[Federal Register Volume 67, Number 183 (Friday, September 20, 2002)]
[Notices]
[Pages 59322-59324]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-23886]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46498; File No. SR-CHX-2002-24]


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

September 13, 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 July 31, 2002, the Chicago Stock Exchange, Incorporated (``CHX'' or 
Exchange'') filed with the Securities and Exchange Commission (``SEC'' 
or Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. 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.
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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 
(the ``Schedule''), effective August 1, 2002, to change the calculation 
of the fixed fee charged to specialists trading Dual Trading System 
securities and to reduce the fees relating to the assignment of Nasdaq/
NM securities. The text of the proposed rule change is below.

[[Page 59323]]

Proposed new language is in italics. Proposed deletions are bracketed.

Membership Dues and Fees

* * * * *
    A.-C. No change to text.
D. Specialist Assignment Fees

Specialist Application Fee........  $150 per application [filed after
                                     April 1, 2000].
Assignment Fee of Dual Trading      [Beginning on April 1, 2000,]
 System Securities.                  O[o]nce the Committee on Specialist
                                     Assignment and Evaluation approves
                                     a member organization to act as
                                     specialist in a security, that
                                     member organization must pay the
                                     following fee:
                                    $350 If the security was assigned
                                     without competition.
                                    $1,000 If the security was assigned
                                     in competition with at least one
                                     other member firm and up to one-
                                     third of all member firms that
                                     trade Dual Trading System
                                     Securities.
                                    $4,000 If the security was assigned
                                     in competition with more than one-
                                     third of all member firms that
                                     trade Dual Trading System
                                     Securities.
Assignment of Nasdaq/NM Securities  Beginning on [April 1, 2000] August
                                     1, 2002, once the Committee on
                                     Specialist Assignment and
                                     Evaluation approves a member
                                     organization to act as specialist
                                     in a security, that member
                                     organization must pay the following
                                     fee:
                                    [$2,000] $350 If the security was
                                     assigned without competition.
                                    [$4,000] $1,000 If the security was
                                     assigned in competition with [at
                                     least] one other member firm [and
                                     up to one-third of all member
                                     firms] that trades Nasdaq/NM
                                     Securities.
                                    [$15,000] $4,000 If the security was
                                     assigned in competition with [more
                                     than] two or more other [one-third
                                     of all] member firms that trade
                                     Nasdaq/NM Securities.
 

* * * * *
E. Specialist Fixed Fees
    Except in the case of Exemption Eligible Securities (as defined 
above in Section D), which shall be exempt from assessment of fixed 
fees, specialists will be assigned a fixed fee per assigned stock on a 
monthly basis, to be calculated as follows:

Fixed Fee Per Dual Trading System   [$417,000 x Percent of Fixed Costs
 Security =                          Per Tier x CTA Trade Volume Per
                                     Security/CTA Trade Volume Per Tier.
                                     (Effective April 1, 2000).]
                                    $500,000 x Percent of Fixed Costs
                                     Per Tier x CTA Trade Volume Per
                                     Security/CTA Trade Volume Per Tier.
                                     (Effective August 1, 2002 [October
                                     1, 2000]).
Fixed Fee For Member Firms Trading  No change to text.
 Nasdaq/NMS Securities=
Fixed Fee Per Dedicated Odd-Lot     No change to text.
 Dealer.
 

    ``Percent of Fixed Costs Per Tier'' is taken from the following 
table:

------------------------------------------------------------------------
                                                 Percent of fixed costs
       Tier            Description of tier              per tier
------------------------------------------------------------------------
1.................  1-25 Most Active           [11%] 17%
                     Securities.
2.................  26-100...................  [11%] 18%
3.................  101-200 [250]............  [12%] 15%
4.................  201+ [251-500]...........  [13%] 50%
[5]...............  [501-1000]...............  [19%]
[6]...............  [1001-2700+].............  [34%]
------------------------------------------------------------------------

    Classification of a particular security for a particular Tier is 
based on the total number of trades reported to the Consolidated Tape 
Association in such security for a specific month.
    ``CTA Trade Volume Per Security'' means the total number of trades 
reported to the Consolidated Tape Association in a specific security 
for a specific month.
    ``CTA Trade Volume Per Tier'' means the total number of trades 
reported to the Consolidated Tape Association in all securities 
classified in a particular Tier for a specific month.
    ``Dedicated Odd-Lot Dealer'' means any odd-lot dealer (as defined 
in Article XXXI, Rule 3) whose principal business is the trading of 
odd-lots.
* * * * *

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. 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 by (1) changing the 
fixed fees charged specialists who trade Dual Trading System 
securities; and (2) reducing the fees associated with the assignment of 
Nasdaq/NM securities.\3\ Each of these changes is described below.
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    \3\ Dual Trading System issues are securities that are traded on 
the Exchange and on either the American Stock Exchange or the New 
York Stock Exchange.
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    Change in the Dual Trading System Specialist Fixed Fee. For a 
number of years, the fixed fee charged to specialists trading Dual 
Trading System issues has been calculated so that specialists pay a 
lower percentage of the fixed fee on securities that trade the most 
and, correspondingly, a higher percentage of the fixed fee on 
securities that trade the least. The Exchange does not use this tiered 
structure in its assessment of fixed fees for specialists trading 
Nasdaq/NM securities, and Exchange management does not believe that, in 
the long term, it is appropriate to continue using it in the Dual 
Trading System specialist program. However, to avoid the quite 
significant impact on a few individual firms that would result from 
immediately collapsing all of the tiers into one, the attached rule 
text would collapse the existing six tiers into four and place 
additional portions of the fee on the more actively traded stocks.
    Decrease in Nasdaq/NM Assignment Fees. Several years ago, for a 
variety of reasons, the Exchange began charging specialists who sought 
assignment of Nasdaq/NM securities a higher fee than specialists who 
sought assignment of Dual Trading System issues. Given the decrease in 
the number of Nasdasq/NM

[[Page 59324]]

issues traded on the Exchange, it no longer appears appropriate to 
maintain this different fee schedule. As a result, this proposal would 
decrease the Nasdaq/NM assignment fees to be more like the fees charged 
for the assignment of Dual Trading System securities.
2. Statutory Basis
    The proposed rule change is consistent with section 6(b)(4) of the 
Act \4\ in that it provides for the equitable allocation of reasonable 
dues, fees and other charges among its members.
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    \4\ 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 
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 proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A)(ii) of the Act \5\ and subparagraph 
(f)(2) of Rule 19b-4 \6\ thereunder, because it establishes or changes 
a due, fee, or other charge. At any time within 60 days of the filing 
date, 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.
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    \5\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \6\ 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. 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 
Exchange. All submissions should refer to File No. SR-CHX-2002-24 and 
should be submitted by October 11, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-23886 Filed 9-19-02; 8:45 am]
BILLING CODE 8010-01-P