[Federal Register Volume 76, Number 129 (Wednesday, July 6, 2011)]
[Notices]
[Pages 39451-39453]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-16854]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64771; File No. SR-CHX-2011-14]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule
Concerning the CHX Connect Service
June 29, 2011.
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 June 24, 2011, 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 and
II below, which Items have been prepared by the CHX. CHX has filed this
proposal pursuant to Exchange Act Rule 19b-4(f)(6) \3\ which is
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\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CHX proposes to add Article 4, Rule 2 (CHX Connect) to include an
explicit description of the Exchange's CHX Connect order routing
service. The text of this proposed rule change is available on the
Exchange's Web site at (http://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 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
New Article 4, Rule 2 describes the operation of the CHX Connect
routing network. CHX Connect is an electronic communications service
owned and operated by the Exchange which allows Participants to
transmit orders and related transaction information directly to any
destination designated by the order sending Participant (such as an
over-the-counter market maker or order-routing vendor) connected to the
service without being submitted to the Exchange's trading facilities.
The CHX Connect communications service was described in a rule filing
made with the Commission in 2006, but which did not update the
Exchange's rules.\4\ In order to remove any potential ambiguity about
the nature of the Exchange's technology and communications offerings,
we are now proposing to add language to our rules describing CHX
Connect. The CHX Connect service has not changed in any material
respect since the 2006 filing. Use of the CHX Connect service by any
Exchange Participant is entirely optional and is not required to direct
orders to our Matching System for execution or display.
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\4\ Exchange Act Release No. 54846 (Nov. 30, 2006), 71 FR 71003
(Dec. 7, 2006).
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The Exchange believes that certain order senders may have an
interest in the CHX Connect service in order to efficiently route
orders which cannot be accepted into the Matching System directly. For
example, an order sender may have received a market order to buy a NMS
security normally traded in the CHX Matching System.\5\ Since the
Matching System does not accept market orders, the order sender cannot
route that order to our trading facilities. An order sender can use the
CHX
[[Page 39452]]
Connect service to transmit that order to a destination which is also
connected to the service and which accepts and executes market orders,
such as an over-the-counter market maker. CHX Connect can be used to
transmit order information to other destinations in any security
approved by the Exchange for use within the system, including, but not
limited to, securities approved for trading within the Matching System.
The Exchange plays no role in determining where the order is sent.
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\5\ Similar examples would be All or None orders or orders in
securities not traded by the Exchange.
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Participants may also elect to use CHX Connect to transmit orders
in an electronic format to the Exchange's Matching System, to
Institutional Brokers registered with the Exchange pursuant to Article
17 of our rules, and to other destinations which are connected to the
CHX's network. The Matching System will only accept orders in
securities listed on the Exchange or eligible for Unlisted Trading
Privileges. The Exchange believes that certain Participants may be
interested in using CHX Connect to send orders to our facilities as an
alternative to private order routing systems or vendors, which perform
the same function. Participants may designate where an order is to be
directed on a security-by-security or order-by-order basis.
Instructions received on an order-by-order basis shall supersede
previously-received instructions on a security-by-security basis. Use
of the CHX Connect service is subject to the approval of the Exchange.
The Exchange evaluates all potential users on an equal and non-
discriminatory basis. The criteria by which potential users of the
service are evaluated relate solely to preserving the security and
integrity of the Exchange's systems, and to ensuring the proper
formatting of messages sent via CHX Connect in generally accepted
industry protocols, such as Financial Information eXchange (FIX)
Protocol. The fees and charges for a subscription to the CHX Connect
Service are set forth in the Exchange's published Schedule of Fees and
Assessments, and apply equally to all users of the system.\6\
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\6\ The Exchange charges only those Participants which receive
(and not those which solely transmit) orders through the CHX Connect
service. The current fee for receiving orders via CHX Connect is
$5,000 per month. See, CHX Schedule of Fees and Assessments, Section
M.
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This service is a facility of the Exchange. As a result, the
Exchange would submit fee changes, and any applicable changes to its
rules, to the Commission as required by Exchange Act Rule 19b-4 in
connection with the CHX Connect service.
The Exchange would provide these routing services in compliance
with its rules and with the provisions of the Exchange Act and the
rules thereunder, including, but not limited to, the requirements of
Sections 6(b)(4) and (5) of the Act that the rules of a national
securities exchange provide for the equitable allocation of reasonable
dues, fees and other charges among its members and issuers and other
persons using its facilities, and not be designed to permit unfair
discrimination between customers, issuers, brokers or dealers.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act in general, and furthers the objectives of
Section 6(b)(1) of the Act in particular, in that it allows the
Exchange to be organized and have the capacity to be able to carry out
the purposes of the Act and to comply, and (subject to any rule or
order of the Commission pursuant to section 17(d) or 19(g)(2) of the
Act) to enforce compliance by its members and persons associated with
such members, with the provisions of the Act, the rules and regulations
thereunder, and the rules of the exchange. As discussed herein, CHX
Connect is a communications service offered by the Exchange to its
Participants to either send orders to the Matching System or to another
destination of its choosing. The CHX Connect communications service was
described in a rule filing made with the Commission in 2006, but which
did not update the Exchange's rules.\7\ In order to remove any
potential ambiguity about the nature of the Exchange's technology and
communications offerings, we are now proposing to add language to our
rules describing CHX Connect. The CHX Connect service has not changed
in any material respect since the 2006 filing. By adding a description
of the nature of the CHX Connect service to the Exchange's rules, this
proposal advances the purposes of the Exchange Act by providing added
clarity about the nature and extent of certain services offered by the
Exchange to its Participants, and thereby contributing to the ability
of our members in complying with the requirements related to those
services.
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\7\ Exchange Act Release No. 54846 (Nov. 30, 2006), 71 FR 71003
(Dec. 7, 2006).
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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. As noted above, the Exchange
believes that its CHX Connect service will compete with the existing
order routing networks operated by broker-dealers or other service
providers. By providing Participants a means of effectively directing
orders which cannot be accepted into the Matching System to a
destination which can handle such orders, the Exchange is attempting to
provide ready solutions to potential order senders, with the ultimate
goal of maximizing order flow to the Exchange's trading facilities.
The CHX Connect service is entirely optional and Participants are
not required to utilize it to send order to the Exchange or elsewhere.
The Exchange notes that the routing and connectivity services of CHX
Connect appear to be very similar manner to those offered by the Secure
Financial Transaction Infrastructure[reg] (``SFTI'') system, which is
provided by NYSE Technologies, an affiliated company of the New York
Stock Exchange, Inc. By competing with SFTI and other service providers
of secure connectivity among market participants, CHX Connect would
offer additional options for participants looking for systems to
deliver their orders.
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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6)
thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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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
[[Page 39453]]
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 e-mail to [email protected]. Please include
File Number SR-CHX-2011-14 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-2011-14. 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 Web site viewing and
printing 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 such 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-2011-14 and should be
submitted on or before July 27, 2011.
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\10\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-16854 Filed 7-5-11; 8:45 am]
BILLING CODE 8011-01-P