[Federal Register Volume 75, Number 96 (Wednesday, May 19, 2010)]
[Notices]
[Pages 28083-28085]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-11938]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62085; File No. SR-CHX-2010-08]
Self-Regulatory Organizations; The Chicago Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Establish a Fixed Provide Credit for CHX-Registered Institutional
Brokers
May 12, 2010.
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 30, 2010, the Chicago Stock Exchange, Inc. (``CHX'' or
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II
and III
[[Page 28084]]
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 the
Substance of the Proposed Rule Change
The CHX proposes to amend its Schedule of Participant Fees and
Assessments (the ``Fee Schedule''), effective May 3, 2010, to establish
a fixed provide credit for CHX-registered institutional brokers for
agency trade executions of one-sided orders entered by their customers
in Tape A, B and C securities which execute within the Exchange's
Matching System. The proposal also removes certain obsolete references
to the now-defunct ITS trading system in the Fee Schedule. 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 in the Commission's
Public Reference Room, 100 F Street, NE., Washington, DC 20549.
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
Through this filing, the Exchange would amend its Fee Schedule,
effective May 3, 2010, to establish a non-variable credit for certain
liquidity-providing single-sided orders submitted by CHX-registered
Institutional Brokers on behalf of their customers to the Exchange's
Matching System and subsequently executed there. The Exchange's Fee
Schedule provides for a tiered schedule of fees and rebates for
Participants for trade executions of single-sided orders in securities
priced over $1 in the event that certain volume thresholds (described
as the ``Average Daily Volume'' or ``ADV'') are achieved.\5\ For
transactions subject to the Agency Execution fee of Section E.3., the
Fee Schedule states that the take fees and provide credits accruing
pursuant to Section E.1. (Matching System single order executions (one-
sided orders of 100+ shares)) shall be assessed against the
Institutional Broker handling the transaction, and not the Participant
which is a party to the transaction.\6\ Currently, the Institutional
Broker is exempt from payment of the liquidity taking fee normally
charged to Participants if it is handling an order subject to the
Agency Execution fees.\7\
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\5\ Section E.1 of the Fee Schedule defines ADV as follows: ``
`ADV' means, with respect to a Participant, the number of shares
such Participant has executed as a liquidity provider in any and all
trading sessions on average per trading day (excluding partial
trading days) across all tapes on the trading facilities of the CHX
(excluding all cross transactions and transactions in issues priced
less than $1.00/share) for the calendar month in which the
executions occurred.''
\6\ See, Section E.3. of the Fee Schedule. (``If the
institutional broker executes the order in the Matching System or as
otherwise permitted by CHX rules, the institutional broker (not its
customer) will be assessed applicable Matching System fees (see (1)
and (2) above).'')
\7\ Section E.1. of the Fee Schedule.
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Pursuant to this filing, the Exchange would modify its Fee Schedule
to state that Institutional Brokers would be entitled to a fixed
provide credit irrespective of its ADV for orders subject to the Agency
Execution fees. A provide credit of $0.0029/share in Tape A and C
securities and $0.0032/share in Tape B securities priced $1.00/share or
more would be paid to the Institutional Broker representing the
Participant which originated the order (regardless of the ADV
attributable to either firm). The filing also calls for a provide
credit of 0.20% of the trade value in Tape A, B and C securities priced
less than $1.00/share to be paid to the Institutional Broker
representing the Participant which originated the order (regardless of
the ADV attributable to either firm).
Institutional Brokers are typically smaller firms that enter orders
manually and cannot realistically achieve the higher ADV levels needed
for preferential pricing.\8\ Payment of a fixed provide credit at a
preferential rate to Institutional Brokers acts as an incentive to post
liquidity in the CHX Matching System when those firms are considering
how best to seek execution of their customer's orders. Representation
of such orders within the CHX Matching System in turn benefits the
Exchange by potentially increasing transaction revenue (in the form of
take fees for orders which interact with posted liquidity) and market
data revenue. Creating a fixed provide rate which does not vary based
upon the Institutional Broker's ADV allows for a simple and consistent
formula which these firms can rely upon when deciding to how to handle
their customer's orders. Furthermore, any market participant may apply
for registration as a CHX Institutional Broker and, if eligible, avail
themselves of the fixed provide credit.
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\8\ Institutional Broker firms (formerly Floor Brokers under the
Exchange's old floor based trading model) are firms that primarily
receive orders needing special handling and manual entry into the
CHX system. These brokers are essentially order-entry firms for
which the Exchange is the designated examining authority.
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The Exchange also proposes to remove from Section E.1. and E.3. of
the Fee Schedule certain obsolete references to the Intermarket Trading
System (``ITS'') and the payment obligations relating to orders
transmitted to other ITS participating markets through the ITS system.
The ITS system was deactivated in 2007 and is no longer is use. The
removal of these obsolete references will serve to eliminate a
potential source of confusion for Exchange Participants.
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 its members. Among other things, the change to the
Fee Schedule would provide incentives to Exchange-registered
Institutional Brokers to increase the amount of liquidity provided on
our trading facilities, which may contribute to an increase in trading
volume on the Exchange and in the income derived therefrom. The removal
of the obsolete references to the Intermarket Trading System in the Fee
Schedule will serve to eliminate a potential source of confusion for
Exchange Participants.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(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 change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
[[Page 28085]]
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
The foregoing rule change has become effective 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 other
charge applicable only to a member imposed by the self-regulatory
organization. Accordingly, the proposal is effective upon Commission
receipt of the filing. At any time within 60 days of the filing of such
rule change, the Commission may summarily abrogate 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 purpose of the Act.
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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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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 [email protected]. Please include
File Number SR-CHX-2010-08 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-2010-08. 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 such 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 publicly available. All
submissions should refer to File Number SR-CHX-2010-08 and should be
submitted on or before June 9, 2010.
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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-11938 Filed 5-18-10; 8:45 am]
BILLING CODE 8010-01-P