[Federal Register Volume 64, Number 119 (Tuesday, June 22, 1999)]
[Notices]
[Pages 33331-33333]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15845]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41526; File No. SR-CHX-99-02]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change and Amendment No. 1 to the
Proposed Rule Change by the Chicago Stock Exchange, Incorporated
Relating to Membership Dues and Fees
June 15, 1999.
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 May 10, 1999, the Chicago Stock Exchange, Incorporated (``CHX'' or
``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. On May
28, 1999, the Exchange filed Amendment No. 1 to the proposed rule
change.\3\ The Exchange has designated this proposal as one
establishing or changing a due, fee, or other charge imposed by the CHX
under section 19(b)(3)(A)(ii) of the Act,\4\ which render the proposal
effective upon filing with the Commission.\5\ The Commission is
publishing this notice to solicit
[[Page 33332]]
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\ Letter from Kathleen M. Boege (``Boege''), Associate General
Counsel, Exchange to Joseph Morra (``Morra''), Attorney, Division of
Market Regulation (``Division''), SEC, dated May 26, 1999
(``Amendment No. 1''). Amendment No. 1 corrected Section II(C) of
the proposal, to acknowledge that the Exchange solicited input from
firms that serve as CHX specialists for Nasdaq issues that are
traded on the CHX pursuant to unlisted trading privileges, and that
there was unanimous consent to the proposal by those firms.
Amendment No. 1 was filed on May 28, 1999, following several
interchanges between Division staff and Exchange staff. The
Commission processed Amendment No. 1 on the same day. Consequently,
the proposal is deemed to have been filed as of May 28, 1999.
\4\ 15 U.S.C. 78s(b)(3)(A)(ii).
\5\ The filing date of this proposed rule change is May 28,
1999. see supra footnote 3.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange proposes to amend its membership dues and fees
schedule, effective with the May billing statements. The text of the
proposed change is below. Additions are in italics; deletions are in
brackets.
Membership Dues and Fees
* * * * *
(e) Equipment/Technology/Space Charges
* * * * *
Technical Equipment (per
month)
Four Screen Rich Units........ $250.00
Three Screen Rich Units....... $208.35
Two Screen Rich Units......... $166.65
Max Floor Broker Terminals.... $37.95
Floor Broker Printer.......... $49.95
Specialist Back Post MAX $37.95
Terminals.
OTC/UTP Equipment............. ...........
Pentium 450 PC................ $100.00
Two 21'' CRTs................. $110.00
Two 15'' flat-panel monitors.. $140.00
Two 18'' flat-panel monitors.. $250.00
[Specialist] Printer (Listed $49.95
or OTC/UTP Specialist).
Tools of the Trade Access Each specialist firm shall be billed on a
monthly basis, based on usage by each of
the firm's OTC/UTP co-specialists, for
actual Tools of the Trade access charges
that become due in accordance with the
Exchange's license agreement with
Financial Systemware, Inc.
Server and Network
Infrastructure Charges
Tools of the Trade and All Server and Network Infrastructure
Nasdaq Connection Charges Charges and all Tools of the Trade and
Nasdaq Connection Charges (i.e., the costs
of providing access to and use of the
Exchange's Nasdaq and Tools of the Trade
servers to facilitate OTC/UTP trading)
shall be located pro rata on a monthly
basis among all specialist firms engaged
in OTC/UTP trading, based on the number of
OTC/UTP co-specialists at each firm.
(b) Not applicable.
(c) Not applicable.
* * * * *
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 Exchange 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 these 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 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 purpose of the proposed rule change is to amend the Exchange's
schedule of membership dues and fees to pass on to Exchange specialists
engaged in trading certain securities on an over-the-counter basis
pursuant to unlisted trading privileges (collectively, the ``OTC/UTP''
specialists) those costs associated with providing new technology and
dedicated equipment to the Exchange's OTC/UTP community.
