Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), and Rule 19b-4 thereunder, notice is hereby given that on June 2, 2003, 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. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
17 CFR 240.19b-4.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The CHX proposes to amend its membership dues and fees schedule (“Schedule”), effective May 1, 2003, to increase the specialist tape credits for certain trades in Tape A and Tape B securities. The text of the proposed rule change is available at the Commission and at the CHX.
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 its proposal 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 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 Exchange proposes to amend the Schedule, effective May 1, 2003, by increasing the specialist tape credits available for certain trades in Tape A and Tape B securities. Specifically, in any month that the CHX's aggregate share of Tape A or Tape B trade volume exceeds the CHX's aggregate share of Tape A or Tape B trade volume for the first quarter of the year 2003, the Exchange intends to distribute 50% of the tape revenue received by the Exchange resulting from that increased share of Tape A or Tape B trade volume (“Additional Revenue”). The Exchange plans to distribute this Additional Revenue to specialist firms in proportion to each firm's share of that month's incremental growth in Tape A or Tape B trade volume. This tape credit program is designed to provide additional credits to the specialist firms that increase the Exchange's market share in Tape A and Tape B securities.
Tape A securities are securities reported on Tape A of the Consolidated Tape Association. Tape B securities are securities reported on Tape B of the Consolidated Tape Association.
These distributions would be made from a month's Additional Revenue after subtracting all direct CTA costs and the Transaction Credits otherwise payable for the increased trade volume. At no time would any specialist firm receive credits, relating to trades in Tape B securities, which exceed 50% of the market data revenue received by the Exchange with respect to trades in those securities.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange and, in particular, with the requirements of Section 6(b)(4), in that it provides for the equitable allocation of reasonable dues, fees and other charges among its members.
15 U.S.C. 78(f)(b)(4).
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will impose any inappropriate 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 either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the CHX consents, the Commission will:
(A) By order approve the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
On July 2, 2002, the Commission issued an Order abrogating certain proposed rule changes relating to market data revenue sharing programs. In that Order, the Commission expressed concern that the subject proposed rule changes raised “serious questions as to whether they are consistent with the Act and with the protection of investors.” Specifically, the Commission questioned the effect of market data rebates on the accuracy of market data, and on the regulatory functions of self-regulatory organizations.
Securities Exchange Act Release No. 46159 (July 2, 2002), 67 FR 45775 (July 10, 2002) (File Nos. SR-NASD-2002-61, SR-NASD-2002-68, SR-CSE-2002-06, and SR-PCX-2002-37) (Order of Summary Abrogation).
The Commission now solicits comment on the CHX's proposed rule change, and in general, on (1) market data fees; (2) the collection of market data fees; (3) the distribution of market data rebates; (4) the effect of market data revenue sharing programs on the accuracy of market data; and (5) the impact of market data revenue sharing programs on the regulatory functions of self-regulatory organizations.
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 at the Commission's Public Reference Room. Copies of such filings will also be available for inspection and copying at the principal office of the Exchange. All submissions should refer to File No. SR-CHX-2003-15 and should be submitted by July 21, 2003.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-16468 Filed 6-27-03; 8:45 am]
BILLING CODE 8010-01-P