[Federal Register Volume 65, Number 60 (Tuesday, March 28, 2000)]
[Notices]
[Pages 16443-16444]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-7586]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42561; File No. SR-CHX-00-06]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Stock Exchange, 
Incorporated, Amending Its Membership Dues and Fees Schedule

March 22, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice hereby is given that on March 3, 2000, the Chicago 
Stock Exchange, Incorporated (``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 prepared by the CHX. The CHX has designated this proposal as one 
establishing or changing a due, fee, or other charge imposed by the CHX 
under Section 19(b)(3)(A)(ii) of the Act,\2\ 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\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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 
(``Schedule'') in several ways. These changes increase the membership 
dues paid by all members; revise the fixed fees and credits for all 
securities; revise the application and assignment fee structure for all 
securities; and reflect charges relating to the processing of 
applications. The text of the proposed rule change is available upon 
request from the CHX or the Commission.

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 Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received regarding the proposed rule change. 
The text of these statements may be examined at the places specified in 
Item IV below. The Exchange 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
    The proposed rule change amends the Schedule in several ways. These 
changes are designed to allow the Exchange to continue its rapid growth 
while providing a strong market for its members and for investors.
    First, the proposal increases the annual membership dues for all 
members by $1,800 (from $3,200 to $5,000 per year). These dues are paid 
in equal monthly installments throughout the year. The proposal would 
increase the payments beginning April 1, 2000.\3\
---------------------------------------------------------------------------

    \3\ Because the increase takes effect during the year, a member 
will not pay the full $5,000 in 2000; instead, a member will pay 
approximately $4,550 (three months at $266.66/month plus nine months 
at $416.66/month equals $4,549.92).
---------------------------------------------------------------------------

    Second, the proposal revises the specialist fixed fees and credits 
for all securities by increasing the specialist fixed fees and credits 
for Dual Trading System Securities and by imposing a specialist fixed 
fee and a credit for Nasdaq/NM Securities. The specialist fixed fee is 
paid by the specialist in a particular security; the amount of the fee 
is based either on the trading volume in that security (for Dual 
Trading System Securities) or on a market share calculation in that 
security (for Nasdaq/NM Securities) \4\ Specialist credits are designed 
to reduce the total monthly fees paid by each specialist and to reduce 
the costs of trading on the

[[Page 16444]]

Exchange for members who make particular contributions to the 
Exchange's overall success.
---------------------------------------------------------------------------

    \4\ According to the proposed schedule, the fixed fee for Dual 
Trading System Securities would increase on April 1, 2000, and again 
on October 1, 2000; the new fixed fee for Nasdaq/NM Securities would 
begin on April 1, 2000. The Exchange has charged its members a fixed 
fee on Dual Trading System Securities for many years; this proposed 
revision to the Schedule represents the first time that the Exchange 
would charge a fixed fee on its nascent Nasdaq/NM Securities product 
line. These new Nasdaq/NM-related fixed fees allow the Exchange to 
defray, at least partially, the costs associated with the continued 
development and anticipated growth of this program. The Exchange 
believes it is appropriate, at least initially, to begin assessing 
this new Nasdaq/NM Securities fixed fee at a somewhat lower level 
than the fee that has been in place for Dual Trading System 
Securities for a number of years in order to allow members time to 
adjust their business models to this new requirement.
---------------------------------------------------------------------------

    The proposed also imposes a $150 fee on each application submitted 
by a member organization to act as the specialist in a security and 
revises the fee paid per assignment by the member organization 
ultimately chosen to fulfill the specialist role. These revised fees 
are smallest for assignments made when only one firm is seeking to act 
as the specialist on a particular security, and then increase in two 
tiers, depending on how many firms seek a common assignment. This 
revised fee structure reflects, in part, the increased work involved 
both in processing multiple specialist applications for the same 
security and in bringing those issues before the Exchange's Committee 
on Specialist Assignment and Evaluation. This structure also reflects 
the Exchange's belief that an assignment sought by more than one 
specialist firm is a more valuable assignment than one that is not the 
subject of competition.\5\ These modified fees take effect on April 1, 
2000.
---------------------------------------------------------------------------

    \5\ Under the proposed arrangement, the Exchange will continue 
its practice of charging somewhat higher fees for the assignment of 
Nasdaq/NM Securities than for the assignment of Dual Trading System 
Securities. The Exchange believes this structure appropriately 
reflects the increasing amount of work related to the number of 
specialist applications the Exchange receives for the assignment of 
Nasdaq/NM Securities. The higher fee will also help to offset at 
least some of the development costs associated with the growing 
Nasdaq/NM Securities program by directly assessing the firms being 
assigned the opportunity to act as specialists in Nasdaq/NM 
Securities. More importantly, demand for Nasdaq/NM issues exceeds 
the supply available under the Exchange's current pilot program, 
which permits the Exchange to trade only 1,000 Nasdaq/NM Securities. 
The Exchange believes that the higher fee will, in part, moderate 
that demand. See Securities Exchange Act Release No. 41392 (May 12, 
1999), 64 FR 27839 (May 21, 1999), (S7-24-89), increasing the 
permissible number of Nasdaq/NM Securities eligible for trading on 
the CHX on an unlisted or listed basis from 500 to 1,000.
---------------------------------------------------------------------------

    Finally, the proposal defines the amounts of the fees for the 
fingerprinting and background checks required as part of the membership 
and floor employee application process, and also states the amount of 
the fee for replacing a floor access badge.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
in general and furthers the objectives of Section 6(b)(4) \6\ in 
particular in that it is intended to provide for the equitable 
allocation of reasonable dues, fees and other charges among its members 
and issuers and other persons using its facilities.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement of Burden on Competition

    The CHX does not believe that the proposed rule change will impose 
any inappropriate burden on competition.

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

    Written comments were neither solicited nor received with respect 
to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
Commission Action

    Because the foregoing rule change establishes or changes a due, 
fee, or other charge imposed by the CHX, it has become effective 
pursuant to Section 19(b)(3)(A) of the Act \7\ and paragraph (f)(2) of 
Rule 19b-4 thereunder.\8\ 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.\9\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(2).
    \9\ In reviewing this proposal, the Commission has considered 
the proposal's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-
0609. 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 inspection and copying in the 
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, 
D.C. Copies of such filing will also be available for inspection and 
copying at the principal office of the Exchange. All submissions should 
refer to File No. SR-CHX-00-06 and should be submitted by April 18, 
2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).

Maragret H. McFarland,
Deputy Secretary.
[FR Doc. 00-7586 Filed 3-27-00; 8:45 am]
BILLING CODE 8010-10-M