[Federal Register Volume 67, Number 93 (Tuesday, May 14, 2002)]
[Notices]
[Pages 34505-34506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-11950]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45892; File No. SR-CHX-2002-08]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change Thereto by the Chicago Stock 
Exchange, Inc. Amending the Specialist Fee Schedule for Certain Nasdaq 
National Market Securities and Certain Tape B Issues

May 7, 2002.
    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 26, 2002, the Chicago Stock Exchange, Inc. (``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 Exchange.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The proposal was originally filed on March 29, 2002. On 
April 26, 2002, the CHX amended the proposal. See Letter from Ellen 
J. Neely, Senior Vice President and General Counsel, CHX, to 
Katherine A. England, Assistant Director, Division of Market 
Regulation, Commission (April 25, 2002) (``Amendment No. 1'').
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to amend its membership dues and fees 
schedule (``Schedule'') to provide for wider application of a recently-
enacted specialist fee exemption \4\ in the case of certain modestly 
traded Nasdaq National Market (``NNM'') securities and certain modestly 
traded Tape B securities, securities listed for trading on the American 
Stock Exchange, Inc (``Amex''). The text of the proposed rule change is 
available at the principal offices of the CHX and at the Commission.
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    \4\ See Securities Exchange Act Release No. 45661 (March 27, 
2002), 67 FR 16481 (April 5, 2002).

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[[Page 34506]]

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 the 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 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 Exchange is proposing to amend the Schedule to provide wider 
application of a recently-enacted specialist fee exemption in the case 
of certain modestly traded NNM securities and certain modestly traded 
Tape B securities. Specifically, the proposed changes to the Schedule 
would modify the definition of ``Exemption Eligible Securities,'' \5\ 
which are exempt from otherwise applicable CHX fixed fees, assignment 
fees, and application fees.
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    \5\ Under the proposed rule change to the Schedule, ``Exemption 
Eligible Security'' would include either of the following categories 
of issues:
    (a) any NNM security, which averages fewer than 1000 trades per 
day that are reported to the consolidated tape on an average daily 
basis during the applicable three-month measuring period. In the 
case of an NNM security assigned to a CHX specialist, the CHX shall 
make a semi-annual determination based on the most recent available 
data for the three-month period preceding the determination date. In 
the case of an NNM security that is not currently assigned to a CHX 
specialist, the CHX shall make its determination based on the most 
recent available data for the three-month period preceding the date 
on which a specialist submits an application for assignment of the 
security. Any NNM security that has had trades reported to the 
consolidated tape for less than three months (or for which three 
months' data is unavailable) is expressly excluded from this 
definition.
    (b) any Tape B issue, which averages fewer than 400 trades per 
day in the national market system on an average daily basis during 
the applicable three-month measuring period. In the case of a Tape B 
issue assigned to a CHX specialist, the CHX shall make a semi-annual 
determination based on the most recent available data for the three-
month period preceding the determination date. In the case of a Tape 
B issue that is not currently assigned to a CHX specialist, the CHX 
shall make its determination based on the most recent available data 
for the three-month period preceding the date on which a specialist 
submits an application for assignment of the security. Any Tape B 
issue that has been traded in the national market system for less 
than three months (or for which three months' data is unavailable) 
is expressly excluded from this definition.
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    As set forth in the Exchange's recently-enacted specialist fee 
exemption, the Exchange believes that the fee exemption constitutes an 
appropriate means of ensuring that the Exchange continues to trade an 
appropriate number of modestly traded securities. For a variety of 
reasons, some specialists have deregistered from certain issues 
formerly assigned to such specialists for trading on the CHX pursuant 
to unlisted trading privileges. At the same time, CHX floor brokers 
continue to receive orders for many of these ``dropped'' issues; such 
floor brokers view continued CHX trading of a wide variety of issues to 
be critical to their customers and an important part of the Exchange's 
overall strategic plan. Accordingly, the CHX has devised the proposed 
fee exemption, which the CHX believes will provide sufficient economic 
incentive for specialists to continue trading a wide array of issues.
    Following one month's review and analysis of the effect of the 
recently-enacted fee exemption, the Exchange has determined that it is 
appropriate to expand the definition of ``Exemption Eligible 
Securities'' to include NNM securities with average daily volume of up 
to 1000 trades in the Nasdaq marketplace, as well as Tape B issues with 
average daily volume of up to 400 trades in the national market system.
    The Exchange anticipates that by expanding the scope of issues to 
which the exemption applies, the Exchange will provide the intended 
incentive for firms to continue trading issues that might otherwise be 
``dropped'' from trading at the CHX.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\6\ generally, and Section 6(b)(4) of the Act \7\ in that it is 
designed to provide for the equitable allocation of reasonable dues, 
fees, and other charges among Exchange members.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The CHX does not believe that the proposed rule change will result 
in 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

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective on filing pursuant 
to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(2) 
thereunder,\9\ as establishing or changing a due, fee, or other charge 
paid solely by members of the CHX. At any time within 60 days of the 
filing of such 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.\10\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(2).
    \10\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
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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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC 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. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
CHX. All submissions should refer to File No. SR-CHX-2002-08 and should 
be submitted by June 4, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
Margaret H. McFarland,
Deputy Secretary.
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    \11\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 02-11950 Filed 5-13-02; 8:45 am]
BILLING CODE 8010-01-P