[Federal Register Volume 76, Number 142 (Monday, July 25, 2011)]
[Notices]
[Pages 44386-44387]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-18684]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64915; File No. SR-CHX-2011-13]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Regarding the Obligations of Exchange-Registered Institutional Brokers
July 19, 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 July 12, 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 Interpretation and Policy .04 to Article 17,
Rule 3 (Institutional Broker Responsibilities) to include an explicit
reference to the obligation of Exchange-registered to seek execution of
orders which they handle in a prompt and timely manner. 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
Through this proposal, the Exchange seeks to add Interpretations
and Policies .04 to Article 17, Rule 3 (Responsibilities of
Institutional Brokers) to make explicit the obligation of Institutional
Brokers registered with the Exchange to handle orders in a prompt and
timely manner. The obligation to handle orders in a prompt and timely
manner is part of the existing responsibility of a broker dealer to
seek best execution when handling or executing an order on behalf of a
customer.\4\ The Exchange's Market Regulation Department conducts
routine automated surveillance for compliance by Institutional Brokers
with the requirement to handle and execute orders in a timely manner.
The explicit
[[Page 44387]]
reference in the Interpretations and Policies to our rules to the
requirement of Institutional Brokers to handle orders in a prompt and
timely manner would reinforce this duty to the Institutional Brokers
operating on the Exchange, and clarify the nature and scope of this
obligation.
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\4\ See, e.g., NASD Rule 2320. (Best Execution and
Interpositioning), ``In any transaction for or with a customer or a
customer of another broker-dealer, a member and persons associated
with a member shall use reasonable diligence to ascertain the best
market for the subject security and buy or sell in such market so
that the resultant price to the customer is as favorable as possible
under prevailing market conditions.''
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The requirement to handle orders in a prompt and timely manner
would be subject to the existing provisions of that rule relating to
``not held'' orders. Not held orders involve price and time discretion
and an Institutional Broker is permitted to delay the execution of a
not held order if it believes that such action is in the best interests
of the customer. Thus, the requirement to handle orders in a prompt and
timely manner, while still applicable to not held orders, must allow
for the legitimate application of price and time discretion by the
Institutional Broker.\5\
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\5\ If an Institutional Broker neglected to take any action on a
not held order for an improper purpose, e.g., inattention to or
forgetting about the order, however, it could still be charged for
failure to comply with these provisions.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act in general,\6\ and furthers the objectives
of Section 6(b)(5) in particular,\7\ in that it is designed to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transaction in
securities, to remove impediments and perfect the mechanisms of a free
and open market, and, in general, to protect investors and the public
interest by reinforcing the duties of best execution and the
requirement to handle orders in a prompt and timely manner to the
Institutional Brokers operating on the Exchange, and clarify the nature
and scope of this obligation. In addition, the Exchange believes that
the proposed rule change is consistent with Section 6(b) of the Act \8\
in general, and furthers the objectives of Section 6(b)(1) of the Act
\9\ 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 noted above, the Exchange believes that by adding an
Interpretation and Policy to make explicit the obligation to handle
orders in a prompt and timely manner, this proposal advances the
purposes of the Exchange Act by providing added clarity about the
nature and extent of the duties owed by Exchange Participants, and
contributes to the ability of the CHX to effectively enforce compliance
with those requirements.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(1).
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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 Regarding 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 \10\ and Rule 19b-4(f)(6)
thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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 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-2011-13 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-2011-13. 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 website 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-2011-13 and should be
submitted on or before August 15, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-18684 Filed 7-22-11; 8:45 am]
BILLING CODE 8011-01-P