[Federal Register Volume 76, Number 194 (Thursday, October 6, 2011)]
[Notices]
[Pages 62126-62128]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-25795]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65444; File No. SR-CHX-2011-27
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Eliminate Certain References to the Exchange Acting as the Designated
Examining Authority
September 30, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act'' or ``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice
is hereby given that on September 22, 2011, the Chicago Stock Exchange,
Inc. (``CHX'' or the ``Exchange'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule
[[Page 62127]]
change as described in Items I and II below, which Items have been
prepared by the CHX. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 19(b)(3)(A) of
the Act \3\ and Rule 19b-4(f)(6) \4\ thereunder. 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\ 15 U.S.C. 78s(b)(3)(A).
\4\ 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 amend its rules to eliminate certain references to
the Exchange acting as the Designated Examining Authority. 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
The Exchange is proposing to delete certain references in its rules
to its status as the Designated Examining Authority (``DEA'').\5\ In
the impacted rules, the DEA references generally act to limit the scope
and applicability of those rules to firms for which the Exchange acts
as the DEA. While this limitation may be appropriate in some contexts,
for example the Rules in Article 7 regarding Financial Responsibility
and Reporting Requirements, the Exchange no longer believes that these
provisions are appropriate in certain other contexts.\6\ The Exchange
is therefore submitting this rule proposal to delete certain of those
references and make appropriate changes to the remaining provisions.\7\
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\5\ Although not a defined term in our rules, the DEA is the
Self-Regulatory Organization (``SRO'') with the responsibility for
examining a member for compliance with applicable financial
responsibility rules pursuant to Exchange Act Rule 17d-1. 17 CFR
240.17d-1.
\6\ For example, Participants for which the Exchange is the DEA
are required by Article 7, Rule 3A to notify the Exchange prior to
opening a Joint Back Office arrangement. Similarly, Article 7, Rule
9 requires firms for which the CHX is the DEA to file reports of
short positions carried by the firm.
\7\ Certain existing rules regarding the qualification and
examination of individuals associated with a Participant firm
contain references to the CHX acting as DEA. The Exchange is
proposing to delete those references as part of a separate rule
filing making additional changes to those provisions. Current
Article 8, Rule 13 (Advertising and Promotion) also contains similar
references and the Exchange plans on eliminating those in a
subsequent proposal to conform our rules with those of the Financial
Industry Regulatory Agency (``FINRA'') in order to make them
``common'' for purposes of our agreement with FINRA for the
allocation of regulatory responsibility of common rules for dual
members.
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In Article 6, Rule 5(a), (Supervision of Registered Persons and
Branch and Resident Offices), the Exchange proposes to delete the
limiting reference to Participants Firms for which the Exchange acts as
the DEA. The Exchange proposes that the provisions of Rule 5(a) will
apply equally to all Participant Firms.
In Article 17 (Institutional Brokers), Rule 1 (Registration and
Appointment) and in Interpretation and Policy .01 of Article 17, Rule 3
(Responsibilities), the Exchange proposes to delete the requirement
that Participant Firms seeking to register as an Institutional Broker
[sic] must have the Exchange act as the DEA. The Exchange does not
believe that it is necessary that the Exchange examine a Participant
Firm for its compliance with applicable financial responsibility rules
in order that it qualify for status as an Institutional Broker.\8\ The
Exchange notes that it conducts comprehensive daily surveillance of
Institutional Broker trading activity on the CHX and conducts
examinations for supervisory and trading-related issues of all CHX-
registered Institutional Brokers, irrespective of whether it acts as
the DEA. The Exchange also administers a qualification examination for
all individuals acting as an Institutional Broker Representative
(``IBR''). Only an approved IBR may handle and accept orders from
customers of the Institutional Broker firm. Given this oversight
structure, the requirement that the CHX act as the DEA for
Institutional Brokers in all cases appears superfluous and
unnecessarily restrictive.
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\8\ The elimination of this requirement does not imply that an
Institutional Broker firm will not be examined for compliance with
financial responsibility rules. It simply means that another SRO
will perform the examination function for those rules.
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2. Statutory Basis
The Exchange believes that the proposed rule changes are consistent
with Section 6(b) of the Act in general,\9\ and furthers [sic] the
objectives of Section 6(b)(5) in particular,\10\ in that it is [sic]
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. The proposed changes will expand the
reach of the Exchange rules in circumstances where it is appropriate
and fair to do so, and will eliminate outdated limitations of certain
provisions to a subset of Exchange Participants. The broad application
of Exchange rules to all Participants should result in the fair and
evenhanded application of such rules to Participant firms generally.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement of 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 Changes Received From Members, Participants or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Changes and Timing for
Commission Action
Pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) \12\ thereunder, the Exchange has designated this proposal as
one that effects a change that: (i) Does not significantly affect the
protection of investors or the public interest; (ii) does not impose
any significant burden on competition; and (iii) by its terms, does not
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest. Rule 19b-4(f)(6) \13\
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
[[Page 62128]]
of the proposed rule change, or such shorter time as designated by the
Commission. The Exchange has satisfied this requirement.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ Id.
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Under Rule 19b-4(f)(6) of the Act,\14\ a proposal does not become
operative for 30 days after the date of its filing, or such shorter
time as the Commission may designate if consistent with the protection
of investors and the public interest. The Commission is waiving the 30-
day operative period for this filing so that it may become effective
and operative upon filing.\15\ The Commission believes waiving the 30-
day operative delay is consistent with the protection of investors and
the public interest as the waiver will allow the Exchange to implement
the change right away. The proposed rule change eliminates references
to DEA which limit the applicability of some rules to firms for which
the CHX serves as DEA. These rules will now apply to all member firms.
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\14\ Id.
\15\ For purposes only of waiving the operative delay of this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f). See also 17 CFR 200.30-3(a)(59).
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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 proposal 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 No. SR-CHX-2011-27 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 No. SR-CHX-2011-27. 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 changes 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 a.m. and 3 p.m. Copies of such filing will
also be available for inspection and copying at the principal office of
the CHX. 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 No. SR-CHX-
2011-27 and should be submitted on or before October 27, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-25795 Filed 10-5-11; 8:45 am]
BILLING CODE 8011-01-P