[Federal Register Volume 75, Number 77 (Thursday, April 22, 2010)]
[Notices]
[Pages 21061-21063]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-9270]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61903; File No. SR-CHX-2010-07]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing of Proposed Rule Change To Amend Certain Incorrect or
Inaccurate Cross-References
April 14, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given
that on April 7, 2010, 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
this proposal pursuant to Exchange Act Rule 19b-4(f)(6) \3\ which is
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\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CHX proposes to amend to correct a number of incorrect or obsolete
cross-references. The text of this proposed rule change is available on
the Exchange's Web site at http://www.chx.com, on the Commission's Web
site at http://www.sec.gov, and at 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 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 Changes
1. Purpose
The Exchange proposes to amend its rules to alter or delete
references to incorrect rule citations or concepts which are no longer
applicable to the manner in which the Exchange now transacts business.
For the most part, these changes arise out of the transformation of the
Exchange in 2006 and 2007 from a traditional floor-based auction
marketplace to an electronic exchange.\4\ In connection with this
change, the Exchange made substantial revisions to its rules in which
all of its rules were renumbered and many of them were altered or
eliminated. This filing would correct cross-references to rule
citations which were altered or eliminated during that process. As
noted above, the Exchange also fundamentally altered its trading
facilities from a floor-based exchange to a fully automated limit-order
matching system. This filing would alter or eliminate references within
CHX rules to obsolete roles or functions, such as the ``floor,''
``floor brokers,'' and ``specialists.'' This filing would also correct
certain other errors or omissions of a grammatical nature.
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\4\ See SR-CHX-2006-05 (Sept. 26, 2006) (approving rule changes
in connection with adoption of Exchange's New Trading Model).
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In Article 1, Rule 1 (Definitions), the Exchange proposes to delete
obsolete references to the CHX Floor, floor brokers, co-specialists and
market makers and replace them with references to Exchange-registered
Market Maker Traders (``MMTs'') and Institutional Broker
Representatives (``IBRs''). As defined in Articles 16 and 17,
respectively, MMTs and IBRs are designations for individuals with
specific rights and obligations when acting through the Exchange's
facilities. IBRs replaced the now-defunct floor broker role and MMTs
replaced the old market maker role, which had been defined under the
now-repealed Article XXXIV.
In Article 2, Rule 5 (Committee on Exchange Procedure), the CHX
proposes to replace an obsolete cross-reference to former Article VIII,
Rule 23 with its replacement, Article 14, Rule 1. This cross-reference
is to Exchange's provisions for the arbitration of controversies
arising out of Exchange business which were renumbered, but not changed
in substance. We also propose to delete a cross-reference to
determinations by a subcommittee of the Committee on Exchange Procedure
in certain disciplinary actions under former Article XII, Rule 3, since
that grant of authority to the Committee on Exchange Procedure no
longer exists under our rules.\5\ In Article 3, Rule 1
(Qualifications), we are adding a missing subparagraph number under
section (c) and removing the reference to Article XVI, which was
repealed as unnecessary in 2006 as part of the New Trading Model rule
changes. Former Article XVI required Participants which engaged in the
sale of insurance products as an ancillary activity to file certain
reports with the Exchange and
[[Page 21062]]
maintain certain records relating to that activity. We note that other
self-regulatory organizations do not have specific rules relating to
the sale of insurance products by their members.\6\ In Rule 8
(Limitation on Interests in Other Organizations) of Article 3, we are
replacing cross-reference to former Article II (Participants) with that
of current Article 3 (Participants and Participant Firms), its
successor. In Article 3, Rule 11 (Transfer of Equity Securities of a
Participant Firm), we are removing Interpretation and Policy .04, which
refers to the now-deleted provisions of former Article VIII, Rule 20.
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\5\ Former Article XII, Rule 3 authorized the Committee on
Exchange Procedure (or appropriately designated subcommittee
thereof) to issue summary fines of up to $2,500 against Participants
for violations of Exchange's former decorum rules, such as fighting
or profanity on Exchange premises, smoking on the Trading Floor and
dress code violations. The power of the Committee on Exchange
Procedure to issue fines was eliminated in 2006 as part of our
transition to the new trading model and elimination of the Trading
Floor (See SR-CHX-2006-05). Certain decorum-type rules have been
retained in Article 8, Rule 16; however, charges based on violations
of those provisions are authorized by the Exchange's Chief
Regulatory Officer as part of the standard disciplinary process.
\6\ See, e.g., Rules of NYSE Archipelago, Inc., National Stock
Exchange, Inc., BATS Exchange, Inc. We continue to believe that a
prospective Participant should not be disqualified merely by the
fact that it engages in insurance-related activities (such as the
sale of variable annuities) to a limited extent and all other
requirements are satisfied.
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In Article 6, Rule 2 (Registration and Approval of Participant
Personnel), we are replacing the reference to the definition of
Principal Stockholders in former Article III, Rule 4, with the current
reference in Article 1, Rule 1(s). We are adding a missing reference in
Interpretation and Policy .01 of Article 6, Rule 3 (Training and
Examination of Registrants) to subsection (d) and updating a cross-
reference to the former Article XI (Financial Responsibility and
Reporting Requirements) to the current rule provisions dealing with
that topic, which is Article 7. In Article 6, Rule 11 (Continuing
Education for Registered Persons), we are deleting the rule text which
was effective prior to September 30, 2005 as no longer being relevant
and leaving only the language which is currently in force. In
Interpretation and Policy .01 to this rule, we are removing the
reference to persons transacting business on the Floor of the Exchange,
given that we no longer maintain a physical floor as part of our
trading facilities.
