Document ID: SEC-2012-0009-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2012-01-04T05:00Z

[Federal Register Volume 77, Number 2 (Wednesday, January 4, 2012)]
[Notices]
[Pages 312-313]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33714]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66061; File No. SR-CHX-2011-34]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change Regarding Suspension of a 
Participant's Trading Privileges on the Exchange

December 28, 2011.
    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 December 16, 2011, the Chicago Stock Exchange, Inc. (``CHX'' 
or the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II 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 add Interpretation and Policy .01 to Article 13, 
Rule 2 (Emergency Suspension) regarding the suspension of a 
Participant's trading privileges on the Exchange. 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 regarding the proposal. 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 Change

1. Purpose
    The Exchange proposes to add Interpretation and Policy .01 to 
Article 13, Rule 2 (Emergency Suspension) thereunder (``Rule 2'') 
regarding the suspension of a Participant's trading privileges on the 
Exchange. Currently, this Rule authorizes the Exchange's Chief 
Regulatory Officer (``CRO'') to suspend a Participant's membership with 
the Exchange or place other limitations on its activities if various 
circumstances occur, such as insolvency, failure to perform its 
contracts or obligations, expulsion or suspension by another self-
regulatory organization or where it reasonably appears that the 
Participant is violating and will continue to violate any provision of 
the Rules of the Exchange or the federal securities laws (or rules 
promulgated thereunder). The Exchange proposes to permit any Officer of 
the Exchange designated by the CRO to suspend the trading privileges of 
a Participant on the Exchange's facilities pursuant to the provisions 
of Rule 2 if a Qualified Clearing Agency refuses to act to clear and 
settle the trades of that Participant. The CRO must approve any such 
suspensions within two (2) days of the action. If the Chief Regulatory 
Officer does not approve the action taken, the suspension shall be 
immediately lifted as of the time of his or her decision or after the 
expiration of two days, whichever is earlier. Suspensions pursuant to 
these provisions, including the appeal thereof, would otherwise be 
governed by the provisions of Article 13, Rule 2.
    The recent actions taken with respect to MF Global, Inc. (``MF 
Global'') illustrate the need for a limited expansion of the emergency 
suspension authority of Rule 2 in the situation where the Qualified 
Clearing Agency is considering whether to continue to act for a 
Participant in the clearance and settlement of trades.\3\ On October 
31, 2011, there were public news reports that MF Global was in 
financial difficulties and might be insolvent. On that day, NSCC stated 
that it would continue to honor the transactions of MF Global presented 
to it for clearance and settlement. After the close of trading that 
day, however, NSCC stated that it would cease to act for MF Global and 
the Exchange's CRO suspended the trading privileges of the firm 
pursuant to Article 13, Rule 2 effective November 1, 2011.\4\
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    \3\ Currently, there is only one Qualified Clearing Agency, the 
National Securities Clearing Corp. (``NSCC''), for cash equities 
securities.
    \4\ See CHX Market Regulation Department Information Memorandum 
MR-11-19 (Nov. 1, 2011), available on CHX public Web site, http://www.chx.com. See also NSCC Notice A7314, Re: MF Global, 
Inc. (Nov. 1, 2011), available on its public Web site at http://www.dtcc.com/downloads/legal/imp_notices/2011/nscc/a7314.pdf.

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[[Page 313]]

    While this situation was adequately addressed under the current 
rule structure, the Exchange is concerned that there may be situations 
in which the CRO may be unavailable to issue the suspension order if 
NSCC signals its intention to cease to act for a CHX Participant. This 
concern is particularly true if the Qualified Clearing Agency were to 
cease to act on an intraday basis.\5\ The Exchange therefore proposes 
that any Officer of the Exchange designated by the CRO may suspend the 
trading privileges on the Exchange of a Participant in the limited 
circumstance in which a Qualified Clearing Agency refuses to act to 
clear and settle the trades of that Participant. The proposal requires 
that the CRO approve this action within two (2) days. Any such 
suspensions of trading privileges would be otherwise governed by the 
provisions of Rule 2.
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    \5\ Historically, NSCC has normally ceased to act for one of its 
Participants only after the close of trading. The Exchange 
understands, however, that NSCC reserves the right to act on an 
intraday basis if necessary and appropriate.
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    The Exchange also proposes to eliminate a reference to the Chief 
Executive Officer in Section (c) of Rule 2 and replace it with a 
reference to the CRO regarding appeals of suspensions under Rule 2. 
Before it was amended in 2006, emergency suspensions were authorized by 
the Chief Executive Officer.\6\ The Exchange believes that the 
continued reference to the Chief Executive Officer in Rule 2(c) 
represents a simple oversight in the 2006 amendments and seeks to 
correct it as part of this proposal.
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    \6\ See Securities Exchange Act Release No. 54437 (Sept. 13, 
2006), 71 FR 55037 (Sept. 20, 2006) (SR-CHX-2005-06).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act in general,\7\ and furthers the objectives 
of Section 6(b)(5) in particular,\8\ in that it is designed to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transaction in 
securities, to remove impediments and perfect the mechanisms of a free 
and open market, and, in general, to protect investors and the public 
interest by allowing CHX to amend its rules to permit any Officer of 
the Exchange designated by the Chief Regulatory Officer to suspend the 
trading privileges of a Participant on the Exchange's facilities if a 
Qualified Clearing Agency refuses to act to clear and settle the trades 
of that Participant. The Exchange believes that this measure serves the 
public interest by giving the CHX more flexibility to prevent the 
execution of trades on our facilities which could not ultimately be 
cleared and settled if the Qualified Clearing Agency refuses to act.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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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.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve or disapprove such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be 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-2011-34 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-2011-34. 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 
a.m. and 3 p.m. Copies of the filing also will 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-2011-34 and should be 
submitted on or before January 25, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Elizabeth M Murphy,
Secretary.
[FR Doc. 2011-33714 Filed 1-3-12; 8:45 am]
BILLING CODE 8011-01-P