.
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    \9\ See Article V, Section 2 of the Amended and Restated 
Certificate of Incorporation of NYSE Group, Inc., approved by the 
Commission in Securities Exchange Act Release No. 53382 (February 
27, 2006), 71 FR 11251 (March 6, 2006) (order approving NYSE-2005-
77).
    \10\ 15 U.S.C. 78s(b)(2).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-CHX-2006-22), as amended, is 
approved.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E6-12321 Filed 7-31-06; 8:45 am]

BILLING CODE 8010-01-P