[Federal Register Volume 78, Number 14 (Tuesday, January 22, 2013)]
[Notices]
[Pages 4506-4508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-01075]



[[Page 4506]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68647; File No. SR-CHX-2013-01]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change, 
as Modified by Amendment Nos. 1 and 2 Thereto, Amending Its Price With 
Respect to Regulatory Fees Related to the Continuing Education 
Regulatory Element, Certain Examinations and Central Registration 
Depository, Which Are Collected By the Financial Industry Regulatory 
Authority, Inc.

January 14, 2013.
    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 January 2, 2013, the Chicago Stock Exchange, Inc. (``CHX'' or 
the ``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.\3\ CHX has 
filed this proposal pursuant to Exchange Act Rule 19b-4(f)(6) \4\ which 
makes it 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\ CHX submitted two amendments to the filing. This Notice 
reflects those amendments.
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    CHX proposes to amend its Schedule of Fees and Assessments (the 
``Fee Schedule''), effective January 2, 2013, relating to certain fees 
for services provided by the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') to Exchange Participants who are not members of FINRA 
(``Non-FINRA Participants''). The text of this proposed rule change is 
available on the Exchange's Web site at (www.chx.com) and in 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. 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.

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

1. Purpose
    The Exchange proposes to amend Section J.5 of the Fee Schedule to 
update certain fees for education, examination and Web Central 
Registration Depository (``CRD'') system \5\ services that are offered 
by FINRA to Non-FINRA Participants. In doing so, the Exchange initially 
proposes to clarify that the fees enumerated under Section J.5 apply to 
Participants that are not FINRA members and that all fees under Section 
J.5 fall under two categories. Specifically, the Exchange proposes to 
amend the title to Section J.5 to read, ``Fees for FINRA-provided 
services (paid directly to FINRA) for Participants that are not FINRA 
members.'' \6\ Moreover the Exchange proposes to reorganize all such 
fees under two new subsections entitled ``Education and Examination 
Fees'' and ``Central Registration Depository (``CRD'') Fees.''
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    \5\ The CRD system is the central licensing and registration 
system for the U.S. securities industry. The CRD system enables 
individuals and firms seeking registration with multiple states and 
self-regulatory organizations to do so by submitting a single form, 
fingerprint card and a combined payment of fees to FINRA. Through 
the CRD system, FINRA maintains the qualification, employment and 
disciplinary histories of registered associated persons of broker-
dealers.
    \6\ The Exchange notes that Participants who are FINRA members 
are already subject to the same fees per FINRA rules.
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Education and Examination Fees
    The Exchange proposes to amend Section J.5 of the Fee Schedule to 
update certain fees for education and examination services provided by 
FINRA to non-FINRA Participants, so as to mirror the corresponding fees 
listed under the current Schedule A to the FINRA By-Laws. The most 
recent updates to these fees by FINRA are not currently reflected in 
the Fee Schedule.\7\ There is no distinction in the cost incurred by 
FINRA for providing such education and examination services if the 
Participant is a FINRA member or a Non-FINRA Participant. The proposed 
changes are as follows:\8\
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    \7\ See Securities Exchange Act Release No. 66465 (February 24, 
2012), 77 FR 12635 (March 1, 2012) (SR-FINRA-2012-09) [sic]; see 
also Securities Exchange Act Release No. 60963 (November 6, 2009), 
74 FR 59334 (November 17, 2009) (SR-FINRA-2009-071).
    \8\ [sic]
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     $100 for the Continuing Education Regulatory Element 
registration fee; \9\
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    \9\ See Section 4(f) of Schedule A to the FINRA By-Laws. The 
current corresponding CHX fee is $75. Participation in the 
Regulatory Element is mandatory for CHX Participants pursuant to CHX 
Article 6, Rule 11(a).
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     Deletion of reference to the Series 7A Examination and its 
corresponding registration fee of $250; \10\
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    \10\ Since the Exchange has retired it [sic] trading floor, the 
Series 7A Examination has become obsolete.
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     $290 for the Series 7 Examination registration fee; \11\
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    \11\ See Section 4(c) of Schedule A to the FINRA By-Laws. The 
current corresponding CHX fee is $250.
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     $115 for the Series 27 Examination registration fee; \12\ 
and
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    \12\ See Section 4(c) of Schedule A to the FINRA By-Laws. The 
current corresponding CHX fee is $85.

