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Notice

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

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Start Preamble September 13, 2002.

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 July 31, 2002, the Chicago Stock Exchange, Incorporated (“CHX” or Exchange”) filed with the Securities and Exchange Commission (“SEC” or 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.

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 (the “Schedule”), effective August 1, 2002, to change the calculation of the fixed fee charged to specialists trading Dual Trading System securities and to reduce the fees relating to the assignment of Nasdaq/NM securities. The text of the proposed rule change is below. Start Printed Page 59323Proposed new language is in italics. Proposed deletions are bracketed.

Membership Dues and Fees

* * * * *

A.-C. No change to text.

D. Specialist Assignment Fees

Specialist Application Fee$150 per application [filed after April 1, 2000].
Assignment Fee of Dual Trading System Securities[Beginning on April 1, 2000,] O[o]nce the Committee on Specialist Assignment and Evaluation approves a member organization to act as specialist in a security, that member organization must pay the following fee:
$350 If the security was assigned without competition.
$1,000 If the security was assigned in competition with at least one other member firm and up to one-third of all member firms that trade Dual Trading System Securities.
$4,000 If the security was assigned in competition with more than one-third of all member firms that trade Dual Trading System Securities.
Assignment of Nasdaq/NM SecuritiesBeginning on [April 1, 2000] August 1, 2002, once the Committee on Specialist Assignment and Evaluation approves a member organization to act as specialist in a security, that member organization must pay the following fee:
[$2,000] $350 If the security was assigned without competition.
[$4,000] $1,000 If the security was assigned in competition with [at least] one other member firm [and up to one-third of all member firms] that trade s Nasdaq/NM Securities.
[$15,000] $4,000 If the security was assigned in competition with [more than] two or more other [one-third of all] member firms that trade Nasdaq/NM Securities.
* * * * *

E. Specialist Fixed Fees

Except in the case of Exemption Eligible Securities (as defined above in Section D), which shall be exempt from assessment of fixed fees, specialists will be assigned a fixed fee per assigned stock on a monthly basis, to be calculated as follows:

Fixed Fee Per Dual Trading System Security =[$417,000 × Percent of Fixed Costs Per Tier × CTA Trade Volume Per Security/CTA Trade Volume Per Tier. (Effective April 1, 2000).]
$500,000 × Percent of Fixed Costs Per Tier × CTA Trade Volume Per Security/CTA Trade Volume Per Tier. (Effective August 1, 2002 [October 1, 2000]).
Fixed Fee For Member Firms Trading Nasdaq/NMS Securities=No change to text.
Fixed Fee Per Dedicated Odd-Lot DealerNo change to text.

“Percent of Fixed Costs Per Tier” is taken from the following table:

TierDescription of tierPercent of fixed costs per tier
11-25 Most Active Securities[11%] 17%
226-100[11%] 18%
3101-200 [250][12%] 15%
4201+ [251-500][13%] 50%
[5][501-1000][19%]
[6][1001-2700+][34%]

Classification of a particular security for a particular Tier is based on the total number of trades reported to the Consolidated Tape Association in such security for a specific month.

“CTA Trade Volume Per Security” means the total number of trades reported to the Consolidated Tape Association in a specific security for a specific month.

“CTA Trade Volume Per Tier” means the total number of trades reported to the Consolidated Tape Association in all securities classified in a particular Tier for a specific month.

“Dedicated Odd-Lot Dealer” means any odd-lot dealer (as defined in Article XXXI, Rule 3) whose principal business is the trading of odd-lots.

* * * * *

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 the 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. 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 proposed rule change amends the Schedule by (1) changing the fixed fees charged specialists who trade Dual Trading System securities; and (2) reducing the fees associated with the assignment of Nasdaq/NM securities.[3] Each of these changes is described below.

Change in the Dual Trading System Specialist Fixed Fee. For a number of years, the fixed fee charged to specialists trading Dual Trading System issues has been calculated so that specialists pay a lower percentage of the fixed fee on securities that trade the most and, correspondingly, a higher percentage of the fixed fee on securities that trade the least. The Exchange does not use this tiered structure in its assessment of fixed fees for specialists trading Nasdaq/NM securities, and Exchange management does not believe that, in the long term, it is appropriate to continue using it in the Dual Trading System specialist program. However, to avoid the quite significant impact on a few individual firms that would result from immediately collapsing all of the tiers into one, the attached rule text would collapse the existing six tiers into four and place additional portions of the fee on the more actively traded stocks.

Decrease in Nasdaq/NM Assignment Fees. Several years ago, for a variety of reasons, the Exchange began charging specialists who sought assignment of Nasdaq/NM securities a higher fee than specialists who sought assignment of Dual Trading System issues. Given the decrease in the number of Nasdasq/NM Start Printed Page 59324issues traded on the Exchange, it no longer appears appropriate to maintain this different fee schedule. As a result, this proposal would decrease the Nasdaq/NM assignment fees to be more like the fees charged for the assignment of Dual Trading System securities.

2. Statutory Basis

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

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

Written comments were neither solicited nor received.

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

The foregoing proposed rule change has become effective upon filing pursuant to Section 19(b)(3)(A)(ii) of the Act [5] and subparagraph (f)(2) of Rule 19b-4 [6] thereunder, because it establishes or changes a due, fee, or other charge. At any time within 60 days of the filing date, 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.

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 20549-0609. 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. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All submissions should refer to File No. SR-CHX-2002-24 and should be submitted by October 11, 2002.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[7]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  Dual Trading System issues are securities that are traded on the Exchange and on either the American Stock Exchange or the New York Stock Exchange.

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5.  15 U.S.C. 78s(b)(3)(A)(ii).

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[FR Doc. 02-23886 Filed 9-19-02; 8:45 am]

BILLING CODE 8010-01-P