[Federal Register Volume 77, Number 221 (Thursday, November 15, 2012)]
[Notices]
[Pages 68167-68169]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-27715]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68182; File No. SR-CHX-2012-16]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Single-Sided Orders Fees and Rebates

November 8, 2012
    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 November 2, 2012, 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. CHX has 
filed the proposal pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(2) thereunder,\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 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 the 
Substance of the Proposed Rule Change

    The CHX proposes to amend its Schedule of Fees and Assessments (the 
``Fee Schedule''), effective November 2, 2012, to create a separate fee 
and rebate structure for each derivative and non-derivative Tape A, B 
and C security, with respect to single-sided order executions of 100 or 
more shares. The text of this proposed rule change is available on the 
Exchange's Web site at http://www.chx.com/rules/proposed_rules.htm and 
in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549.

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 changes and 
discussed any comments it received regarding the proposal. 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
    Through this filing, the Exchange proposes to amend its Schedule of 
Fees and Assessments (the ``Fee Schedule''), effective November 2, 
2012, to amend Section E.1 of the Fee Schedule, which concerns single-
sided order executions of 100 or more shares, to establish fees and 
rebates specific to each derivative and non-derivative Tape A, B and C 
security type.
Current Section E.1
    On January 9, 2012, the Exchange adopted the current Fee Schedule 
that incorporated, inter alia, a separate fee and rebate structure for 
Derivative Securities Products (``DSPs'') \5\ and removed references to 
Tape A, B and C securities throughout its Fee Schedule.\6\ 
Specifically, with respect to Section E.1, the Exchange eliminated the 
distinction in the fee and rebate structure for Tape A, B and C 
securities \7\ and replaced it with a structure based on DSPs and non-
DSPs.
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    \5\ Per Section E.1 of the current Fee Schedule, ``Derivative 
Securities Product'' is defined as any type of option, warrant, 
hybrid securities product or any other security, other than a single 
equity option or a security futures product, whose value is based, 
in whole or in part, upon the performance of, or interest in, an 
underlying instrument. This definition is drawn from Rule 19b-4(e). 
See 17 CFR 240.19b-4(e).
    \6\ See Exchange Act. Release No. 66139 (January 11, 2012), 77 
F.R. 2583 (January 18, 2012) (SR-CHX-2012-01).
    \7\ Tape A securities are those securities for which the New 
York Stock Exchange, Inc. is the primary listing market. Tape C 
securities are those securities for which the NASDAQ Stock Exchange, 
Inc. is the primary listing center. Tape B securities are those 
securities for which some other national securities exchange is the 
primary listing market.
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    With respect to the current fees and rebates of Section E.1, for 
transactions in DSPs priced greater than or equal to $1.00/share that 
are executed in the Regular Trading Session, the current Fee Schedule 
charges a fee of $0.003/share for removing liquidity and gives a rebate 
of $0.0022/share for providing liquidity. For transactions in non-DSPs 
priced equal to or greater than $1.00/share that are executed in the 
Regular Trading Session, the current Fee Schedule charges a fee of 
$0.003/share for removing liquidity, but gives no rebate for providing 
liquidity. For transactions in all securities priced equal to or less 
than $1.00/share that are executed in the Early and Late Trading 
Sessions, the current Fee Schedule charges a fee of $0.003/share for 
removing liquidity and gives a rebate of $0.0022/share for providing 
liquidity. For transactions in all securities priced less than $1.00/
share, the current Fee Schedule charges a fee of 0.30% of trade value 
for removing liquidity and gives a rebate of $0.00009/share for 
providing liquidity.
Proposed Section E.1
    The Exchange now proposes to amend Section E.1 to reincorporate 
references to Tape A, B and C securities, while maintaining the 
distinction between DSPs and non-DSPs, so as to establish fees and 
rebates specific to each derivative and non-derivative Tape A, B and C 
security type and to maintain the current rebate and fee values, but 
for two exceptions. Specifically, the Exchange proposes to distinguish 
between ``Regular'' and ``Early and Late'' trading sessions. Each 
trading session will be further divided into six categories, one for 
each derivative and non-derivative Tape A, B and C security. Finally, 
each one of the six security-types will be then divided into securities 
priced greater than or equal to $1.00/share or priced less than $1.00/
share. At this point, each security-type will be assigned a specific 
fee and rebate value, resulting in a total of twenty-four (24) distinct 
sets of fees and rebates.
    With respect to the actual values of the fees and rebates of 
proposed Section E.1, the Exchange proposes to mostly adopt the fee and 
rebate values currently in Section E.1. Specifically, for transactions 
in Tape A and B Non-DSP securities priced greater than or equal to 
$1.00/share executed during the Regular Trading Session, the

[[Page 68168]]

