[Federal Register Volume 78, Number 112 (Tuesday, June 11, 2013)]
[Notices]
[Pages 35082-35083]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-13772]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69701; File No. SR-CHX-2013-11]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Order Cancellation Fee
June 5, 2012.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on May 31, 2013, the Chicago Stock Exchange, Inc. (``CHX'' or
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by the self-regulatory
organization. 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\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
CHX proposes to amend its Schedule of Participant Fees and
Assessments (the ``Fee Schedule'') to amend the Order Cancellation Fee.
The Exchange proposes to implement the fee change on June 3, 2013. The
text of this proposed rule change is available on the Exchange's Web
site at http://www.chx.com/rules/proposed_rules.htm, at the principal
office of the Exchange, and at 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 self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those 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 parts 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 proposes to amend Section E.8 of the Fee Schedule to
change the value of the Near order multiplier (``Nmult'')
from two (2) to four (4) for all security-types and to replace an
obsolete citation. Under SR-CHX-2012-15, the Exchange adopted the
current formula-based Order Cancellation Fee, which assesses a daily
cancellation fee per Account Symbol,\4\ if the order cancellation ratio
exceeds a designated threshold.\5\ In addition, the Exchange adopted
security-type specific parameter values, such as the Nmult,
in order to permit the Exchange to make adjustments to ensure equitable
application of the Order Cancellation Fee.\6\ To this end, the Exchange
noted in footnote 10 of SR-CHX-2012-15 that ``changes to any of the
proposed parameter values, including Order Cancellation Fee,
Cancellation Ratio, Threshold Away Amount, Minimum Duration and
Nmult, will be made through proposed fee filings pursuant to
Rule 19b-4.'' \7\
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\4\ A CHX ``Account Symbol'' is similar to the Market
Participant Identifiers (``MPID'') issued by the Financial Industry
Regulatory Authority.
\5\ See Securities Exchange Act Release No. 68219 (November 13,
2012), 77 FR 69673 (November 20, 2012) (SR-CHX-2012-15); see also
Section E.8 of the Fee Schedule.
\6\ Id.
\7\ Id.
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The Nmult, was adopted because the Exchange recognized
that, inter alia, Wide orders (i.e. orders that are less marketable),
as well as Near orders (i.e. orders that are more marketable), can be
utilized to promote display liquidity. Thus, the purpose of the
Nmult is to allow the Exchange to multiply the mitigating
affect of Near orders on Wide orders and by extension, the overall
order cancellation ratio. Practically speaking, a higher
Nmult, will result in a lower order cancellation ratio and
thereby allow more Wide orders to be placed before an order
cancellation fee is assessed.
Based on an analysis of nearly seven months of data, the Exchange
has determined that the Nmult of two (2) is overly
restrictive. For instance, the Exchange observed that a Participant was
submitting and cancelling a significant number of Wide orders as part
of a trading strategy designed to follow rapid changes to the National
Best Bid and Offer (``NBBO''). When these cancellations were viewed
within the totality of the trading strategy, the Exchange discovered
that the Wide order cancellations were necessary to provide valuable
display liquidity to the Exchange. After analyzing the trading activity
of this Participant and other Participants, the Exchange determined
that by increasing the Nmult value to four (4) for all
security-types, the application of the Order Cancellation Fee will be
adequately relaxed to better promote display liquidity. Consequently,
the Exchange has decided to forego some Order Cancellation Fees that
would be lost by increasing the Nmult in favor of promoting
display liquidity.
Moreover, the Exchange proposes to replace an obsolete citation to
the ``Do Not Display'' order display modifier with the correct citation
to Article 1, Rule 2(c)(2).
The Exchange proposes to make these amendments to Section E.8
effective June 3, 2013. The formula by which the cancellation fee is
derived shall continue to be calculated and made available to
Participants daily, but billed after the end of the month.
2. Statutory Basis
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)(4) of the Act \9\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and other persons using any facility or
system which the Exchange operates or controls. The Exchange believes
that the amendment to the Nmult described herein should help
to recoup some of the costs of administering and processing large
[[Page 35083]]
numbers of cancelled orders while fairly allocating costs among
Participants according to system use. In addition, these changes to the
Fee Schedule would equitably allocate reasonable fees among
Participants in a non-discriminatory manner by properly imposing fees
on those Participants which enter and subsequently cancel orders above
a fixed threshold while not imposing fees on Participants that do not
exceed this threshold.
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\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(4).
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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. The proposed change to
increase the Nmult value from two (2) to four (4) for all
security-types contributes to the protection of investors and the
public interest by promoting display liquidity on the Exchange. Since
the Exchange does not propose to otherwise substantively modify the
Order Cancellation Fee, the proposed change will not impose any burden
on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A)(ii) of the Act \10\ and subparagraph(f)(2) of Rule
19b-4 thereunder \11\ because it establishes or changes a due, fee or
other charge imposed by the Exchange.
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\10\ 15 U.S.C. 78s(b)(3)(A)(ii).
\11\ 17 CFR 240.19b-4(f)(2).
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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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
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 email to [email protected]. Please include
File Number SR-CHX-2013-11 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-2013-11. This file
number should be included on the subject line if email 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 20549-1090, on official business days
between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing
also will be available for inspection and copying at the principal
offices of 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 Number SR-CHX-
2013-11, and should be submitted on or before July 2, 2013.
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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-13772 Filed 6-10-13; 8:45 am]
BILLING CODE 8011-01-P