Self-Regulatory Organizations; The Chicago Stock Exchange Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Clearing Support and Other Fees

[Federal Register Volume 61, Number 68 (Monday, April 8, 1996)]
[Notices]
[Pages 15544-15545]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-8546]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37054; File No. SR-CHX-96-10]


Self-Regulatory Organizations; The Chicago Stock Exchange 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Clearing Support and Other Fees

April 1, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
\1\ (``Act''), notice is hereby given that on February 29, 1996, the 
Chicago Stock Exchange, Incorporated (``CHX'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change (File No. SR-CHX-96-10) as described in Items I, II, and III 
below, which items have been prepared primarily by the CHX. The CHX 
supplemented the filing on March 18, 1996, to clarify and to provide 
additional detail to the original filing.\2\ The Commission is 
publishing this notice to solicit comments on the proposed rue change 
from interested persons.

    \1\ 15 U.S.C. 78s(b)(1) (1988).
    \2\ Letter from George T. Simon Foley & Lardner [counsel to 
CHX], to Glenn Barrentine, Senior Attorney, Division of Market 
Regulation, Commission (March 25, 1995).
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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 by 
deleting the P&L System report fee and by adding new clearing support 
fees which pertain to certain additional services that the CHX will 
provide to its floor members and member organizations as a result of 
Midwest Clearing Corporation's (``MCC'') withdrawal from the securities 
clearing business.\3\

    \3\ For a discussion of MCC's withdrawal from the securities 
clearing business, refer to Securities Exchange Act Release No. 
36684 (January 5, 1996), 61 FR 1195 [File No. SR-MCC-95-04] (order 
approving proposed rule change).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, CHX 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. CHX has prepared summaries, set forth in section (A), 
(B), and (C) below, of the most significant aspects of such 
statements.\4\

    \4\ The Commission has modified the text of the summaries 
prepared by CHX.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The primary purpose of the proposed rule change is to delete from 
the CHX's Membership Dues and Fees schedule the P&L System report fees 
and to institute new clearing support fees. The new fees will be 
charged in connection with certain additional services that the CHX 
will provide to floor members and member organizations as a result of 
the MCC's withdrawal from the securities clearing business. The 
clearing support fees are applicable to all members and member 
organizations that have entered into an agency agreement with the CHX 
pursuant to Article XXI, Rule 13 of the CHX's rules. The agency 
agreements will authorize the CHX to perform various functions on 
behalf of such a member, including, among other things, (i) drawing 
upon and depositing to such member's bank account, (ii) borrowing of 
securities and providing reports and records for such member, and (iii) 
performing special cashiering functions for such member. The two 
categories of clearing support fees are account fees and CUSIP fees, 
which will compensate the CHX for its time and effort in providing 
these agency services.
    Account fees include a fee for (i) a master account, (ii) each 
additional master account, and (iii) each sub-account. Each firm that 
enters into an agency agreement must establish a master account and a 
sub-account. In addition, firms may have additional master accounts or 
sub-accounts. The interest in maintaining more than one