The CHX maintains that due to the recent explosive growth in OTC/
UTP trading at the Exchange and the corresponding increase in related
technological demands, the Exchange has had to augment its existing CHX
computer equipment and network infrastructure, solely to accommodate
the Exchange's OTC/UTP specialists. Because the rapid expansion of the
OTC/UTP program has necessitated, and will continue to demand,
significant expenditures of the Exchange's capital and personnel
resources, the Exchange's Finance Committee has determined that the
Exchange should not continue to absorb all of the costs incurred by the
Exchange in connection with the OTC/UTP program. Accordingly, the
Exchange proposes to commence rebilling OTC/UTP specialists for these
costs.
The CHX rules expressly authorize the Exchange to ``* * * fix and
impose other charges or fees to be paid to the Exchange by members and
member organizations * * * for the use of equipment or facilities * *
*.'' \6\ Proceeding under this authority, Exchange management developed
a proposed fee schedule, identifying the costs that will be passed on
to OTC/UTP specialists. The proposed fee schedule was discussed with
specialist firms that will be affected thereby; none of these firms
(nor any individual co-specialist) opposed the Exchange's proposal. In
light of this consensus, the CHX Finance Committee approved the
proposed amendment at its April 13, 1999 meeting and the CHX Board of
Governors concurred at its April 15, 1999 meeting.
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\6\ Article XIV, Rule 7(a).
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As reflected in the proposed text set forth above, the costs that
the Exchange seeks to pass on to OTC/UTP co-specialists consist of
three principal categories. Each category is comprised of costs that
are incurred by the Exchange solely on account of the OTC/UTP program.
Accordingly, the Exchange believes that it is appropriate to limit
pass-through of these costs to OTC/UTP co-specialists on a pro rata
basis. The first category, ``Server and Network Infrastructure
Charges'' and ``Tools of the Trade and Nasdaq Connection Charges''
consists of the costs (including ongoing maintenance and service costs)
relating to the Exchanges' new Nasdaq and Tools of the Trade \7\
servers. The second
[[Page 33333]]
category, ``Technical Equipment'' assesses the OTC/UTP co-specialist
with the cost of computer equipment, monitors and printers dedicated to
an OTC/UTP co-specialist's own trading environment. Finally, the
``Tools of the Trade Access'' category provides for direct rebilling of
actual access charges incurred by the Exchange when a co-specialist
uses Tools of the Trade for the particular issues traded by the co-
specialist.
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\7\ Tools of the Trade is a proprietary software enhancement
licensed to CHX by Financial Systemware, Inc. This software operates
as an overlay on existing OTC/UTP systems and provides for increased
functionality and enhanced capacity with respect to automated
quotation display and trade execution.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b)(4) of the Act \8\ in that it provides for the equitable
allocation of reasonable dues, fees and other charges among its
members.
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\8\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that no burden will be placed on competition
as a result of the proposed rule change.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The CHX held a meeting on March 29, 1999, which was attended by the
principals of all UTP Specialist Firms, at which time CHX management
outlined the proposed fee structure contained in this proposal, and the
rationale for imposition of such fees. There was unanimous consent of
the UTP Specialist Firms to the imposition of the proposed fees.
Subsequently, the proposal was approved unanimously by the CHX
committee (referred to as the OTC Committee) responsible for matters
having an impact on unlisted trading at the Exchange.\9\
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\9\ See Amendment No. 1.
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III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
The proposed rule change, as amended, has become effective pursuant
to Section 19(b)(3)(A)(ii) of the Act \10\ and subparagraph (f)(2) of
Rule 19b-4 thereunder,\11\ because it involves a due, fee, or other
charge. At any time within 60 days of the filing of the proposed rule
change (May 28, 1999), the Commission may summarily abrogate 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.\12\
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\10\ 15 U.S.C. 78s(b)(3)(A)(ii).
\11\ 17 CFR 240.19b-4(f)(2).
\12\ In reviewing this proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
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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. Persons making written submissions should file
six copies thereof with the Secretary, Securities and Exchange
Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. 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 inspection and copying in the Commission's
Public Reference Room. Copies of such filing will also be available for
inspection and copying at the principal office of the Exchange. All
submissions should refer to file number SR-CHX-99-02, and should be
submitted by July 12, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland
Deputy Secretary.
[FR Doc. 99-15845 Filed 6-21-99; 8:45 am]
BILLING CODE 8010-01-M
