[Federal Register Volume 67, Number 196 (Wednesday, October 9, 2002)]
[Notices]
[Pages 62999-63001]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-25670]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46592; File No. SR-CHX-2002-28]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 by the 
Chicago Stock Exchange, Incorporated To Amend the CHX Membership Dues 
and Fees Schedule to Reduce Tape A and Tape B Specialist Credits, 
Reduce Floor Broker Earned Credits, and Increase the OTC Specialist 
Fixed Fees

October 2, 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 September 3, 2002, 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 Exchange. On 
September 30, 2002, the CHX amended the proposal.\3\ The Exchange has

[[Page 63000]]

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,\4\ which renders the proposal effective upon filing with the 
Commission. 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\ See September 27, 2002 letter from Ellen J. Neely, Senior 
Vice President and General Counsel, CHX, to Nancy J. Sanow, Division 
of Market Regulation, Commission (``Amendment No. 1'') Amendment No. 
1 completely replaces and supersedes the original filing. For 
purposes of calculating the 60-day abrogation period, the Commission 
considers the period to have commenced on September 30, 2002, the 
date the CHX filed Amendment No. 1.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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'') for the period from September through December 
2002, to (1) reduce the Tape A and Tape B specialist credits; (2) 
reduce the floor broker earned credits; and (3) increase the OTC 
specialist fixed fees. The text of the proposed rule change is below. 
Proposed new language is in italics; proposed deletions are in 
brackets.

Membership Dues and Fees

* * * * *

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 Security                        =  No change to text
Fixed Fee For Specialist [Member] Firms Trading Nasdaq/NMS        =  The lowest monthly fixed fee charged each
 Securities                                                           member firm for period from January
                                                                      through June 2002, less the market data
                                                                      rebate earned by the firm in June, 2002.
                                                                      (Effective July 2002)
                                                                 ..  For each month from September 2002 through
                                                                      December 2002, each specialist firm shall
                                                                      be charged a Fixed Fee Charge equal to
                                                                      that specialist firm's pro rata share of
                                                                      an additional $10,000 monthly fee. A
                                                                      specialist firm's pro rata share shall be
                                                                      based on the firm's percentage
                                                                      participation in the total market data
                                                                      rebates paid to specialist firms trading
                                                                      Nasdaq/NMS Securities in June 2002.
 

* * * * *

M. Credits

1. Specialist Credits
    Total monthly fees owed by a specialist to the Exchange will be 
reduced (and specialists will be paid each month for any unused credits 
by the application of the following credits):
    a. Effective July 1, 2002 for transactions in Tape A Securities:

------------------------------------------------------------------------
  CHX monthly CTA trade volume by
          stock (percent)                Transaction credit (percent)
------------------------------------------------------------------------
                    < 7                                   18
                   7-12                                   45
          12                                   70
------------------------------------------------------------------------

    ``Tape A Securities'' are securities reported on Tape A of the 
Consolidated Tape Association.
    ``Transaction Credit'' when used in connection with Tape A 
Securities means the applicable percentage of monthly CHX tape revenue 
from the Consolidated Tape Association generated by a particular stock. 
To the extent that CHX tape revenue is subject to a year end 
adjustment, specialist credits may be adjusted accordingly.
    For each month from September 2002 through December 2002, the 
Transaction Credit calculated above for each specialist firm shall be 
decreased by an amount equal to that specialist firm's ``Credit 
Reduction Charge,'' which shall be calculated as follows:
    (Total CHX Monthly Tape A Transaction Credits / Total CHX Monthly 
Tape A & B Transaction Credits) x $40,000 = Tape A Pro Rata Share
    (Specialist's Monthly Tape A Transaction Credits / Total CHX 
Monthly Tape A Transaction Credits) x Tape A Pro Rata Share = 
Specialist's Credit Reduction Charge
    b. Effective July 1, 2002 for transactions in Tape B Securities:

------------------------------------------------------------------------
  CHX monthly CTA trade volume by
          stock (percent)                Transaction credit (percent)
------------------------------------------------------------------------
                <=5.75%                                   18
       5.75%                                  50%
------------------------------------------------------------------------

