[Federal Register Volume 61, Number 68 (Monday, April 8, 1996)]
[Notices]
[Pages 15544-15545]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-8546]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37054; File No. SR-CHX-96-10]
Self-Regulatory Organizations; The Chicago Stock Exchange
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to Clearing Support and Other Fees
April 1, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
\1\ (``Act''), notice is hereby given that on February 29, 1996, the
Chicago Stock Exchange, Incorporated (``CHX'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change (File No. SR-CHX-96-10) as described in Items I, II, and III
below, which items have been prepared primarily by the CHX. The CHX
supplemented the filing on March 18, 1996, to clarify and to provide
additional detail to the original filing.\2\ The Commission is
publishing this notice to solicit comments on the proposed rue change
from interested persons.
\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ Letter from George T. Simon Foley & Lardner [counsel to
CHX], to Glenn Barrentine, Senior Attorney, Division of Market
Regulation, Commission (March 25, 1995).
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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 Membership Dues and Fees Schedule by
deleting the P&L System report fee and by adding new clearing support
fees which pertain to certain additional services that the CHX will
provide to its floor members and member organizations as a result of
Midwest Clearing Corporation's (``MCC'') withdrawal from the securities
clearing business.\3\
\3\ For a discussion of MCC's withdrawal from the securities
clearing business, refer to Securities Exchange Act Release No.
36684 (January 5, 1996), 61 FR 1195 [File No. SR-MCC-95-04] (order
approving proposed rule change).
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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, 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 section (A),
(B), and (C) below, of the most significant aspects of such
statements.\4\
\4\ The Commission has modified the text of the summaries
prepared by CHX.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The primary purpose of the proposed rule change is to delete from
the CHX's Membership Dues and Fees schedule the P&L System report fees
and to institute new clearing support fees. The new fees will be
charged in connection with certain additional services that the CHX
will provide to floor members and member organizations as a result of
the MCC's withdrawal from the securities clearing business. The
clearing support fees are applicable to all members and member
organizations that have entered into an agency agreement with the CHX
pursuant to Article XXI, Rule 13 of the CHX's rules. The agency
agreements will authorize the CHX to perform various functions on
behalf of such a member, including, among other things, (i) drawing
upon and depositing to such member's bank account, (ii) borrowing of
securities and providing reports and records for such member, and (iii)
performing special cashiering functions for such member. The two
categories of clearing support fees are account fees and CUSIP fees,
which will compensate the CHX for its time and effort in providing
these agency services.
Account fees include a fee for (i) a master account, (ii) each
additional master account, and (iii) each sub-account. Each firm that
enters into an agency agreement must establish a master account and a
sub-account. In addition, firms may have additional master accounts or
sub-accounts. The interest in maintaining more than one
[[Page 15545]]
master account has been expressed to the CHX by its member firms that
have several joint ventures on the floor of the CHX. Such members have
requested additional master accounts so that they can segregate their
pay and collect figures, dividends, and reorganization processing with
respect to each entity on the exchange floor. In addition, in response
to the request of member firms that have more than one registered co-
specialist trading for them, CHX members will be able to maintain more
than one sub-account so that they may maintain a sub-account for each
of their co-specialists. This will enable such firms to receive
separate purchase and sale reports and profit and loss reports for each
co-specialist while also receiving reports of aggregate figures at the
master account level.
CUSIP fees are divided into three categories: (i) the specialist
CUSIP fee, (ii) the market maker CUSIP fee, and (iii) the floor broker
as principal fee. The CHX will charge a floor broker that trades as
principal and has entered into an agency agreement a certain monthly
fee for each CUSIP in which such floor broker trades as principal.
Likewise, a market maker that enters into an agency agreement will be
charged a monthly fee for each CUSIP in which it is registered as a
market maker. The CHX will charge a specialist that has entered into an
agency agreement a monthly fee for each CUSIP in which it is registered
as a specialist. For a specialist, the amount of the fee per CUSIP will
vary depending on the number of trades that the specialist has in a
particular CUSIP in given month. Thus, the amount of the per CUSIP fee
for specialists will be discounted for CUSIPs in which trading is below
certain thresholds.
The different CUSIP fees for each of the three categories are based
upon the difference in expected account activity and the different
expenses that the CHX will incur in servicing accounts for market
makers, specialists, and floor brokers as principal. For example,
because the CHX expects specialists to have the most activity per
CUSIP, resulting in the greatest amount of staff time expended to
produce reports and to provide the services contemplated by the agency
agreement, specialists have the highest CUSIP fee.
The CHX also proposes to add a new self-regulatory organization
(``SRO'') fee that is applicable to all CHX members and member
organizations. This fee relates to the additional costs that the CHX
will incur in performing SRO obligations, such as capturing certain
surveillance information and producing surveillance reports. Prior to
MCC's withdrawal from the securities clearing business, the CHX
received certain surveillance information from and utilized the
expertise of MCC at no cost.
The text of the proposed rule change is as follows:
Chicago Stock Exchange, Incorporated, Membership Dues and Fees,
Additions are Underlined ; Deletions [Bracketed]
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$125 per account per month,
(o) [MSE P&L System Reports and 20 cents per trade]
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Clearing Support Fees:
(1) Account Fees:
First Master Account Fee................ $500 per month
Additional Master Account Fee........... $300 per month
Sub-Account Fees........................ $100 per account per month
(2) CUSIP Fees:
Specialist CUSIP Fee.................... $50 per CUSIP per month
Market Maker CUSIP Fee.................. $10 per CUSIP per month
Floor Broker as Principal............... $2 per CUSIP per month
(minimum clearing support fee is $600 per month)
Discounts:
The above Specialist CUSIP Fee will be subject to the following
discounts:
If between 20 and 200 trades occur in a particular CUSIP in a given
month, the Specialist CUSIP Fee for that CUSIP shall be $40 for that
month.
If less than 20 trades occur in a particular CUSIP in a given month,
the Specialist CUSIP Fee for that CUSIP shall be $20. for the month.
(p) (Reserved)
(q) Self-Regulatory Organization Fee $100 per month and member
organization per month
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The CHX believes the proposed rule change is consistent with
Section 6(b)(4) of the Act in that it provides for the equitable
allocation of reasonable dues, fees, and other charges among its
members and issuers and persons using its facilities.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The CHX does not believe that the proposed rule change will impose
a burden on competition.
(C) Self-Regulatory Organization's Statement of Comments on the
Proposed Rule Change Received From Members, Participants or Others
No written comments were solicited or received by the CHX.
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) 5 of the Act and pursuant to Rule 19b-4(e)(2)
6 promulgated thereunder because the proposal establishes or
changes a due, fee, or other charge imposed by the CHX At
any time within sixty 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 purposes of the Act.
\5\ 15 U.S.C. 78s(b)(3)(A)(ii) (1988).
\6\ 17 CFR 240.19b-4(e)(2) (1994).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing. Persons making written submission
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street NW., Washington, D.C. 20549.
Copies of the submissions, 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, 450 Fifth Street NW., Washington,
D.C. 20549. Copies of such filing also will be available for inspection
and copying at the CHX. All submissions should refer to file number SR-
CHX-96-10 and should be submitted by April 29, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-8546 Filed 4-5-96; 8:45 am]
BILLING CODE 8010-01-M