Document ID: SEC-2008-0315-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2008-02-28T05:00Z

[Federal Register: February 28, 2008 (Volume 73, Number 40)]
[Notices]               
[Page 10846-10848]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28fe08-112]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57363; File No.-CHX-2007-21]

 
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 
1, To Amend Rules Relating to Registration Requirements

February 20, 2008.
    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 October 9, 2007, 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 substantially prepared by CHX. On 
February 14, 2008, CHX filed Amendment No. 1 to the proposed rule 
change.\3\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced and superseded the original filing 
in its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    CHX proposes to amend its registration requirements to require CHX 
participants to use the Financial Industry Regulatory Authority, Inc.'s 
(``FINRA'') Web Central Registration Depository (``Web CRD'') to 
register associated persons who are required to register with the 
Exchange under CHX rules. The Exchange would also amend its Fees 
Schedule (the ``Fee Schedule'') to include fees that would be charged 
in connection with the use of Web CRD. The text of this proposed rule 
change is available at CHX, 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, 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. 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
    FINRA's Web CRD system is a centralized, web-based system used by 
securities exchanges and broker-dealers across the country to track 
registration and qualification information about firms and the 
individuals who work for those firms. The Exchange has entered into an 
agreement with FINRA to allow the Exchange's participants to use Web 
CRD to register certain of their associated persons. Through this 
proposal, the Exchange seeks to amend its registration rules and Fee 
Schedule: (a) To require Exchange participants to use Web CRD to 
register associated persons who are required to register with the 
Exchange under CHX rules; (b) to allow CHX to determine whether 
participants should submit fingerprints to CHX or to FINRA for 
processing during the registration process; and (c) to adopt new fees 
to cover charges assessed by FINRA for its work in processing 
fingerprints or the materials submitted through the Web CRD system. CHX 
would also delete a provision that requires firms to notify CHX of the 
termination of any non-registered, associated person's employment.\4\
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    \4\ See Article 6, Rule 2, Interpretations and Policies .03. CHX 
believes that this requirement has become somewhat obsolete with 
CHX's move to its new trading model (and the elimination of its 
physical trading floor), because the requirement had, in effect, 
been largely focused on the employment status of clerks working on 
the Exchange's trading floor. Because the Exchange no longer has a 
physical trading floor, it is no longer as important to learn of the 
termination of a clerk's employment with a participant firm. 
Moreover, CHX regularly receives an updated list of a firm's 
associated persons when it conducts its annual examinations.
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    The first part of this proposal would require CHX participants to 
use the Web CRD system to register certain of their associated 
persons.\5\ Today, CHX participants that are not members of FINRA do 
not have access to the Web CRD system for registering their associated 
persons. Instead of using this on-line tool, those participants must 
handle their registration and continuing education processes manually, 
by filing paperwork with CHX. CHX staff must process and store this 
paperwork in hard copy form. To alleviate the need for manual 
processing and to ensure that other regulatory benefits are

[[Page 10847]]

