Document ID: SEC-2011-0839-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2011-06-16T04:00Z

[Federal Register Volume 76, Number 116 (Thursday, June 16, 2011)]
[Notices]
[Pages 35257-35259]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-14894]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64644; File No. SR-CHX-2011-11]

 Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Add a Rule Concerning the CHX Book Feed

June 10, 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 June 2, 2011, 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 and 
II below, which Items have been prepared by the Exchange. CHX has filed 
this proposal pursuant to Exchange Act Rule 19b-4(f)(6) \3\ which is 
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\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CHX proposes to add Article 4, Rule 1 (Book Feed) to include an 
explicit description of the Exchange's Book Feed information service. 
The text of this proposed rule change is available on the Exchange's 
Web site at (http://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 makes information about display-eligible orders sent 
to and trades executed on the Exchange available to Participants and 
other interested persons via its Book Feed Service. The purpose of 
making this information available is to increase the transparency of 
orders and trading activity on the Exchange. The Book Feed service 
became effective pursuant to a rule filing made with the Commission in 
2007, but the service was not described in the Exchange's rules.\4\ In 
order to remove any potential ambiguity about the nature of the 
Exchange's technology and communications offerings, we are now

[[Page 35258]]

proposing to add language to our rules describing the Book Feed. The 
Book Feed service has not changed in any material respect.\5\ Use of 
the Book Feed service by any Exchange Participant is entirely optional 
and is not required to direct orders to our Matching System for 
execution or display.
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    \4\ Securities Exchange Act Release No. 56611 (Oct. 4, 2007), 72 
FR 57980 (Oct. 11, 2007).
    \5\ See e-mail, dated June 2, 2011, from David C. Whitcomb, Jr., 
General Counsel and Chief Regulatory Officer, CHX, to Christopher W. 
Chow, Special Counsel, Commission.
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    New Article 4, Rule 1 governs the provision by the Exchange of its 
Book Feed data service. The CHX Book Feed distributes data regarding 
orders received and trades executed by the Matching System, our trading 
facility. The Book Feed service supplements the market data provided by 
the Exchange through the industry-mandated Securities Information 
Processors or SIPs (currently Nasdaq and SIAC). The SIPs collect market 
data from each trading center, consolidate it into a unified 
transmission, and disseminate it to market participants, including 
market data vendors.
    The CHX Book Feed is intended to augment the market data provided 
by the SIPs by providing additional detail about orders resident in the 
Exchange's Matching System. Unlike SIP data, quotations distributed via 
the Book Feed are not aggregated at a particular price point. Instead, 
each individual order is separately represented in the Book Feed, even 
if there are multiple orders at the same price and on the same side of 
the market. Moreover, the Book Feed provides information for all 
displayed orders resident in the Matching System, including odd lots 
and orders inferior to our top of book.\6\ The Book Feed data includes 
basic information about each order, including the size and price of the 
order; whether it was an order to buy or sell; its time of receipt; and 
the identity of the participant firm that submitted the order.\7\ The 
Book Feed also provides for the transmission of last sale data through 
the Book Feed in a manner which is substantially similar to that 
provided through the SIPs.\8\ Proposed Rule 1 of Article 4 authorizes 
the Exchange to provide Book Feed data to a recipient which has entered 
into a Book Feed Subscriber agreement with the Exchange and in a form 
acceptable to the Exchange.\9\ No market participant is required to 
subscribe to the Book Feed service. The Exchange believes that some 
market participants will be interested in receiving our Book Feed 
transmission since it provides additional information about the orders 
residing in the Matching System beyond what is available from the 
SIPs.\10\
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    \6\ Undisplayed orders and the undisplayed portions of reserve 
size orders are not to be disseminated through the Book Feed; 
however, any odd lot orders (which are not expressly identified as 
``undisplayed'') are disseminated through the Book Feed.
    \7\ A participant firm can choose, either on a firm-wide or 
order-by-order basis, to have its identity kept confidential in the 
order information that is distributed in the Book Feed.
    \8\ The Book Feed includes transaction data for all trades 
executed in the Matching System, including odd lot transactions, 
while the SIP last sale transmissions may not include data on odd 
lot executions.
    \9\ The Exchange makes the Book Feed available to any person or 
entity which signs our subscriber agreement. It is not necessary to 
be an Exchange Participant to be eligible to receive the Book Feed.
    \10\ Within the Exchange's systems, the data that is 
disseminated as part of the Book Feed leaves the Matching System 
immediately following the best bids, offers and last sales that are 
being sent to the SIPs. The Exchange would not use any technology 
that is designed to make the Book Feed data available from the 
Matching System earlier than the best bids, offers and last sales 
are available to the SIPs.
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    Any charges for the Exchange's Book Feed service would be specified 
in our Schedule of Fees and Assessments. Currently, the Fee Schedule 
provides that the Book Feed shall be available free of charge to 
subscribers.\11\ Rule 603(a)(2) for Regulation NMS requires trading 
centers to distribute market data ``on terms that are not unreasonably 
discriminatory.'' \12\ The policy of the Exchange is to require that 
all Book Feed recipients execute a subscriber agreement. This 
requirement applies equally to all recipients and therefore the 
Exchange believes that its proposal satisfies Rule 603(a)(2) for 
Regulation NMS.
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    \11\ The Exchange does not currently plan to charge a fee for 
the distribution of this data, but may choose to do so in the 
future. Any decision to charge a fee for the Book Feed data would be 
reflected in a filing submitted to the Commission as required by 
Rule 19b-4 of the Act.
    \12\ 17 CFR 603(a)(2).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \13\ in general, and furthers the 
objectives of Section 6(b)(1) of the Act \14\ in particular, in that it 
allows the Exchange to be organized and have the capacity to be able to 
carry out the purposes of the Act and to comply, and (subject to any 
rule or order of the Commission pursuant to section 17(d) or 19(g)(2) 
of the Act) to enforce compliance by its members and persons associated 
with such members, with the provisions of the Act, the rules and 
regulations thereunder, and the rules of the exchange. As noted above, 
the Book Feed service was previously described in a filing with the 
Commission in 2007.\15\ By adding a description of the nature of the 
Book Feed service to the Exchange's rules, this proposal advances the 
purposes of the Exchange Act by providing added clarity about the 
nature and extent of certain services offered by the Exchange to its 
Participants, and thereby contributing to the ability of our members in 
complying with the requirements related to those services.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(1).
    \15\ See note 4, supra, and accompanying text.
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. As noted above, the Exchange 
believes that its Book Feed service will compete with the existing 
market data products issued by other exchanges and will assist the 
Exchange in attracting and retaining order flow. The Exchange further 
believes that the added transparency offered by the Book Feed service 
will benefit market participants looking to interact with orders 
residing in the Matching System or trying to determine the level of 
buying or selling interest in a security. The fact that the Exchange 
currently distributes market data for no charge also acts as a 
competitive force among market data products. As noted above, the Book 
Feed service is entirely optional and Participants are not required to 
subscribe to it in order to gain access to our marketplace.

C. Self-Regulatory Organization's Statement on Comments Regarding 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 rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \16\ and Rule 19b-4(f)(6) \17\ thereunder in 
that it effects a change that: (i) Does not significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; and (iii) by its terms, does not 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6).

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[[Page 35259]]

    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.

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-2011-11 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-2011-11. 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 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-2011-11 and should be 
submitted on or before July 7, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-14894 Filed 6-15-11; 8:45 am]
BILLING CODE 8011-01-P