[Federal Register Volume 68, Number 12 (Friday, January 17, 2003)]
[Notices]
[Pages 2599-2601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1102]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47175; File No. SR-CHX-2002-38]


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

January 13, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on December 23, 2002, the Chicago Stock Exchange, Inc. 
(``Exchange'' or ``CHX'') submitted to 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 CHX. The Exchange 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,\3\ which renders the proposal 
effective upon filing with the SEC.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ The proposal affects only fees and charges assessed to 
members. Telephone conversation between Ellen Neely, General 
Counsel, CHX and Tim Fox, Attorney, Division of Market Regulation, 
Commission, January 9, 2003.
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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 January 1, 2003, to: (1) Increase 
membership dues from $5,000 to $6,000 per year; (2) eliminate the fee 
relating to member firm branch offices; (3) extend the OTC Fixed Fee 
Charge, Listed Specialist Credit Reduction Charge and Floor Broker 
Credit Reduction Charge; (4) increase the monthly caps on transaction 
fees on orders sent through the Exchange's MAX[hairsp][hairsp][reg] 
system; (5) add a new processing fee for certain transactions in OTC 
securities; and (6) revise references to certain Nasdaq charges and 
make other clarifying changes.
    The text of the proposed rule change is below. Proposed additions 
are in italics and proposed deletions are in [brackets].

Membership Dues and Fees

* * * * *

A. Membership Dues and Transfer Fees

    All members: Effective [April 1, 2000] January 1, 2003, [$5,000] 
$6,000 per year, payable monthly in equal installments.
    Transfer of memberships: No change to text.

B. Self-Regulatory Organization Fee

    No change to text.

C. Registration Fees

    Firm or Corporation: No change to text.

[Office (other than principal)]:
    [$25 per year (up to a maximum of 1,500 offices each year) and $25 
for each additional registration during the year.]

    Off-Floor Traders: No change to text.
    Clerks: No change to text.
    Registration Processing Fees: No change to text.

D. Specialist Assignment Fees

    No change to text.

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 Firms Trading Nasdaq/NMS Securities =
    The lowest monthly fixed fee charged each member firm for the 
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,] E[e]ach 
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.
* * * * *

F. Transactions and Order Processing Fees

    1. SEC Transaction Fees: No change to text.
    2. NASD Fees on Cleared Transactions: No change to text.
    3. Order Processing Fees: No change to text.
    4. Transaction Fees:
    a. to g: No change to text.
    h. Effective January 1, [2001] 2003, monthly maximums for fees:
    (1) Maximum monthly transaction fees [$7,000] $10,000 for orders 
sent via MAX
    (2) Maximum monthly transaction fee $110,000 for transactions in 
NASDAQ/NMS Securities (other than transactions included in (1) above)
    (3) Maximum monthly transaction fee $110,000 for transactions in 
Dual Trading System Securities (other than transactions included in (1) 
above
    (4) Maximum monthly transaction fees shall not exceed the lesser of 
that specified in (1), (2) or (3) above, or $.40 per 100 average 
monthly gross round lot shares.
* * * * *

H. Equipment, Information Services and Technology Charges

* * * * *
    Telephone Charges: No change to text.

[Tools of the Trade Access]
    [Each specialist firm shall be billed on a monthly basis, based on 
usage by each of the firm's OTC/UTP co-specialists, for actual Tools of 
the Trade access charges that become due in accordance with the 
Exchange's license agreement with Financial Systemware, Inc.]

[Tools of the Trade Connection Charges]
    [All Tools of the Trade Connection Charges (i.e., the costs of 
providing access to and use of the Exchange's Tools of the Trade server 
to facilitate OTC/UTP trading) shall be allocated pro rata on a monthly 
basis among all specialist firms that use Tools of the Trade in OTC/UTP 
trading, based on the number of OTC/UTP co-specialists at each firm 
using Tools of the Trade software.]

    Server and Network Infrastructure: All Server and Network 
Infrastructure.
    Charges; Nasdaq Connection Charges: Charges and all Nasdaq 
Connection Charges (i.e., the costs of providing access to and use of 
the Exchange's Nasdaq servers to facilitate OTC/UTP

[[Page 2600]]

trading) shall be allocated pro rata on a monthly basis among all 
specialist firms engaged in OTC/UTP trading, based on the number of 
OTC/UTP co-specialists at each firm.
    Time clocks: No change to text.
    Cable TV: No change to text.
    [ACT/Select Net access]: No change to text.