Exchange proposes to maintain no liquidity providing rebate and a 
$0.0030/share liquidity removing fee. Also, for transactions in Tapes A 
and B DSP securities priced greater than or equal to $1.00/share 
executed during the Regular Trading Session and all Tapes DSP and Non-
DSP securities priced greater than or equal to $1.00 executed during 
the Early or Late Trading Session, the Exchange proposes to maintain a 
liquidity providing rebate of $0.0020/share and a liquidity removing 
fee of $0.0030/share. Furthermore, for transactions in all Tapes Non-
DSP securities priced less than $1.00/share executed in the Regular, 
Early or Late Trading Sessions, the Exchange proposes to maintain a 
liquidity providing rebate of $0.00009/share and a liquidity removing 
fee of 0.30% of trade value.
    However, the Exchange proposes a new fee and rebate for Tape C DSP 
and Non-DSP securities priced greater than or equal to $1.00/share 
executed in the Regular Trading Session. Currently, for transactions in 
Tape C non-DSP securities priced greater than or equal to $1.00/share 
executed in the Regular Trading Session, there is no liquidity 
providing rebate and a $0.0030/share liquidity removing fee. Moreover, 
for transactions in Tape C DSP securities priced greater than or equal 
to $1.00/share executed in the Regular Trading Session, there is 
currently a liquidity providing rebate of $0.0020/share and a liquidity 
removing fee of $0.0030/share. In lieu of these current values, the 
Exchange now proposes a liquidity providing rebate of $0.00010/share 
and a liquidity removing fee of $0.0006/share, for both of these 
security types. The Exchange submits that the imposition of these new 
fee and rebate values is necessary to promote order flow in Tape C 
securities to the Exchange.
    Generally speaking, the purpose of this new fee and rebate 
structure is to create greater granularity in the Exchange's billing 
structure, which will in turn provide it with greater flexibility in 
setting fees and rebates.\8\ This granularity will allow the Exchange 
to make fine-tuned adjustments, through future proposed fee filings 
pursuant to Rule 19b-4, to incentivize order flow in a specific group 
of securities, such as in Tape C securities, without affecting other 
fees or rebates associated with orders in other groups of securities 
that the Exchange does not wish to impact. That is, such flexibility 
will allow the Exchange to adapt to fast-paced changes in today's 
orders marketplace and will, in turn, allow the Exchange to remain 
competitive for such orders.
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    \8\ The Exchange endeavors to incorporate this new security-type 
specific fee structure throughout its Fee Schedule, to the extent 
applicable, through proposed rule filings, such as this one and SR-
CHX-2012-15. SR-CHX-2012-15 proposes the adoption of a similar 
security-type specific fee structure in the context of order 
cancellation fees.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \9\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \10\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and other persons using any facility or 
system which the Exchange operates or controls. Specifically, since the 
proposed fee and rebate structure will apply to all single-sided orders 
of 100 or more shares executed in the CHX Matching System, the Exchange 
believes that it will equitably allocate the fees and rebates among 
Participants in a non-discriminatory nature. In addition, because 
quoting and trading activity is different among certain categories of 
securities, such as DSPs, as well as those securities on different 
Tapes, the Exchange believes that it is fair and reasonable to impose 
specific fees and rebates for each of the six security-types in order 
to better incent activity by Participants on the Exchange's trading 
facilities in those particular categories. Furthermore, the proposed 
values for the liquidity removing fees for each of the security types 
are reasonable where such values will either remain the same as the 
current fees or will decrease (in the case of transactions in Tape C 
DSP and Non-DSP securities priced greater than or equal to $1.00/share 
executed in the Regular Trading Session) and where the proposed fee 
values are generally similar to the fees of other exchanges, such as 
NASDAQ.\11\
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
    \11\ NASDAQ pricing provides for a flat fee of $0.0030/share to 
remove liquidity for transactions in all Tape securities priced 
greater than or equal to $1.00/share and a fee of 0.30% of total 
dollar volume for transactions in securities priced less than $1.00/
share.
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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 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 solicited or received.

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

    The proposed rule change is to take effect pursuant to Section 
19(b)(3)(A)(ii) of the Act \12\ and subparagraph (f)(2) of Rule 19b-4 
thereunder \13\ because it establishes or changes a due, fee or other 
charge applicable to the Exchange's members and non-members, which 
renders the proposed rule change effective upon filing.
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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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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend 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.

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 email to [email protected]. Please include 
File Number SR-CHX-2012-16 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-2012-16. This file 
number should be included on the subject line if email 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

[[Page 68169]]

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 Web site viewing and printing in the Commission's Public 
Reference Room on official business days between the hours of 10:00 
a.m. and 3:00 p.m. Copies of such filing also will be available for 
inspection and copying at the principal offices 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-2012-16, and should be 
submitted on or before December 6, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27715 Filed 11-14-12; 8:45 am]
BILLING CODE 8011-01-P