[Federal Register Volume 72, Number 229 (Thursday, November 29, 2007)]
[Notices]
[Pages 67616-67618]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-23170]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56833; File No. SR-CHX-2007-26]


Self-Regulatory Organizations; The Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment Number 1 Thereto Relating to Participant Fees and Credits

November 21, 2007.
    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 October 31, 2007, The Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been substantially prepared by the 
Exchange. On November 19, 2007, CHX filed Amendment No. 1 to the 
proposed rule change. The Exchange has designated this proposal as one 
establishing or changing a due, fee, or other charge imposed by the 
Exchange under Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders it 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\ 15 U.S.C. 78s(b)(3)(A).
    \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 CHX proposes to amend its Schedule of Participant Fees and 
Credits (the ``Fee Schedule'') to: (a) Provide that port fees would not 
be charged to participant firms that provide a certain amount of 
liquidity to the ``Matching System'' \5\; (b) modify the ``provide'' 
credits associated with trades in Tape B securities to create an 
incentive to send orders in these and other securities to the Matching 
System; (c) modify the fees for the receipt of orders through the CHX 
Connect network; and (d) add new fees in connection with the processing 
of away-market trades that are sent to clearing through the Exchange's 
facilities. The text of the proposed rule change is available at the 
Exchange's Web site, http://www.chx.com/rules/proposed_rules.htm, the 
Exchange, and the Commission's Public Reference Room.
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    \5\ See generally, CHX Rules, Article 20.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, 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. 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
    Through this filing, the Exchange would amend its Fee Schedule in 
several ways. First, the Exchange would amend the Fee Schedule to 
provide that port fees would not be charged to participant firms that 
provide a certain amount of liquidity to the Matching System.\6\ 
Specifically, port fees would not be charged to a participant firm for 
any month in which that firm executes an average daily volume of 5 
million or more provide shares in the Matching

[[Page 67617]]

