Document ID: SEC-2006-0714-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Stock Exchange, Inc.
Posted Date: 2006-06-01T04:00Z

[Federal Register: June 1, 2006 (Volume 71, Number 105)]
[Notices]               
[Page 31242-31243]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01jn06-120]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53868; File No. SR-CHX-2006-13]

 
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change Relating to Participant Fees 
and Credits

May 25, 2006.
    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 April 24, 2006, 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 CHX. 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

    The CHX proposes to amend its Participant Fee Schedule (``Fee 
Schedule'') to reduce, retroactively to March 1, 2006, the assignment 
fees charged to specialist firms seeking the right to trade securities 
to $500 per assignment, when the securities are assigned in competition 
with other firms.\3\ The text of this proposed rule change is available 
on the Exchange's Web site at http://www.chx.com/rules/ proposed--

rules.htm and at the Commission's Public Reference Room.
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    \3\ The Exchange filed with the Commission a separate filing 
proposing an identical assignment fee reduction (SR-CHX-2006-12) on 
April 24, 2006, which was immediately effective as of that date 
under section 19(b)(3)(A) of the Act and Rule 19b-4(f)(2) 
thereunder. Because the Exchange seeks to apply the assignment fee 
reduction to its Fee Schedule on a retroactive basis as of March 1, 
2006, the Exchange is submitting this proposal to the Commission 
under section 19(b)(2) of the Act, to be published for notice and 
comment. The Commission notes that the discussion in the Purpose 
section below reflects the Fee Schedule as it existed prior to the 
immediately effective changes made pursuant to SR-CHX-2006-12.
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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 change 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 Change

1. Purpose
    Under the Exchange's rules, the Committee on Specialist Assignment 
and Evaluation is responsible for appointing participant firms to act 
as specialists on the Exchange.\4\ When more than one firm competes for 
the right to be the specialist in a particular security, the Exchange 
charges assignment fees of $1,000 or $4,000 for the assignment, 
depending on the number of firms competing for that right.\5\
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    \4\ See CHX Article IV, Rule 6.
    \5\ For ``dual trading system'' securities, a group of 
securities which includes securities listed on the New York Stock 
Exchange or American Stock Exchange, the Exchange currently charges 
a $1,000 assignment fee if the security (or a group of securities) 
was assigned in competition with at least one other participant and 
up to one-third of all participants that trade these issues. The fee 
for the assignment of this type of security is increased to $4,000 
if the security (or a group of securities) was assigned in 
competition with more than one-third of the participants that trade 
these issues. For Nasdaq/NM securities, the Exchange currently 
charges a $1,000 assignment fee if the security was assigned in 
competition with one other participant firm; the fee is increased to 
$4,000 if two or more firms compete for the assignment.
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    In a separate filing, the Exchange has submitted a proposal to 
implement a

[[Page 31243]]

new trading model, which features an automated Matching System into 
which orders may be sent for execution, but which does not involve the 
use of specialists to handle customer orders.\6\ Instead, in this new 
model, off-Exchange market makers may choose to handle customer orders, 
sending those orders to the Exchange or to other venues for execution. 
Because the Exchange hopes to be able to implement its new model in the 
second quarter of 2006, the Exchange believes that the right to trade 
securities as an Exchange specialist has only a short-term benefit. For 
that reason, the Exchange has filed another proposal to reduce the 
assignment fees to $500 per security, regardless of the number of 
participants competing for the assignments and regardless of the type 
of security that is being assigned.\7\ Through this proposed rule 
change, the Exchange seeks to make the assignment fee reduction 
effective, on a retroactive basis, to March 1, 2006. The Exchange 
believes that this retroactive effectiveness will appropriately allow 
the Exchange to apply the fee reduction to assignments that have been 
made in recent weeks, when the Exchange's management began talking with 
specialist firms about the reasons for, and possibility of, this type 
of fee reduction.
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    \6\ See SR-CHX-2006-05.
    \7\ See supra note 3. The Exchange believes that it is 
appropriate to maintain at least a $500 assignment fee to help 
defray the costs of the assignment process. The Exchange will 
continue to charge no fee when securities are assigned without 
competition.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b)(4) of the Act \8\ in that it provides for the 
equitable allocation of reasonable dues, fees and other charges among 
its members and creates an appropriate (and limited) incentive for a 
firm to agree to act as specialist on a temporary basis.
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    \8\ 15 U.S.C. 78(f)(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on 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

    Within 35 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 Exchange consents, the Commission will:
    (A) By order approve 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 e-mail to rule-comments@sec.gov. Please include 

File Number SR-CHX-2006-13 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-CHX-2006-13. 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 inspection 
and copying in the Commission's Public Reference Room. 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-2006-13 and should be submitted on or before June 
22, 2006. 

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E6-8482 Filed 5-31-06; 8:45 am]

BILLING CODE 8010-01-P