The Exchange notes that the proposed changes are not otherwise intended 
to address any other issues surrounding regulatory fees and that the 
Exchange is not aware of any problems that Participants would have in 
complying with the proposed changes.
    As for implementation of the proposed education and examination 
fees, the Exchange has filed the proposed rule change for immediate 
effectiveness and proposes an implementation date of January 2, 2013. 
This date is the same as FINRA's implementation date for its proposed 
Web CRD system fees, as discussed below.\13\
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    \13\ See Securities Exchange Act Release No. 67247 (June 25, 
2012), 77 FR 38866 (June 29, 2012) (SR-FINRA-2012-030).
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Central Registration Depository (``CRD'') Fees
    The Exchange further proposes to amend Section J.5 of the Fee 
Schedule with respect to certain fees related to the CRD system which 
are collected by FINRA. These fees have not been updated since the 
Exchange required its Participants to register certain associated 
persons through the Web CRD System.\14\
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    \14\ See Securities Exchange Act Release No. 57587 (March 31, 
2008), 73 FR 18598 (April 4, 2008) (SR-CHX-2007-21).
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    FINRA collects and retains certain regulatory fees via the CRD 
system for the registration of employees of non-FINRA Participants. 
FINRA recently amended some of the fees assessed for use of the CRD 
system and those amendments will become effective January 2, 2013.\15\
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    \15\ See Securities Exchange Act Release No. 67247 (June 25, 
2012), 77 FR 38866 (June 29, 2012) (SR-FINRA-2012-030).

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[[Page 4507]]

    The CRD system fees are user-based and there is no distinction in 
the cost incurred by FINRA if the user is a FINRA member or a Non-FINRA 
Participant. Accordingly, the Exchange is proposing to amend Section 
J.5 of the Fee Schedule to mirror the fees assessed by FINRA, which 
will be implemented concurrently with the amended FINRA fees on January 
2, 2013.\16\ The proposed changes are as follows: \17\
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    \16\ The Exchange notes that it has only adopted the CRD system 
fees charged by FINRA to Non-FINRA Participants when such fees are 
applicable. In this regard, certain FINRA CRD system fees and 
requirements are specific to FINRA members, but do not apply to non-
FINRA Participants.
    \17\ Non-FINRA Participants have been charged CRD system fees 
since 2008. See Securities Exchange Act Release No. 57587 (March 31, 
2008), 73 FR 18598 (April 4, 2008) (SR-CHX-2007-21).
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     $100 for each initial Form U4 filed for the registration 
of a representative or principal; \18\
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    \18\ See Section 4(b)(1) of Schedule A to the FINRA By-laws 
effective on January 2, 2013. This fee is assessed when a Non-FINRA 
Participant submits its first Initial, Transfer, Relicense, or Dual 
Registration Form U4 filing on behalf of a registered person. The 
current corresponding CHX fee is $85.
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     $110 for additional processing of each initial or amended 
Form U4, Form U5 or Form BD that includes the initial reporting, 
amendment, or certification of one or more disclosure events or 
proceedings; \19\
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    \19\ See Section (4)(b)(3) of Schedule A to the FINRA By-laws 
effective on January 2, 2013. The current corresponding CHX fee is 
$95 related to Form U4 and Form U5. The fee related to Form BD is a 
new fee charged by FINRA. Broker-dealers use Form BD to, among other 
things, report disclosure matters in which they or a control 
affiliate have been involved. Prior to the adoption of the new fee, 
FINRA did not have a fee designed to cover the costs associated with 
the review of Form BD, notwithstanding that the review is similar to 
that performed of broker-dealers' Forms U4 and U5. Such reviews 
include confirming that the matter is properly reported, reviewing 
any documentation submitted and determining whether additional 
documentation is required, conducting any necessary independent 
research and, depending on the matter reported, analyzing whether 
the event or proceeding subjects the individual or firm to a 
statutory disqualification pursuant to Section 3(a)(39) of the Act 
(15 U.S.C. 78c(a)(39)). FINRA adopted a $110 fee for the review of a 
Form BD, which mirrors the increased fee adopted for the review of 
Forms U4 and U5. As such, the Exchange is adopting the identical fee 
for FINRA's review of a Form BD submitted by Non-FINRA Participants.
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     $15 for processing and posting to the CRD system each set 
of fingerprints submitted electronically to FINRA, plus any other 
charge that may be imposed by the U.S. Department of Justice for 
processing each set of fingerprints; \20\
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    \20\ See Section (4)(b)(4) of Schedule A to the FINRA By-laws 
effective on January 2, 2013. After subtracting the U.S. Department 
of Justice fingerprint processing fee, which was $17.25 at the time 
the Fee Schedule was last amended, the current corresponding CHX fee 
is $13. See Revised User Fee Schedule, 76 FR 78950 (December 20, 
2011) (prior to March 19, 2012, the U.S. Department of Justice 
fingerprint processing fee was $17.25 and since March 19, 2012, the 
fee was decreased to $14.50 per card).
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     $30 for processing and posting to the CRD system each set 
of fingerprint cards submitted in non-electronic format to FINRA, plus 
any other charge that may be imposed by the U.S. Department of Justice 
for processing each set of fingerprints; \21\
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    \21\ See Section (4)(b)(5) of Schedule A to the FINRA By-laws 
effective on January 2, 2013. After subtracting the U.S. Department 
of Justice fingerprint processing fee, which was $17.25 at the time 
the Fee Schedule was last amended, the current corresponding CHX fee 
is $13. See Revised User Fee Schedule, 76 FR 78950 (December 20, 
2011) (prior to March 19, 2012, the U.S. Department of Justice 
fingerprint processing fee was $17.25 and since March 19, 2012, the 
fee was decreased to $14.50 per card).
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     $45 annually for system processing for each registered 
representative and principal.\22\
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    \22\ See Section (4)(b)(7) of Schedule A to the FINRA By-Laws 
effective on January 2, 2013. The current corresponding CHX fee is 
$30. The proposed system processing fee would become effective for 
the 2013 Renewal Program. In this regard, as part of FINRA's 2013 
Renewal Program, Preliminary Renewal Statements reflecting the 
proposed $45 system processing fee will be made available in the 
fourth quarter of 2012.