In Article 7, Rule 3A (Joint Back Office Participants) we are
substituting a cross-references [sic] to Article 7 in place of former
Article XI and to current Article 10 (Margins) in place of former
Article X (Margins). We propose to update cross references to old
Article XI to current Article 7 in Article 7, Rule 4 (Financial and
Operational Reports), in a table in Article 7, Rule 6 (Fidelity Bonds)
and in Article 10, Rule 3(c)(6) (Initial Margin Rule).
In Article 12 (Disciplinary Matters and Trial Proceedings), we
propose to update the cross references to former Article XII
(Discipline and Trial Proceedings) to current Article 12, which deals
with the same subject matter, in Rules 2 (Summary Procedure) and 8
(Minor Rule Violations). In Article 12, Rule 2(a), an incorrect cross-
reference to Article 12, Rule 5 concerning a respondent's Answer to
disciplinary charges will be replaced by the correct cross-reference to
Article 12, Rule 4(b). We are also adding a missing reference to Rule
9, which will be reserved for future use.
In Article 17, Rule 3 (Responsibilities of Institutional Brokers),
Interpretations and Policies .03, we are removing an obsolete reference
to former Rule 11 of Article 20. Rule 11, which addressed cancellation
or modification of transactions due to systems malfunctions or
disruptions, was deleted in October 2009 as part of an industry-wide
initiative to standardize the rules relating to clearly erroneous
transactions.\7\
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\7\ SR-CHX-2009-11 (October 2, 2009). Much of the content of
former Rule 11 is now addressed in current Rule 10 under Article 20.
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In Article 20, Rule 8 (Operation of the Matching System), we are
correcting certain erroneous cross references to existing order types
defined in Rule 4 (Eligible Orders). Rule 8.e.1. describes the manner
in which Cross and Cross with Size orders shall be executed and
contains an erroneous cross-reference to the description of each of
those order types in Rule 4(b)(3) and (b)(5), respectively. The
proposal corrects those cross-references to Rule 4(b)(4) and (b)(6). We
also propose to delete Interpretation and Policy .03 to Rule 8, which
contained a reference to former Rule 10a-1(e)(5) under the Act.\8\
Current Interpretation and Policy .04 will be renumbered as .03.
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\8\ Former Exchange Act Rule 10a-1(e)(5), sometimes known as the
``equalizing exemption,'' provided an exception to the former
``uptick restrictions'' of Exchange Act Rule 10a-1 for registered
specialists or market makers which executed transactions at prices
at or above the last reported sale. This exemption no longer exists
under current Regulation SHO, which governs short selling in
securities.
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In Article 22, Rule 1 (General Provisions Regarding Listing), we
propose to change outdated references to Article XXVIII (the former
Article dealing with Listings) to the current Article 22, which is
simply the renumbered version of the former Article. We also propose to
correct numbering errors in subsection (g) to Rule 1 and update the
cross reference in that subsection from old Article XXII, Rule 37 to
current Article 21, Rule 2.\9\ In Article 22, Rule 19 (Corporate
Governance), we again propose to change an outdated cross reference to
Article XXVIII to the current Article 22. The cross reference in
Interpretation and Policy .06 of Rule 19 would be updated from old
Article XXXIII, Rule 3, dealing with certain proxy requirements, to
current Article 8, Rule 14(c), which addresses the same subject matter.
In Article 22, Rule 23 (Public Disclosure Requirements for Tier I and
Tier II Issues), Interpretation and Policy .01, we propose to delete
the section headed ``Relationship Between Company Officials and
Exchange Specialists,'' since the Exchange no longer has specialists.
These provisions note certain limitations on the sharing of non-public
information between company officials and the specialist making a
market in the company's securities. Since specialists no longer exist
under our current market structure, this section appears to be
superfluous. In Article 22, Rule 24 (Investment Company Units) and Rule
25 (Portfolio Depository Receipts), we propose to update references to
the Nasdaq Small Cap Market to its current name, Nasdaq Capital Market.
Finally, in Article 22, Rule 25 (Portfolio Depository Receipts), we are
adding subsection (d) and reserving it for further use.
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\9\ Those provisions address the requirement that Participants
utilize the facilities of a national securities depository for the
book entry settlement of all transactions in depository eligible
securities settled in the United States.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act in general,\10\ and furthers the
objectives of Section 6(b)(5) in particular,\11\ in that it is designed
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transaction in securities, to remove impediments and perfect the
mechanisms of a free and open market, and, in general, to protect
investors and the public interest. The elimination of obsolete cross
references and correction of other errors in our rules will serve to
eliminate a potential source of confusion for Exchange Participants.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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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.
[[Page 21063]]
C. Self-Regulatory Organization's Statement on Comments Regarding the
Proposed Rule Changes Received From Members, Participants or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Changes and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) \13\ thereunder in
that it effects a change that: (i) Does not significantly affect the
protection of investors or the public interest; (ii) does not impose
any significant burden on competition; and (iii) by its terms, does not
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of the proposed 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 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 proposal 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 No. SR-CHX-2010-07 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 No. SR-CHX-2010-07. 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 available publicly. All
submissions should refer to File No. SR-CHX-2010-07 and should be
submitted on or before May 13, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-9270 Filed 4-21-10; 8:45 am]
BILLING CODE 8011-01-P