Document ID: SEC-2012-0073-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2012-01-18T05:00Z

[Federal Register Volume 77, Number 11 (Wednesday, January 18, 2012)]
[Notices]
[Pages 2583-2585]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-779]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66139; File No. SR-CHX-2012-01]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend its Fee Schedule To Assess Fees for Derivative Securities 
Products

January 11, 2012.
    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 January 6, 2012, the Chicago Stock Exchange, Inc. (``CHX'' or the 
``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. 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CHX proposes to amend its Fee Schedule, effective January 9, 2012, 
to create a separate fee and rebate structure for Derivative Securities 
Products and to remove certain references to Tape A, B and C securities 
throughout the Fee Schedule.
    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

[[Page 2584]]

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
    Through this filing, the Exchange proposes to amend its Schedule of 
Fees and Assessments (the ``Fee Schedule''), effective January 9, 2012, 
to create a separate fee and rebate structure for Derivative Securities 
Products \5\ and to remove references to Tape A, B and C securities 
throughout our Fee Schedule.
---------------------------------------------------------------------------

    \5\ ``Derivative Securities Product'' is defined under Rule 19b-
4(e) as any type of option, warrant, hybrid securities product or 
any other security, other than a single equity option or a security 
futures product, whose value is based, in whole or in part, upon the 
performance of, or interest in, an underlying instrument. See, 17 
CFR 240.19b-4(e).
---------------------------------------------------------------------------

    Pursuant to this proposal, the Exchange would eliminate the 
distinction in the fee and rebate structure for Tape A, B and C 
securities and replace it with a structure based on Derivative 
Securities Products.\6\ Currently, the Exchange offers a provide credit 
of $0.0022/share under Section E.1. of the Fee Schedule only for 
transactions in Tape B securities.\7\ Many, but not all, Tape B 
securities are Derivative Securities Products and some Tape A and C 
securities are Derivative Securities Products. For securities priced 
$1/share or more and which are executed in the Regular Trading Session, 
the Exchange seeks to eliminate the payment of provide credits pursuant 
to Section E.1. of the Fee Schedule for all non-Derivative Securities 
Products priced $1/share or more and simultaneously extend the provide 
credit to transactions in Derivative Securities Products priced $1/
share or more. Thus, some Tape B securities which are not Derivative 
Securities Products would no longer be eligible for a provide credit in 
the Regular Trading Session and certain Derivative Securities Products 
which are Tape A and C securities would be eligible for a provide 
credit. As a category, Derivative Securities Products are heavily 
traded in the National Market System. By this proposal, the Exchange 
seeks to pay a provide credit for transactions in such securities in 
order to incent additional order flow in these issues to the Exchange.
---------------------------------------------------------------------------

    \6\ Tape A securities are those equity securities for which the 
New York Stock Exchange, Inc. is the primary listing market. Tape C 
securities are those issues for which the Nasdaq Stock Exchange, 
Inc. is the primary listing center. Tape B securities are those 
issues for which some other national securities exchange is the 
primary listing market.
    \7\ Among other things, the Exchange proposes to correct a 
typographical error in its Fee Schedule to clarify that the provide 
credit paid pursuant to Section E.1. for issues priced $1/share or 
more is $.00022 per share.
---------------------------------------------------------------------------