The Exchange again notes that the proposed changes are not otherwise 
intended to address any other issues surrounding regulatory fees and 
that the Exchange is not aware of any problems that Participants would 
have in complying with the proposed changes.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \23\ in general, and, in particular, 
furthers the objectives of Section 6(b)(4) of the Act,\24\ in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among its members, issuers and other persons using its 
facilities and Section 6(b)(5) of the Act,\25\ in that it does not 
unfairly discriminate between customers, issuers, brokers or dealers. 
In sum, the Exchange believes that the fee changes are reasonable 
because the proposed fees are identical to those adopted by FINRA for 
its members and that the proposed fees are equitably allocated because 
they apply to all similarly situated Non-FINRA Participants.
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    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(4).
    \25\ 15 U.S.C. 78f(b)(5).
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    As FINRA noted in amending its Continuing Education Regulatory 
Element fee, the fee increase is reasonable because it is consistent 
with the overall costs associated with the program and that the 
increase is necessary to ``cover the full costs associated with the 
[Continuing Education] program, including costs associated with the 
redesign of the Regulatory Element and to maintain an adequate reserve 
for the program.'' \26\ In addition, as FINRA noted in amending its 
fees for the Series 7 and 27 examinations, the fees increase is 
necessary ``to better align the examination fee structure with the 
costs associated with the programs.'' \27\
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    \26\ See Securities Exchange Act Release No. 60963 (November 6, 
2009), 74 FR 59334 (November 17, 2009) (SR-FINRA-2009-071).
    \27\ See Securities Exchange Act Release No. 66465 (February 24, 
2012), 77 FR 12635 (March 1, 2012) (SR-FINRA-2012-09) [sic].
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    Moreover, as FINRA noted in amending its CRD system fees, the fees 
increase is reasonable based on the increased costs associated with 
operating and maintaining the CRD system and due to enhancements made 
by FINRA since the last fees increase, including (1) incorporation of 
various uniform registration form changes; (2) electronic fingerprint 
processing; (3) Web EFT TM, which allows subscribing firms 
to submit batch filings to the CRD system; and (4) increases in the 
number and types of reports available through the CRD system.\28\ These 
increased costs are similarly borne by FINRA when a Non-FINRA 
Participants uses the CRD system. FINRA further noted its belief that 
the proposed fees are reasonable because they help to ensure the 
integrity of the information in the CRD system, which is very important 
because the Securities and Exchange Commission (``Commission''), FINRA, 
other self-regulatory organizations and state securities regulators use 
the CRD system to make licensing and registration decisions, among 
other things.
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    \28\ See Securities Exchange Act Release No. 67247 (June 25, 
2012), 77 FR 38866 (June 29, 2012) (SR-FINRA-2012-030).
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    The Exchange also believes that the change is reasonable because it 
will provide greater specificity regarding the CRD system fees that are 
applicable to Non-FINRA Participants. All similarly situated 
Participants are subject to the same fee structure and every 
Participant must use the CRD system for registration and 
disclosure.\29\ Accordingly, the Exchange believes that the fees 
collected for such use should likewise increase in lockstep with the 
fees assessed to FINRA members, as proposed by the Exchange. The 
proposed change, like FINRA's proposal, is equitable and not unfairly 
discriminatory because it will result in the same regulatory fees being 
charged to all Participants required to report information to the CRD 
system and for services performed by FINRA,

[[Page 4508]]

regardless of whether or not such Participants are FINRA members.
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    \29\ Participation in the Regulatory Element is mandatory for 
CHX Participants pursuant to CHX Article 6, Rule 11(a).
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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. Specifically, the Exchange 
believes that the proposed change will result in the same regulatory 
fees being charged to all Participants who are required to report 
information to the CRD system and for services performed by FINRA, 
regardless of whether or not such Participants are FINRA members.

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 proposed rule change is to effect upon filing pursuant to 
Section 19(b)(3)(A)(ii) of the Act \30\ and subparagraph (f)(2) of Rule 
19b-4 thereunder \31\ because it establishes or changes a due, fee or 
other charge imposed by the Exchange.
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    \30\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \31\ 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or 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 email to [email protected]. Please include 
File Number SR-CHX-2013-01 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-2013-01. 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 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 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-2013-01, and should be submitted on or before 
February 12, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-01075 Filed 1-18-13; 8:45 am]
BILLING CODE 8011-01-P