    ``Transaction Credit'' when used in connection with Tape B 
Securities means the applicable percentage of monthly CHX tape revenue 
from the Consolidated Tape Association generated by a particular stock. 
To the extent that CHX tape revenue is subject to a year end 
adjustment, specialist credits may be adjusted accordingly.
    ``Tape B Securities'' are securities reported on Tape B of the 
Consolidated Tape Association.
    For each month from September 2002 through December 2002, the 
Transaction Credit calculated above for each specialist firm shall be 
decreased by an amount equal to that specialist firm's ``Credit 
Reduction Charge,'' which shall be calculated as follows:
    (Total CHX Monthly Tape B Transaction Credits / Total CHX Monthly 
Tape A & B Transaction Credits) x $40,000 = Tape B Pro Rata Share 
(Specialist's Monthly Tape B Transaction Credits / Total CHX Monthly 
Tape B Transaction Credits) x Tape B Pro Rata Share = Specialist's 
Credit Reduction Charge
2. Floor Broker Credits
a. Earned Credits.
    Effective January 1, 2001, total monthly fees owed by a floor 
broker to the Exchange will be reduced by the application of the 
following Earned Credit (and floor brokers will be paid each month for 
any unused credits):
* * * * *
    For each month from September 2002 through December 2002, the 
Earned Credit calculated above for each floor broker shall be decreased 
by an amount equal to that floor broker's ``Credit Reduction Charge,'' 
which shall be calculated as follows:
    (Floor Broker's Monthly Earned Credit / Total CHX Monthly Earned 
Credits) x $50,000 = Floor Broker's Credit Reduction Charge
* * * * *

[[Page 63001]]

3. Credits for Qualified Market Makers Registered in Cabinet Securities
    No change to text.
* * * * *

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 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 CHX proposes to amend the Schedule by (1) reducing the Tape A 
and Tape B credits provided to Exchange specialists; (2) reducing the 
earned credits available to Exchange floor brokers; and (3) increasing 
the fixed fees charged to specialists who trade OTC securities. These 
changes apply for the period from September through December 2002.
    The Exchange, like other business entities, sets financial goals 
for its operations, and attempts, throughout the year, to make 
decisions that permit it to meet or exceed those goals. To help meet 
the Exchange's goals for 2002, the Exchange has decided to temporarily 
reduce certain credit programs and to increase certain fees.
    In doing so, the CHX has designed the proposed changes to the 
credit and fee arrangements to have an equal effect on the Exchange's 
specialist firms, as a group, and its floor broker firms, as a group. 
Within each of these two groups, the fee changes are designed to impact 
specific firms based on the level of their current participation in the 
credit and/or fee programs.\5\ The Exchange believes that its member 
firms are in agreement with this proposal.
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    \5\ For example, for each of the months from September to 
December 2002, the Exchange's specialists that trade securities 
reported on Tape A of the Consolidated Tape Association, will be 
assessed a credit reduction charge that is based on their share of 
the total Tape A transaction credit for those months.
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    The changes in the credit section of the Schedule (Section M) 
decrease the credits from the levels that were set in July 2002 as a 
result of discussions with Commission staff.\6\ Among other things, the 
Tape B transaction credits outlined in the Schedule continue to be 50% 
or less.
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    \6\ See Securities Exchange Act Release No. 46231 (July 19, 
2002), 67 FR 48687 (July 25, 2002)(SR-CHX-2002-22).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b)(4) of the Act \7\ in that it provides for the equitable 
allocation of reasonable dues, fees and other charges among its 
members.
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    \7\ 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 
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

    No written comments were solicited or received.

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

    The proposed rule change has become effective pursuant to section 
19(b)(3)(A)(ii) of the Act \8\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\9\ because it involves a due, fee, or other charge. 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.\10\
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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 17 CFR 240.19b-4(f)(2).
    \10\ See footnote 3, supra.
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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 proposal 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 number SR-CHX-2002-28, and should be 
submitted by October 30, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-25670 Filed 10-8-02; 8:45 am]
BILLING CODE 8010-01-P