achieved, the Exchange believes that it is appropriate to require CHX 
participants to use Web CRD to register associated persons who are 
required to register with the Exchange under CHX rules.\6\ Among other 
things, use of the Web CRD system would allow all information relating 
to the registration of associated persons to be compiled in one central 
repository for access by regulators and broker-dealers and would permit 
the automated tracking of a registered person's continuing education 
requirements, if any.
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    \5\ See Proposed Article 6, Rule 2, Interpretations and Policies 
.01.
    \6\ Under CHX rules, a variety of persons, including, but not 
limited to, officers, partners, principal stockholders, and 
directors of a participant firm, must register with the Exchange, as 
well as any person acting as an institutional broker representative 
or as a market maker trader or any person listed on Schedules A, B 
or C of a participant firm's Form BD. See Article 6, Rule 2(b). 
These registration rules only apply to participant firms for which 
the Exchange is the designated examining authority and to registered 
persons of other participant firms where the registered persons act 
as institutional broker representatives or market maker traders on 
the Exchange. See Article 6, Rule 2, Interpretations and Policies 
.04.
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    In addition, under this proposal, CHX participants would be 
required to submit any required fingerprints to either the Exchange or 
to FINRA for processing.\7\ Under the Exchange's current rules, CHX 
participants submit fingerprints to the Exchange for processing.\8\ 
Under the proposal, the Exchange would have the discretion to continue 
this process or to require its participants to submit fingerprint cards 
to FINRA for processing. The Exchange seeks this flexibility so that it 
can determine, from time to time, which fingerprint processing method 
is most efficient for the Exchange and for its participants.
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    \7\ See Proposed Article 6, Rule 10, Interpretations and 
Policies .01.
    \8\ When the Exchange receives fingerprints, the Exchange 
processes them through the Federal Bureau of Investigation 
(``FBI''). The FBI retrieves criminal history information associated 
with those fingerprints and returns reports to the Exchange for 
review.
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    Finally, because FINRA would assess charges to CHX participants for 
using the Web CRD system and for processing any fingerprints that are 
submitted, the Exchange also seeks to amend its Fee Schedule to include 
applicable registration, processing and termination fees, as well as 
various fingerprint charges.\9\
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    \9\ These charges include an $85 registration fee; a $95 
disclosure processing fee; a $30 annual processing fee; and 
termination fees of $40 and $80. Fingerprint processing fees would 
be $30.25 per card for an initial submission; $13 per card for a 
second submission; and $30.25 per card for a third submission. These 
fees reflect the charges assessed by FINRA for these services; CHX 
is not charging any additional fees of its own.
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    The Exchange anticipates that its participants would be able to 
begin using Web CRD for registering associated persons in mid-March 
2008 and plans to allow its participants to transition to the use of 
the Web CRD system over the course of a six to nine-month period.\10\ 
At the end of this period, CHX participants would be required to use 
Web CRD for submitting any registration materials required by CHX 
rules.
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    \10\ The Exchange believes that this transition period is 
appropriate because each CHX participant firm that is not already a 
FINRA member will be required to enter a new Form U-4 into the Web 
CRD for each person associated with the firm that is required, by 
CHX rules, to register with the Exchange. The entry of this 
information could be time-consuming for some firms, and the Exchange 
believes it is appropriate to give firms an adequate period of time 
to complete this task before mandating the use of the Web CRD 
system.
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2. Statutory Basis
    CHX believes the proposal is consistent with the requirements of 
the Act and the rules and regulations thereunder that are applicable to 
a national securities exchange, and, in particular, with the 
requirements of Section 6(b) of the Act.\11\ The proposed rule change 
is consistent with Section 6(b)(5) of the Act \12\ because it would 
promote just and equitable principles of trade, remove impediments to, 
and perfect the mechanism of, a free and open market and a national 
market system, and, in general, protect investors and the public 
interest by permitting the Exchange to require CHX participant firms to 
register certain associated persons using FINRA's Web CRD system, a 
centralized database used by the securities exchanges and broker-
dealers across the country to track registration and qualification 
information about firms and individuals who work for those firms. By 
requiring use of the Web CRD system, the Exchange's regulatory group, 
as well as the firms themselves, would be better able to determine 
whether a registrant has met applicable continuing education 
requirements. The Exchange also notes that it would be ensuring that 
other regulators can readily find information about disciplinary 
actions taken against CHX-only participants.
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    \11\ 15 U.S.C. 78(f)(b).
    \12\ 15 U.S.C. 78(f)(b)(5).
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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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were 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-2007-21 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-2007-21. 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

[[Page 10848]]

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 on official business days between the hours of 10 a.m. 
and 3 p.m. Copies of such filing also will be available for inspection 
and copying at the principal office of CHX. 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-2007-21 and should be submitted on 
or before March 20, 2008.

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-3731 Filed 2-27-08; 8:45 am]

BILLING CODE 8011-01-P