Nasdaq/Nasdaq Tools Fees and Charges

* * * * *
    MAX Connection Charges: No change to text.

MAX Access Charge

    $1,000 per access point, allocated pro rata among the firms that 
gain access to the Exchange's MAX system through that access point.

I. Clearing Support Fees

(Minimum clearing support fee is $600 per month)

    1. Account Fees: No change to text.
    2. CUSIP Fees: No change to text.

3. Processing Fees

Transactions in OTC securities that are executed by floor brokers in 
securities that are not assessed a Specialist OTC CUSIP Fee but are 
processed by the Exchange's clearing systems
    $.0015/share, up to $100 per side

J. Listing Fees

    No change to text.

K. Market Regulation and Market Surveillance Fees

    No change to text.

L. Supplies and Reports

    No change to text.

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] [f]For transactions in Tape A 
Securities:

------------------------------------------------------------------------
                                                            Transaction
          CHX monthly CTA trade volume by stock               credit
------------------------------------------------------------------------
<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,] [t]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] [f]For transactions in Tape B 
Securities:

------------------------------------------------------------------------
                                                            Transaction
          CHX monthly CTA trade volume by stock               credit
------------------------------------------------------------------------
<=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,] [t]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,] [t]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,] [t]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
* * * * *
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 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. The 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 proposed rule change amends the Schedule in several ways. 
First, the proposal increases membership dues, for all members, from 
$5,000 to $6,000 per year and eliminates the fee relating to member 
firm branch offices. The Exchange believes that it is appropriate to 
eliminate the branch office fees given, among other things, its limited 
involvement in branch office examinations.
    Next, the proposal extends, for an indefinite term, the OTC 
Specialist Fixed Fee Charge, Listed Specialist Credit Reduction Charge 
and Floor Broker Credit Reduction Charge. These charges were put in 
place late last year \5\ and have the impact of increasing the OTC 
Specialist Fixed Fee and reducing the amount of tape credits available 
to

[[Page 2601]]

floor brokers and specialists trading listed securities.
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    \5\ See Securities Exchange Act Release No. 46592 (October 2, 
2002), 67 FR 62999 (October 9, 2002) (SR-CHX-2002-28).
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    The proposal also increases the monthly caps on transaction fees on 
orders sent through the Exchange's MAX[hairsp][hairsp][reg] system, 
adds a new access charge for firms that send orders through the 
Exchange's MAX system and adds a new processing fee for certain 
transactions in OTC securities. The new access charge will apply to 
firms that send orders from outside the Exchange to the Exchange's MAX 
system and is designed to help defray the costs of maintaining system 
access. The new processing fee will apply to transactions by CHX floor 
brokers in OTC securities, when those securities are not traded by a 
CHX specialist, but where the floor broker transactions are processed 
by the Exchange's clearing systems.
    Finally, this proposal revises references to certain Nasdaq charges 
and makes other clarifying changes. Specifically, the proposal updates 
references to Nasdaq's Tools of the Trade product to confirm that this 
product is now offered directly through Nasdaq and confirms that each 
of the Exchange's monthly transaction fee caps apply separately to 
different types of transaction charges.
    The Exchange has proposed these fee changes in connection with the 
development of its 2003 operating budget and believes that these 
changes appropriately and equitably allocate among Exchange members the 
costs associated with providing various Exchange services and the 
overall costs associated with operating the Exchange. All of these 
changes to the Exchange's Schedule of Membership Dues and Fees are 
effective as of January 1, 2003.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(4) of the Act \6\ in that it provides for the 
equitable allocation of reasonable dues, fees and other charges among 
its members.
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    \6\ 15 U.S.C. 78(f)(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 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 either solicited or received.

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

    Because the foregoing proposed rule change establishes or changes a 
member due, fee or other charge, it has become effective pursuant to 
Section 19(b)(3)(A)(ii) of the Act \7\ and subparagraph (f)(2) of Rule 
19b-4 \8\ thereunder.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \8\ 17 CFR 240.19b-4(f)(2).
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    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\
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    \9\ 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-2002-38 and should 
be submitted by February 7, 2003.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\10\

    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-1102 Filed 1-16-03; 8:45 am]
BILLING CODE 8010-01-P