System.\7\ The Exchange believes that it is appropriate to eliminate 
the port fees charged to participant firms that send a high level of 
volume to the Matching System because the Exchange's costs of providing 
services to these firms are offset by the revenues produced by the 
firms' trading activity on the Exchange.
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    \6\ Under the Exchange's Fee Schedule, port charges of $400 per 
month currently are assessed for each participant give-up that has 
access through a participant connection to the Matching System. Port 
charges are not assessed for access to the Matching System through 
the Exchange's Brokerplex system.
    \7\ A ``provide'' share is one that is given a provide credit 
under the take/provide provisions of the Exchange's Fee Schedule. 
See Fee Schedule, Section E(1). In calculating a firm's average 
daily volume, the Exchange would not count activity on days when the 
Exchange closes early.
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    As its second Fee Schedule change, the Exchange would modify the 
provide credits associated with trades in Tape B securities to create 
an incentive for CHX participants to send orders in these and other 
securities to the Matching System. Under the current Fee Schedule, the 
Exchange charges a $.0029/share take fee and pays a $.0026/share credit 
in connection with the execution of single-sided orders of 100 or more 
shares in the Exchange's Matching System. The Exchange proposes to 
increase, to $.0036/share, the credit paid for trades in Tape B 
securities, for any participant firm that executes an average daily 
volume of 5 million or more provide shares in Tape A and/or C 
securities in the Exchange's Matching System. The Exchange also 
proposes to increase, to $.0032/share, the credit paid for trades in 
Tape B securities, for any participant firm that executes an average 
daily volume of fewer than 5 million provide shares in Tape A and/or C 
securities.\8\ These increases in the credit paid for trades in Tape B 
securities are in direct response to price changes announced by other 
market centers and are designed to create an incentive for CHX 
participants to send orders in Tape B securities to the CHX, rather 
than to other markets.\9\
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    \8\ In calculating a firm's average daily volume, the Exchange 
would not count trading activity on days when the Exchange closes 
early. The Exchange calculates a firm's ADV based on the total 
number of provide shares executed in the Exchange's Matching System 
for each full trading day in a month, divided by the number of full 
trading days.
    \9\ The Exchange's proposal to make the top tier of the credit 
available to firms that execute at least a certain number of shares 
in Tape A and C securities similarly is designed to create an 
incentive for firms to send orders in these securities to the 
Exchange.
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    Another proposed change to the Fee Schedule would modify the fees 
for the receipt of orders through the CHX Connect network.\10\ Under 
the current Fee Schedule, the Exchange charges a $5,000 per month fee 
to any participant firm that receives orders through the CHX Connect 
network. The Exchange proposes to increase this fee to $10,000/month 
and charge an additional fee of $.0004/share for executions that are 
processed by the network. These changes are designed to help cover the 
costs of providing the network. The Exchange, however, proposes to 
reduce the base fee from $10,000 per month to as low as $5,000 per 
month, by applying a credit of $.0004 for each provide share executed 
in the Exchange's Matching System.\11\ This credit would create an 
incentive for users of the CHX Connect network to send orders to the 
Exchange's Matching System.
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    \10\ The Exchange's CHX Connect system is a communications 
service that allows its participants to route orders to any 
destination connected to the CHX's network, including (1) the CHX 
Matching System; (2) CHX institutional brokers; (3) market makers or 
other broker-dealers connected to the CHX's network, which provide 
order handling and execution services in the over-the-counter 
market; and (4) other destinations (including order-routing vendors) 
that are connected to the CHX's network. See Securities Exchange Act 
Release No. 54846 (November 30, 2006), 71 FR 71003 (December 7, 
2006) (SR-CHX-2006-34). Fees are charged under the Fee Schedule to 
participants that receive orders through this service.
    \11\ No credits will be carried over from month to month.
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    The last proposed change to the Fee Schedule would add new fees in 
connection with the processing of certain away-market trades that are 
sent to clearing through the Exchange's facilities. Under the 
Exchange's existing Fee Schedule, the Exchange charges a $.0015/share 
fee for the clearing-related processing of away-market trades in 
securities that are not listed or traded pursuant to unlisted trading 
privileges on the Exchange. The Exchange proposes to increase this fee 
to $.0035/share for clearing reports in Tape A and B securities and to 
$.0025/share for clearing reports in Tape C securities up to a maximum 
of $100 per side.\12\ The Exchange also proposes to apply the fees to 
trades in all securities, instead of limiting the fee to securities 
that are not listed or traded on the Exchange, to better allocate the 
Exchange's costs across all of these clearing-only reports.\13\ These 
fee changes are designed to help offset the Exchange's costs of 
processing these transactions for clearing.
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    \12\ These fees would be assessed only on away-market trades 
that are reported to the tape, but not to clearing, in another 
market. The fees would be charged for each report that is submitted 
to clearing through the Exchange's systems.
    \13\ With the introduction of the Exchange's electronic book and 
its move to its new trading model, the Exchange has begun trading 
more securities pursuant to unlisted trading privileges, leaving 
fewer issues that are neither listed nor traded on the Exchange. The 
Exchange believes it is no longer appropriate to assess these 
processing fees only on a subset of the reports that are sent to 
clearing.
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    All of the proposed fee changes, except the change to the CHX 
Connect fees, would take effect November 1, 2007. The proposed changes 
to the CHX Connect fees would take effect December 1, 2007.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b)(4) of the 
Act \14\ in that it provides for the equitable allocation of reasonable 
dues, fees and other charges among its members.
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    \14\ 15 U.S.C. 78(f)(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 changes will 
impose any 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 is filed pursuant to Section 
19(b)(3)(A)(ii) of the Act \15\ and subparagraph (f)(2) of Rule 19b-4 
thereunder \16\ because it establishes or changes a due, fee, or other 
charge applicable only to a member imposed by a self-regulatory 
organization. Accordingly, the proposal is effective upon Commission 
receipt of the filing. 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.\17\
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 17 CFR 240.19b-4(f)(2).
    \17\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on November 19, 2007, the date on which CHX filed 
Amendment No. 1. See 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. 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

[[Page 67618]]

     Send an e-mail to [email protected]. Please include 
File Number SR-CHX-2007-26 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CHX-2007-26. 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 Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of 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-2007-26 and should be 
submitted on or before December 20, 2007.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E7-23170 Filed 11-28-07; 8:45 am]
BILLING CODE 8011-01-P