[Federal Register Volume 81, Number 124 (Tuesday, June 28, 2016)]
[Notices]
[Pages 42022-42024]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15176]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78126; File No. SR-CHX-2016-10]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Institutional Broker Fee Cap and Credit
June 22, 2016.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given
that on June 16, 2016, 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, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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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 Schedule of Fees and Assessments (the
``Fee Schedule'') to modify certain fees and
[[Page 42023]]
credits applicable to CHX Institutional Brokers. The text of this
proposed rule change is available on the Exchange's Web site at
(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 on the proposed rule change. 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 Changes
1. Purpose
The Exchange proposes to amend the Fee Schedule to modify certain
fees and credits applicable to CHX Institutional Brokers
(``Institutional Brokers'').\3\ Specifically, the Exchange proposes to
amend Sections E.3(a) and E.7 to decrease the respective fee caps \4\
from $100 each to $75 each and to amend Section F.2 to decrease the
Transaction Fee Credit and Clearing Submission Fee Credit (collectively
``Institutional Broker credits'') from 10% each to 5% each.\5\
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\3\ See CHX Article 1, Rule 1(n) defining ``Institutional
Broker''; see also generally CHX Article 17.
\4\ The Exchange recently amended the process through which the
Sections E.3(a) and E.7 fee caps are applied. See Exchange Act
Release No. 77785 (May 9, 2016), 81 FR 29936 (May 13, 2016) (SR-CHX-
2016-06).
\5\ Section E.3(a) and E.7 fees are virtually identical as both
apply to executions effected through Institutional Brokers that are
cleared through the Exchange's clearing systems, except that Section
E.3(a) applies to executions within the Matching System, whereas
Section E.7 applies to qualified away executions pursuant to CHX
Article 21, Rule 6(a).
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Sections E.3(a) and E.7
Current Section E.3(a) assesses a fee of $0.0030 per share, capped
at $100 per Clearing Side,\6\ for an execution within the Matching
System in a security priced at $1.00 per share or more that results
from an agency order submitted by an Institutional Broker. Current
Section E.7 assesses a similar fee of $0.0030 per share, capped at $100
per Clearing Side, for an away execution in a security priced at $1.00
per share or more that is cleared through the Exchange's clearing
systems by an Institutional Broker.\7\
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\6\ Section E.3(a)(3) of the Fee Schedule defines ``Clearing
Side,'' in pertinent part, as the buy or sell side of a clearing
submission that is relate to a Section E.3(a) or Section E.7
execution.
\7\ See supra note 5.
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The Exchange now proposes to decrease the Sections E.3(a) and E.7
caps from $100 each to $75 each. The Exchange believes that the [sic]
reducing Sections E.3(a) and E.7 caps would further incentivize market
participants to utilize Institutional Brokers to submit orders to the
Matching System.
Section F.2
Current Section F.2 provides for Institutional Broker credits and
generally states that the total monthly fees owed by an Institutional
Broker to the Exchange will be reduced (and Institutional Brokers will
be paid for any unused credits) by the application of a Transaction Fee
Credit and a Clearing Submission Fee Credit. Specifically, a Clearing
Broker \8\ receives a ``Transaction Fee Credit'' equal to 10% of the
transaction fees received by the Exchange for agency trades executed
through the Institutional Broker (i.e., Section E.3(a) fees) for the
portion(s) of the transaction handled by the Clearing Broker.
Similarly, a Clearing Broker receives a ``Clearing Submission Fee
Credit'' equal to 10% of the Clearing Submission Fees received by the
Exchange pursuant to Section E.7 of the Fee Schedule for the portion(s)
of the transaction handled by the Clearing Broker. Also, only
Institutional Brokers which are members of the Financial Industry
Regulatory Authority, Inc. are eligible for the Clearing Submission Fee
Credit.
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\8\ Section F.2 of the Fee Schedule defines ``Clearing Broker''
as the Exchange-registered Institutional Broker that did not execute
the trade, but acted as the broker for the ultimate Clearing
Participant. The Exchange notes that the Institutional Broker that
executed the trade may also be a Clearing Broker for the purposes of
Section F.2 if the Institutional Broker acted as the broker for one
or more of the Clearing Participants allocated positions to the
trade.
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The Exchange now proposes to decrease both Institutional Broker
credits from 10% each to 5% each so as to help offset lost revenue that
may result from the proposed fee cap decreases. The Exchange also
proposes to eliminate the phrase ``per side'' under the first sentence
of the current definition of ``Clearing Submission Fee Credit'' as the
definition already provides that the Clearing Submission Fee Credit is
paid to a Clearing Broker for the portion of the transaction handled by
the Clearing Broker. The Exchange believes that the current reference
to ``per side'' is duplicative and non-substantive.
Operative Date
The proposed rule change is effective upon filing, but will be
operative on July 1, 2016.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act \9\ in general, and furthers the
objectives of Section 6(b)(4) of the Act \10\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and other persons using its facilities.
Specifically, Sections E.3(a) and E.7 fees and respective fee caps will
continue to be equitably allocated among all Clearing Participants.
Also, the Section F.2 Institutional Broker credits will continue to be
equitably allocated among all Clearing Brokers based on attributed
activity in qualified executions.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(4).
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Moreover, the Exchange believes that the proposed rule change is
consistent with Section 6(b)(1) of the Act \11\ in particular in that
the proposed deletion of the words ``per side'' under the definition of
``Clearing Submission Fee Credit'' clarifies the applicability of the
credit, which would further enable the Exchange to be so organized as
to have the capacity to be able to carry out the purposes of the Act
and to comply, and to enforce compliance by its Participants and
persons associated with its Participants, with the provisions of the
Act, the rules and regulations thereunder, and the rules of the
Exchange.
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\11\ 15 U.S.C. 78f(b)(1).
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Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues. In such an environment, the Exchange must continually
review, and consider adjusting, its fees and credits to remain
competitive with other exchanges. For the reasons described above, the
Exchange believes that the proposed decreases in the Sections E.3(a)
and E.7 fee caps and the Institutional Broker credits reflects this
competitive environment.
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
[[Page 42024]]
of the purposes of the Act. The Exchange operates in a highly
competitive market in which market participants can readily direct
order flow to competing venues if they deem fee levels set by the
Exchange to be excessive. The Exchange believes that the proposed rule
change will further encourage market participants to submit orders to
the Exchange through Institutional Brokers, which will enhance
competition in the national market system.
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
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A)(ii) of the Act \12\ and subparagraph(f)(2) of Rule
19b-4 thereunder \13\ because it establishes or changes a due, fee or
other charge imposed by the Exchange.
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\12\ 15 U.S.C. 78s(b)(3)(A)(ii).
\13\ 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-2016-10 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CHX-2016-10. 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, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing will also 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-2016-10 and should be
submitted on or before July 19, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-15176 Filed 6-27-16; 8:45 am]
BILLING CODE 8011-01-P