    Pursuant to the Exchange's proposed new fee and rebate structure, 
Participants would be charged a fee of $0.003/share to take liquidity 
and given a rebate of $0.0022/share for providing liquidity in the 
Regular Trading Session for securities priced $1.00/share or more which 
are Derivative Securities Products. For transactions in non- Derivative 
Securities Products priced $1/share or more which were executed in the 
Regular Trading Session, the Exchange proposes to charge a fee of 
$0.003/share to take liquidity while giving no rebate for providing 
liquidity. A liquidity removal fee of $0.003/share and a provide credit 
of $0.0022/share would be assessed for transactions in securities 
priced $1/share or more in the Exchange's Early and Late Trading 
Sessions. Participants would be assessed a liquidity removal fee of 
0.30% of trade value and given a provide credit of $0.00009/share in 
all issues priced less than $1/share in all trading sessions.
    The Exchange proposes similar changes to the fee and rebate 
structure for single-sided orders executed in the Matching System which 
were submitted through an Exchange-registered Institutional Broker. 
These changes in essence substitute the term ``Derivatives Securities 
Products'' for ``Tape B securities'' within the applicable section of 
the Exchange's Fee Schedule (Section E.1.). Thus, a provide credit of 
$0.0022/share in transactions involving Derivatives Securities products 
executed in the Regular Trading Session would be paid to the 
Institutional Broker representing the Participant which originated the 
order.\8\ The Exchange proposes to replace references to ``Tape A, B 
and C'' securities with an all-inclusive reference to ``any'' or 
``all'' securities in the text governing the provide credit paid to 
Institutional Brokers for transactions in the Early and Late Trading 
Sessions and in securities priced under $1/share in any trading 
session.
---------------------------------------------------------------------------

    \8\ Currently, the same amount is paid to the Institutional 
Broker for transactions in Tape B securities.
---------------------------------------------------------------------------

    The Exchange proposes to add the definition of a Derivative 
Securities Product, taken from Rule 19b-4(e) of the Exchange Act, to 
the Fee Schedule for purposes of clarity.\9\ The Exchange also proposes 
to replace all references in Section E. of the Fee Schedule to the term 
``issue'' with that to [sic] ``securities,'' which is a more accurate 
and well-defined term.\10\ The Exchange proposes to remove all other 
references in various sections of the Fee Schedule to Tape A, B and C 
securities, since those categories would no longer be relevant in 
assessing fees to CHX Participants. Finally, the Exchange proposes to 
replace the references to Exchange Traded Funds (``ETFs''), Exchange 
Traded Notes (``ETNs'') or Exchange Traded Vehicles (``ETVs'') in 
Section E.8. (Order Cancellation Fee (Regular Trading Session only)) 
with a reference to Derivative Securities Products.\11\ The Exchange 
believes that these references are functionally equivalent as applied 
to trading on the Exchange and use of a common term throughout the Fee 
Schedule should provide additional clarity to Exchange Participants.
---------------------------------------------------------------------------

    \9\ 17 CFR 240.19b-4(e).
    \10\ The Exchange also proposes to replace the references to the 
term ``issue'' in Section I (Listing Fees) to the different types of 
securities ``listed on the Exchange'' in order to be consistent.
    \11\ The Exchange also proposes to delete the reference to the 
effective date of the Cancellation Fees, since that date is now a 
number of months in the past.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \12\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \13\ 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. Because the proposed 
structure will apply to all single sided orders executed in the CHX 
Matching System, with the limited exception of take fees for 
Institutional Brokers, which have their own, previously approved, fee 
structure, the Exchange believes the proposed fee and rebate structure 
will equitably allocate the same reasonable rebate rates among 
Participants in a non-discriminatory nature. Furthermore, because 
quoting and trading activity is different among certain categories of 
securities, such as Derivative Securities Products, the Exchange 
believes that it is fair and reasonable to create different fee and 
rebate structures for Derivative Securities Products and all other 
securities in order to better incent activity by Participants on the

[[Page 2585]]

Exchange's trading facilities in those particular categories.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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.

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

    The proposed rule change is to take effect pursuant to Section 
19(b)(3)(A)(ii) of the Act \14\ and subparagraph (f)(2) of Rule 19b-4 
thereunder \15\ because it establishes or changes a due, fee or other 
charge applicable to the Exchange's members and non-members, which 
renders the proposed rule change effective upon filing.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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.
    As more fully discussed above, the Exchange believes that the 
proposed changes represent a fair and reasonable structure designed to 
create different fee and rebate amounts to incent activity among all 
Participants within the Exchange's trading facilities.

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-2012-01 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-2012-01. 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-2012-01 and should be 
submitted on or before February 8, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-779 Filed 1-17-12; 8:45 am]
BILLING CODE 8011-01-P