Document ID: SEC-2011-1820-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2011-11-25T05:00Z

[Federal Register Volume 76, Number 227 (Friday, November 25, 2011)]
[Notices]
[Pages 72739-72741]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30354]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65792; File No. SR-CHX-2011-31]

 Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Trade Processing Fee

November 18, 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 November 9, 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 
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

    CHX proposes to amend its Fee Schedule to amend the Trade 
Processing Fee. 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

[[Page 72740]]

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
    Through this proposal, the Exchange seeks to modify the definition 
of its Trade Processing Fee to conform to recent rule changes. Trade 
Processing Fees are charged by the Exchange for certain non-CHX trades 
to the Clearing Participants to the transaction. These non-CHX 
transactions are entered into the Exchange's systems by an 
Institutional Broker and submitted by the Exchange to a Qualified 
Clearing Agency for clearance and settlement.\5\
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    \5\ See Securities Exchange Act Rel. No. 65615 (Oct. 24, 2011), 
76 FR 67239 (Oct. 31, 2011) (SR-CHX-2011-17) which added Article 21, 
Rule 6 describing the process by which Institutional Brokers can 
submit non-CHX trades for clearance and settlement via the 
Exchange's systems.
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    Earlier this year, the Exchange restricted the imposition of Trade 
Processing Fees on transactions executed directly in the over-the-
counter (``OTC'') marketplace by an Institutional Broker. As part of 
this change, Trade Processing Fees could only be imposed on cross 
trades which originated with an Institutional Broker and were 
transmitted to and executed by another broker-dealer (which was not an 
Institutional Broker) in the OTC marketplace and which were submitted 
to clearing by the Exchange's systems.\6\ This amendment reflected 
discussions between the Exchange and the staff of the Commission 
regarding limitations on the ability of Institutional Brokers to 
directly execute trades in the OTC marketplace. Since that time, the 
Exchange has reclassified Institutional Brokers as not operating on the 
Exchange, which permits such firms to directly execute trades in the 
OTC marketplace.\7\ The Exchange therefore proposes to modify the 
definition of Trade Processing Fee in its Fee Schedule to remove that 
restriction. Moreover, the Exchange has added Article 21, Rule 6 
governing the submission by the Exchange of non-CHX trades entered 
through an Institutional Broker to a Qualified Clearing Agency for 
clearance and settlement. In recognition of these two new provisions of 
the CHX rules, the Exchange proposes to define Trade Processing Fees as 
fees are charged for transactions entered by an Institutional Broker 
into the Exchange's systems and submitted to a Qualified Clearing 
Agency pursuant to Article 21, Rule 6(a).
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    \6\ See Securities Exchange Act Rel. No. 64953 (July 25, 2011), 
76 FR 45626 (July 29, 2011) (SR-CHX-2011-19).
    \7\ See Securities Exchange Act Rel. No. 65633 (Oct. 26, 2011), 
76 FR 67509 (Nov. 1, 2011) (SR-CHX-2011-29).
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    Pursuant to the proposed definition, Trade Processing Fees would be 
charged for transactions executed otherwise than on the Exchange (in 
most cases, in the OTC marketplace) that originated with an 
Institutional Broker and were executed by that Institutional Broker, or 
transmitted to and executed by another broker-dealer, and reported to a 
Qualified Clearing Agency by the Exchange after entry of the relevant 
clearing information by the Institutional Broker into the Exchange's 
systems. The fees are also charged for transactions which were executed 
in another trading center by a third party broker-dealer, which then 
utilizes an Institutional Broker as its agent to enter them into the 
Exchange's systems for submission to a Qualified Clearing Agency for 
clearance and settlement. These third-party transactions may include 
both cross transactions executed in the OTC marketplace by the third-
party broker-dealer, as well as purchases or sales of securities by the 
third party broker-dealer on another exchange or other trading center. 
The Exchange does not propose to charge a Trade Processing Fee for 
single-sided purchases and sales of securities on another exchange or 
in the OTC marketplace by Institutional Brokers and submitted to 
clearing as a riskless principal transaction pursuant to Article 21, 
Rule 6(b).\8\
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    \8\ The execution of the first leg of a riskless principal 
transaction may well have entailed the payment of a transactional 
fee to the trading center on which it was executed. The Exchange 
believes that an imposition of a Trade Processing Fee on riskless 
principal transactions could result in higher transactional costs 
for the parties to the transaction, which could render the 
Exchange's provision of clearing submission services non-
competitive.
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    The Exchange does not propose to alter the rate imposed for Trade 
Processing Fees as part of this proposal. The proposed changes would 
become effective on November 29, 2011.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \9\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \10\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and other persons using any facility or 
system which the Exchange operates or controls. Pursuant to this 
proposal, Trade Processing Fees are charged to the Clearing 
Participants involved in certain transactions which were not executed 
on the CHX's trading facilities, but submitted for clearance and 
settlement by the Exchange's systems. The Exchange believes that it is 
fair and reasonable for it to charge a fee for the services it provides 
to its Participants which elect to submit non-CHX trades to clearing 
via the Exchange's systems. This proposal conforms the definition of 
Trade Processing Fees to recent changes in its rules, including both 
changes in the status of Institutional Brokers which permits them to 
directly execute trades in the OTC marketplace and the addition of new 
Rule 6 under Article 21, which permits Institutional Brokers to submit 
those trades (and others) to a Qualified Clearing Agency through the 
Exchange's systems. Pursuant to the proposed new definition, a Trade 
Processing Fee would be charged for transactions submitted to a 
Qualified Clearing Agency pursuant to Article 21, Rule 6(a). These fees 
would be imposed based upon the nature of the activity handled through 
the Exchange's systems and are fair and non-discriminatory in nature, 
and the Exchange therefore believes that the imposition of a Trade 
Processing Fee as defined in this proposal is appropriate. Permitting 
the Exchange to charge a Trade Processing Fee for its services 
associated with the clearing submissions would allow it to compete with 
other exchanges, such as Nasdaq, which provide similar services to its 
members for a fee.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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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 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 proposed rule change is to take effect pursuant to Section 
19(b)(3)(A)(ii) of the Act \11\ and subparagraph (f)(2) of Rule 19b-4 
thereunder \12\ because it establishes or changes a due, fee or

[[Page 72741]]

other charge applicable to the Exchange's members and non-members, 
which renders the proposed rule change effective upon filing.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 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.

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-2011-31 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-2011-31. 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-2011-31 and should be 
submitted on or before December 16, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30354 Filed 11-23-11; 8:45 am]
BILLING CODE 8011-01-P