[Federal Register Volume 75, Number 9 (Thursday, January 14, 2010)]
[Notices]
[Pages 2175-2176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-541]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61304; File No. SR-CHX-2009-18]


Self-Regulatory Organizations; The Chicago Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change To Amend Its Co-Location Fees

January 6, 2010.

    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on December 22, 2009, 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 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\ 15 U.S.C. 78a.
    \3\ 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 Schedule of Participant Fees and 
Assessments (the ``Fee Schedule''), effective the first month after the 
proposal is approved, relating to charges for co-location services.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.chx.com/rules/proposed_rules.htm, at the 
Exchange's principal office, and at the Commission's Public Reference 
Room.

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 those 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 parts of such 
statements.

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

1. Purpose
    The Exchange makes space available to Participants at its data 
center for the storage of their computer hardware and maintaining 
connections equipment to the CHX network. This hardware and connections 
equipment are used by Participants to increase the processing speed of 
information transferred from their systems to those of the Exchange and 
to reduce the latencies associated with order and information 
messaging. The practice of Participants to store physical computer 
hardware and network connections equipment on an exchange's premises is 
known as ``co-location.'' \4\
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    \4\ The Exchange also allows non-Participants to co-locate 
computer hardware and connections equipment, provided that they 
enter into an agreement providing for, inter alia, the payment of 
fees for such co-location.
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    Since 2004, the Exchange has charged fees to its Participants for 
its co-location services.\5\ Initially, fees on co-located equipment 
were limited to computer hardware which was not used to direct orders 
to the Exchange, but that restriction was removed in 2006 with the 
transition to the Exchange's New Trading Model. The CHX charges 
Participants for the physical space associated with co-locating 
computer hardware and network equipment on its premises. This equipment 
is generally used for the transmission of order and execution messages, 
market data information and other information services between 
Participants and the Exchange's trading facilities, or other 
destinations. Charges for space are based upon the number of ``U'' (a 
commonly accepted unit of measurement of data center space) of shelf 
space used to store the equipment. Additionally, the CHX charges a co-
location fee for the network connections equipment used to connect 
Participants to the CHX network.\6\ These charges are intended to 
offset, at least in part, the costs borne by the Exchange for rent, 
utilities and maintenance of the space occupied by the co-located 
equipment.\7\ In this filing, the Exchange seeks to increase the 
periodic charge for co-location of network connections equipment from 
$50/month to $100/month.
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    \5\ See SR-CHX-2004-15 (May 19, 2004) (establishing fees for co-
located computer hardware and network equipment); See also SR-CHX-
2006-29 (October 26, 2006) (broadening the scope of such fees).
    \6\ This fee is separate from the Port fees charged pursuant to 
Section D of the CHX Fee Schedule for connections to the CHX 
Matching System. Port fees are not based upon the equipment stored 
on our premises, but rather upon the number of logical connections 
between the Exchange's Matching System and those of the Participant. 
The co-location fee for network connections equipment is a charge 
for various forms of cabling (POTS, ISDN, T1 lines, etc.) from the 
telecom provider's point of presence in our data center to our 
network. It is not necessary for Participants to co-locate network 
connection equipment at the CHX's data center in order to connect to 
our trading facilities, since they have the option to connect via an 
extranet service. Such extranet services connect to the Exchange in 
the same manner as orders routed through co-located equipment.
    \7\ The CHX does not separately charge for the electricity used 
to power the Participant's equipment or rent and other utilities 
associated with the space.
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    The CHX offers co-location to all of its Participants on an equal 
and non-discriminatory basis. As far as possible, the Exchange has 
architected its systems to eliminate or reduce differences amongst and 
between co-located and non-co-located access.\8\ Participants which 
enter orders through co-located equipment access our network via the 
same common connections or gateway as Participants which do not co-
locate.\9\ Currently, the Exchange has sufficient space at its data 
center to accommodate

[[Page 2176]]

all requests to co-locate computer equipment. We believe that we will 
continue to have adequate capacity to co-locate Participant computer 
hardware and network connections equipment for the foreseeable future. 
If for some reason that our capacity was exceeded, we would file a rule 
proposal with the Commission seeking to adopt a fair and neutral policy 
to accommodate requests to co-locate.
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    \8\ Of course, Participants which co-locate would normally 
expect lower latencies and faster message turnaround times because 
of the physical proximity of their equipment to our systems.
    \9\ This description applies equally to both inbound messages 
(e.g., new orders) and outbound messages (e.g., execution reports).
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2. Statutory Basis
    The Exchange 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. The Exchange believes that the co-
location charges are fair and reasonable inasmuch as they offset the 
Exchange's expenses involved in providing co-location services. The 
Exchange also believes that proposed rule change furthers the 
objectives of Section 6(b)(5) in particular,\12\ in that it is designed 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transaction in securities, to remove impediments and perfect the 
mechanisms of a free and open market, and, in general, to protect 
investors and the public interest. By providing co-location services in 
a fair and evenhanded manner to interested Participants, the Exchange 
believes that it is contributing to the rapid transmission of order and 
trade-related messages which are vital to the effective functioning of 
the national market system.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
    \12\ 15 U.S.C. 78f(b)(5).
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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

    No written comments were either solicited or received.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2009-18 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CHX-2009-18. 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 the filing also will be available for 
inspection and copying at the principal office of the Exchange. 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-2009-18 and should be 
submitted on or before February 4, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-541 Filed 1-13-10; 8:45 am]
BILLING CODE 8011-01-P