[Federal Register Volume 70, Number 87 (Friday, May 6, 2005)]
[Notices]
[Pages 24143-24145]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2205]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51639; File No. SR-CHX-2005-12]


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

April 29, 2005.
    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 April 21, 2005, 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 CHX. The proposed 
rule change has been filed by the CHX as establishing or changing a 
due, fee, or other charge, pursuant to Section 19(b)(3)(A)(ii) of the 
Act,\3\ and Rule 19b-4(f)(2) \4\ thereunder, 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.
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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\ 17 CFR 240.19b-4(f)(2)..
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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 rules to amend its Participant 
Fee Schedule to allow the Exchange to extend the fixed fee exemption 
for CHXpress[reg] securities to new securities during the course of a 
month. Below is the text of the proposed rule change. Proposed new 
language is in italics; proposed deletions are in [brackets].
* * * * *

PARTICIPANT FEES AND CREDITS

* * * * *

E. Specialist Fixed Fees

    Except in the case of Tape B Exemption Eligible Securities (as 
defined above in Section D), and Designated CHXpress Securities (as 
defined below), 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:
* * * * *
    ``Designated CHXpress Securities'' are those issues which have been 
designated by the Exchange [on a monthly basis] as fixed-fee exempt at 
the beginning of each month, or which have been added by the Exchange 
to the list of exempt securities during the month, with the consent of 
the specialist assigned to trade the issue.
* * * * *

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.

[[Page 24144]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange stated that it is rolling out a new, automated 
functionality for the handling of particular orders, called 
CHXpress.TM According to the Exchange, the CHXpress 
functionality is designed to provide additional opportunities for the 
Exchange's participants to seek and receive liquidity through automated 
executions of orders at the Exchange.\5\ With a few exceptions, 
CHXpress orders will be executed immediately and automatically against 
same or better-priced orders in the specialist's book, or against the 
specialist's quote (when that functionality is available).\6\ If a 
CHXpress order cannot be immediately executed, it will be placed in the 
specialist's book for instantaneous display or later execution.\7\ A 
CHX specialist may not cancel or place a CHXpress order on hold or 
otherwise prevent the order-sending firm from canceling the order.
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    \5\ See Securities Exchange Act Release No. 50481 (Sept. 30, 
2004), 69 FR 60197 (Oct. 7, 2004) (SR-CHX-2004-12).
    \6\ CHXpress orders will not be executed if those executions 
would improperly trade-through another ITS market or if trading in 
the issue had been halted. CHXpress orders that would improperly 
trade through an ITS market or that are received during a trading 
halt will be cancelled. If trading in an issue has been halted, 
CHXpress orders in the book will be cancelled.
    \7\ A CHXpress order will be instantaneously and automatically 
displayed when it constitutes the best bid or offer in the CHX book. 
See CHX Article XX, Rule 37(b)11(D). CHXpress orders, like all other 
orders at the Exchange, will not be eligible for automated display 
if that display would improperly lock or cross the NBBO. A CHXpress 
order that would improperly lock or cross the NBBO will be 
cancelled. CHXpress orders cannot be excluded from the CHX's quote.
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    The Exchange stated that this new functionality currently is 
available in select issues, and the Exchange plans to extend the use of 
this functionality to additional issues in upcoming weeks. Last month, 
the Exchange began exempting, from the specialist fixed fees, 
securities in which CHXpress orders are processed by the Exchange.\8\ 
The Exchange stated that it had planned to identify these securities, 
on a monthly basis, at the beginning of each month, based on business 
factors including the interest demonstrated by order-sending firms in 
trading a particular security. The Exchange also stated that the 
CHXpress functionality was to have been enabled for these designated 
CHXpress securities throughout the month.
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    \8\ See Securities Exchange Act Release No. 51430 (Mar. 24, 
2005), 70 FR 16540 (Mar. 31, 2005) (SR-CHX-2005-03). According to 
the CHX, the fee exemption was designed to address concerns of CHX 
specialist firms, who have noted that they will be best able to 
handle issues associated with the automatic execution of CHXpress 
orders when two systems projects--to automatically execute inbound 
ITS commitments and to allow them to display (and have automatically 
executed) their manual proprietary quotes--have been completed.
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    The Exchange, however, has determined that it is not efficient, 
from a business perspective, to try to designate the CHXpress 
securities on a monthly basis, unless the Exchange has the authority to 
add to the list when necessary. The Exchange believes that it is 
important to be able to respond to potential new order flow during a 
month by allowing the Exchange to extend CHXpress functionality to 
additional issues, so long as the specialist in the security agrees to 
the addition.\9\
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    \9\ The Exchange believes that it is appropriate to consult with 
the specialist firm assigned to an issue before extending CHXpress 
functionality to that issue because of the potential double 
liability associated with the handling of ITS commitments when 
CHXpress orders are automatically executing against displayed bids 
and offers and because of the specialist's inability to manually 
post bids and offers in CHXpress-eligible securities until the two 
system projects described in note 8, supra, have been completed.
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2. Statutory Basis
    The CHX believes that the proposed rule change is consistent with 
Section 6(b) of the Act,\10\ in general, and furthers the objectives of 
Section 6(b)(4) of the Act,\11\ in particular, in that it provides for 
the equitable allocation of reasonable dues, fees and other charges 
among its members.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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 either solicited or received.

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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A)(ii) of the Act,\12\ and Rule 19b-4(f)(2) \13\ 
thereunder, because it establishes or changes a due, fee, or other 
charge imposed by the Exchange. 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.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-CHX-2005-12 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.

    All submissions should refer to File Number SR-CHX-2005-12. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 Section, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
CHX. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-CHX-

[[Page 24145]]

2005-12 and should be submitted on or before May 27, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).

Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-2205 Filed 5-5-05; 8:45 am]
BILLING CODE 8010-01-P