[[Page 15545]]
master account has been expressed to the CHX by its member firms that 
have several joint ventures on the floor of the CHX. Such members have 
requested additional master accounts so that they can segregate their 
pay and collect figures, dividends, and reorganization processing with 
respect to each entity on the exchange floor. In addition, in response 
to the request of member firms that have more than one registered co-
specialist trading for them, CHX members will be able to maintain more 
than one sub-account so that they may maintain a sub-account for each 
of their co-specialists. This will enable such firms to receive 
separate purchase and sale reports and profit and loss reports for each 
co-specialist while also receiving reports of aggregate figures at the 
master account level.
    CUSIP fees are divided into three categories: (i) the specialist 
CUSIP fee, (ii) the market maker CUSIP fee, and (iii) the floor broker 
as principal fee. The CHX will charge a floor broker that trades as 
principal and has entered into an agency agreement a certain monthly 
fee for each CUSIP in which such floor broker trades as principal. 
Likewise, a market maker that enters into an agency agreement will be 
charged a monthly fee for each CUSIP in which it is registered as a 
market maker. The CHX will charge a specialist that has entered into an 
agency agreement a monthly fee for each CUSIP in which it is registered 
as a specialist. For a specialist, the amount of the fee per CUSIP will 
vary depending on the number of trades that the specialist has in a 
particular CUSIP in given month. Thus, the amount of the per CUSIP fee 
for specialists will be discounted for CUSIPs in which trading is below 
certain thresholds.
    The different CUSIP fees for each of the three categories are based 
upon the difference in expected account activity and the different 
expenses that the CHX will incur in servicing accounts for market 
makers, specialists, and floor brokers as principal. For example, 
because the CHX expects specialists to have the most activity per 
CUSIP, resulting in the greatest amount of staff time expended to 
produce reports and to provide the services contemplated by the agency 
agreement, specialists have the highest CUSIP fee.
    The CHX also proposes to add a new self-regulatory organization 
(``SRO'') fee that is applicable to all CHX members and member 
organizations. This fee relates to the additional costs that the CHX 
will incur in performing SRO obligations, such as capturing certain 
surveillance information and producing surveillance reports. Prior to 
MCC's withdrawal from the securities clearing business, the CHX 
received certain surveillance information from and utilized the 
expertise of MCC at no cost.
    The text of the proposed rule change is as follows:

     Chicago Stock Exchange, Incorporated, Membership Dues and Fees,    
            Additions are Underlined ; Deletions [Bracketed]            
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                                             $125 per account per month,
        (o) [MSE P&L System Reports            and 20 cents per trade]  
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Clearing Support Fees:                                                  
(1) Account Fees:                                                       
  First Master Account Fee................  $500 per month              
  Additional Master Account Fee...........  $300 per month              
  Sub-Account Fees........................  $100 per account per month  
(2) CUSIP Fees:                                                         
  Specialist CUSIP Fee....................  $50 per CUSIP per month     
  Market Maker CUSIP Fee..................  $10 per CUSIP per month     
  Floor Broker as Principal...............  $2 per CUSIP per month      
(minimum clearing support fee is $600 per month)                        
Discounts:                                                              
  The above Specialist CUSIP Fee will be subject to the following       
 discounts:                                                             
  If between 20 and 200 trades occur in a particular CUSIP in a given   
 month, the Specialist CUSIP Fee for that CUSIP shall be $40 for that   
 month.                                                                 
  If less than 20 trades occur in a particular CUSIP in a given month,  
 the Specialist CUSIP Fee for that CUSIP shall be $20. for the month.   
(p) (Reserved)                                                          
(q) Self-Regulatory Organization Fee        $100 per month and member   
                                             organization per month     
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    The CHX believes the proposed rule change is consistent with 
Section 6(b)(4) of the Act in that it provides for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and persons using its facilities.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The CHX does not believe that the proposed rule change will impose 
a burden on competition.

(C) Self-Regulatory Organization's Statement of Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    No written comments were solicited or received by the CHX.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) 5 of the Act and pursuant to Rule 19b-4(e)(2) 
6 promulgated thereunder because the proposal establishes or 
changes a due, fee, or other charge imposed by the CHX At 
any time within sixty days of the filing of such rule change, 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.

    \5\ 15 U.S.C. 78s(b)(3)(A)(ii) (1988).
    \6\ 17 CFR 240.19b-4(e)(2) (1994).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing. Persons making written submission 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street NW., Washington, D.C. 20549. 
Copies of the submissions, 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, 450 Fifth Street NW., Washington, 
D.C. 20549. Copies of such filing also will be available for inspection 
and copying at the CHX. All submissions should refer to file number SR-
CHX-96-10 and should be submitted by April 29, 1996.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-8546 Filed 4-5-96; 8:45 am]
BILLING CODE 8010-01-M