Skip to Content


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

Document Details

Information about this document as published in the Federal Register.

Document Statistics
Document page views are updated periodically throughout the day and are cumulative counts for this document including its time on Public Inspection. Counts are subject to sampling, reprocessing and revision (up or down) throughout the day.
Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble January 15, 2002.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)[1] and Rule 19b-4 thereunder,[2] notice hereby is given that on December 21, 2001, the Chicago Stock Exchange, Inc. (“CHX”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II and III below, which the CHX has prepared. The Commission is publishing this notice to solicit comments on the Start Printed Page 3518proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The CHX proposes to amend its membership dues and fees schedule, effective through June 30, 2002, to provide for continued assessment of a marketing fee in instances where transactions in a subject issue meet certain criteria described below. The text of the proposed rule change is available at the CHX and at the Commission.

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 change and discussed any comments it received regarding the proposed rule change. 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

The CHX proposes to change its fee schedule to provide for assessment of a marketing fee of $.01 per share applicable to “Subject Transactions”[3] in “Subject Issues” [4] occurring on or before June 30, 2002. The marketing fee would not be assessed if the specialist trading the Subject Issue elected to forego collection of the marketing fee.

The CHX currently imposes a marketing fee under a provision of the CHX fee schedule that, by its term, would expire on December 31, 2001.[5] Under the system in place until December 31, 2001, the CHX calculates, bills, and collects the marketing fee and then remits the proceeds to the specialist firm that trades the Subject issue. The specialist firm then distributes the funds to order-sending firms in accordance with its payment for order flow arrangements relating to the Subject Issue, or in certain instances, to market makers who have contributed to market share growth. The CHX has also issued quarterly refunds of unspent marketing fee proceeds to market makers, floor brokers, and specialists, on a pro rata basis, for amounts in excess of $1,000.

The CHX is currently proposing to: (a) Extend the marketing fee provision until June 30, 2002; (b) modify the definition of Subject Issue to exclude issues other than ETFs' (c) revise the definition of Subject Transaction to include any trade with a customer where the order is delivered to the CHX via the MAX system; and (d) revise procedures to preclude assessment of the marketing fee against specialists in the case of transactions where market makers are exercising their entitlement rights under CHX rules.

The CHX states that the continued imposition of the marketing fee is intended to allocate equitably the financial burden of seeking order flow for Subject Issues. Prior to the establishment of the current fees program, according to the CHX, a CHX specialist trading a particular Subject Issue was the sole bearer of the often substantial costs associated with attracting order flow to the CHX, as well as any licensing fees that the licensor of the product imposes.[6] The CHX also notes that, prior to the implementation of the current program, CHX market makers that participated in transactions in Subject Issues did not share any of these costs.

By extending the current payment for order flow program, the proposed rule change would continue to allow a specialist trading a Subject Issue to impose the marketing fee in instances where the specialist believes that it would be appropriate to allocate the financial burden of trading the Subject Issue among all those who trade it, including the specialist and market makers. The CHX believes that the proposed rule change will continue to provide specialist trading Subject Issues with sufficient incentive to continued their efforts to attract additional order flow and increase market share.

2. Statutory Basis

The CHX believes that the proposed rule change is consistent with section 6(b)(4) of the Act[7] in that it would provide for the equitable allocation of reasonable dues, fees and other charges among its members.

B. Self-Regulatory Organization's Statement of Burden on Competition

The CHX does not believe that the proposed rule change will impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments Regarding the Proposed Rule Change From Members, Participants or Others

The CHX neither solicited nor received written comments with respect to the proposed rule change.

Because the foregoing rule change establishes or changes a due, fee, or other charge imposed by the CHX, it has become effective pursuant to section 19(b)(3)(A) of the Act[8] and Rule 19b-4(f)(2) thereunder.[9] At any time within 60 days after the filing of the proposed rule change, the Commission may summarily abrogate the proposed 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 purpose 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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 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 at the Commission's Public Reference Start Printed Page 3519Room. Copies of the filing will also be available for inspection and copying at the principal office of the CHX. All submissions should refer to File No. SR-CHX-2001-30 and should be submitted by February 14, 2002.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[10]

Start Signature

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  “Subject Transaction” means (a) any trade with a customer, whether the contra party is a specialist or a market maker, where the order is delivered to the CHX via the MAX system or where compensation is paid to induce the routing of the order to the CHX; or (b) any trade between a specialist and a market maker in which the market maker is exercising rights under the market maker entitlement rules.

Back to Citation

4.  “Subject Issue” means any issue which constitutes an exchange-traded fund (“ETF”) and meets the following two criteria: (a) average daily share volume in the issue exceeds 150,000 shares each month during a consecutive two month period; and (9b) market maker share participation in the same issue exceeds 5% for each month during the same two-month period.

Back to Citation

5.  See Securities Exchange Act Release No. 44646 (August 2, 2001), 66 FR 41641 (August 8, 2001) (SR-CHX-2001-10).

Back to Citation

6.  Under the proposed rule change, the marketing fee would be assessed only against ETF products, which almost always have an associated licensing fee.

Back to Citation

8.  15 U.S.C. 78s(b)(3)(A)(ii).

Back to Citation

[FR Doc. 02-1702 Filed 1-23-02; 8:45 am]