
[Federal Register Volume 80, Number 40 (Monday, March 2, 2015)]
[Notices]
[Pages 11252-11254]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-04181]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74357; File No. SR-CHX-2015-01]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Concerning the Use of Market Data Feeds by the Exchange

February 24, 2015.
    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 February 12, 2015, 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 and 
II 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 clarify for Participants and non-Participants the 
Exchange's use of data feeds for order handling and execution, order 
routing and regulatory compliance.\3\ On July 16, 2014, the Exchange 
filed a proposed rule change that described its use of the consolidated 
market data disseminated by the securities information processors 
(``SIP data feeds'') for all operational and regulatory compliance 
purposes (the ``initial rule filing'') with the Securities and Exchange 
Commission (the ``Commission'').\4\ The Exchange now submits this 
supplemental filing.\5\ The Exchange has designated this proposed rule 
change as non-controversial and provided the Commission with the notice 
required by Rule 19b-4(f)(6)(iii) under the Act.\6\
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    \3\ CHX Article 1, Rule 1(s) defines ``Participant,'' in 
pertinent part, as ``any Participant Firm that holds a valid Trading 
Permit and any person associated with a Participant Firm who is 
registered with the Exchange under Articles 16 and 17 as a Market 
Maker Trader or Institutional Broker Representative, respectively. A 
Participant shall be considered a `member' of the Exchange for 
purposes of the Exchange Act.''
    \4\ See Securities Exchange Act Release No. 72711 (July 29, 
2014), 79 FR 45570 (August 5, 2014) (SR-CHX-2014-10). Other national 
securities exchanges filed similar proposals. See e.g., Securities 
Exchange Act Release Nos. 72710 (July 29, 2014), 79 FR 45511 (August 
5, 2014) (SR-NYSE-2014-38), and 72684 (July 28, 2014), 79 FR 44956 
(August 1, 2014) (SR-NASDAQ-2014-072).
    \5\ The Exchange understands that other national securities 
exchanges will file similar proposed rule changes with the 
Commission to further describe their use of data feeds for order 
handling and execution, order routing and regulatory compliance.
    \6\ 17 CFR 240.19b-4(f)(6)(iii).
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    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 Change

1. Purpose
    On June 5, 2014, Chair White requested that all national securities 
exchanges develop proposed rule changes to disclose their use of data 
feeds to execute and route orders and comply with regulatory 
requirements.\7\ In addition, on June 20, 2014, the Commission's 
Division of Trading and Markets requested that the Exchange file 
proposed rule changes that disclose its usage of particular market data 
feeds, among other things.\8\ In response to these requests, the 
Exchange filed an initial rule filing with the Commission on July 16, 
2014.\9\ The Exchange now submits this supplemental filing concerning 
the use of SIP data feeds for the CHX Routing Services,\10\ which is 
not yet operational, and the pricing of cross orders marked Midpoint 
Cross.\11\
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    \7\ See Mary Jo White, Chair, Securities and Exchange 
Commission, Speech at Sandler O'Neil & Partners L.P. Global Exchange 
and Brokerage Conference (June 5, 2014).
    \8\ See letter from Stephen Luparello, Division of Trading and 
Markets, Securities and Exchange Commission, to John K. Kerin, Chief 
Executive Officer and President, Chicago Stock Exchange, Inc., dated 
June 20, 2014.
    \9\ See supra note 4.
    \10\ See Exchange Act Release No. 73150 (September 19, 2014), 79 
FR 57603 (September 25, 2014) (SR-CHX-2014-15).
    \11\ CHX Article 1, Rule 2(b)(2)(D) defines ``Midpoint Cross'' 
as follows:
    a cross order modifier with an instruction to execute it at the 
midpoint between the NBBO. If the NBBO is locked at the time a 
Midpoint Cross is received, the Midpoint Cross will execute at the 
locked NBBO. If the NBBO is crossed at the time a Midpoint Cross is 
received, the Midpoint Cross will be automatically cancelled. A 
Midpoint Cross order may only be executed in an increment permitted 
by Article 20, Rule 4(a)(7)(b).
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Initial Rule Filing
    Under the initial rule filing, the Exchange adopted Article 1, Rule 
4, which provides that the consolidated market data disseminated by the 
securities information processors shall be the only market data feed 
utilized by the Exchange for all operational and regulatory compliance 
purposes.\12\ The Exchange also noted the following:
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    \12\ At the time SR-CHX-2014-10 was filed, the SIP data feeds 
were the only data feeds utilized by the Exchange for operational 
and regulatory compliance purposes.
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     The SIP data feeds are the only data feeds utilized by the 
Exchange to calculate the National Best Bid and Offer (``NBBO'') for 
the purposes of compliance with Regulation NMS and Regulation SHO. The 
Exchange does not utilize direct feeds from away markets for such 
purposes.
     In addition to the SIP data feeds, the Exchange uses its 
own internal data for operational and regulatory compliance purposes.
     The Exchange does not ignore or modify SIP quote data for 
the purposes of establishing the NBBO under any circumstances where the 
SIP data feed shows an uncrossed market.\13\
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    \13\ Where the SIP data feeds show a crossed NBBO, the 
Exchange's NBBO calculation protocol ignores crossing quotes and 
executes orders up to the first uncrossed NBBO. See paragraph .01(d) 
of CHX Article 20, Rule 5
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     The Exchange does not offer outbound routing of orders, 
but that if the Exchange were to adopt such functionality in the 
future, the Exchange would only utilize the SIP data feeds for routing 
purposes.
     The Exchange does not offer pegged orders that have limit 
prices that track the NBBO.

The Exchange continues to utilize the SIP data feeds for all 
operational and regulatory compliance purposes, as described under 
initial filing, and submits the following updates and points of 
clarification.
CHX Routing Services
    On September 8, 2014, the Exchange filed SR-CHX-2014-15, through 
which the Exchange adopted rules concerning the CHX Routing Services, 
an outbound order routing service that is not yet operational.\14\ As 
described in the initial rule filing, the CHX Routing Services will 
only utilize the SIP data feeds for order routing purposes.
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    \14\ See supra note 10.
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    Thus, the Exchange proposes to amend Article 1, Rule 4(a) to 
explicitly provide that the consolidated market

[[Page 11253]]

data disseminated by the securities information processor shall be the 
only market data feeds utilized by the Exchange for the handling, 
execution and routing of orders, as well as for the regulatory 
compliance processes related to those functions.\15\
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    \15\ The Exchange may utilize other data feeds in conducting 
manual reviews of Matching System activity.
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Midpoint Cross
    Under the initial rule filing, the Exchange noted that it does not 
offer pegged orders that have limit prices that track the NBBO. To 
clarify, the Exchange has never offered single-sided orders that are 
continuously repriced to follow changes to the NBBO (``single-sided 
pegged orders''). The Exchange does, however, offer Midpoint Cross, 
which is a cross order (i.e., two-sided order) modifier that instructs 
the Matching System to execute the order at the midpoint of the 
NBBO.\16\ Unlike single-sided pegged orders, cross orders marked 
Midpoint Cross are not continuously repriced to follow changes to the 
NBBO because cross orders are always handled Immediate Or Cancel 
(``IOC'').\17\
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    \16\ See supra note 11.
    \17\ See CHX Article 1, Rule 2(a)(2).
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    Mechanically, upon receipt of a cross order marked Midpoint Cross, 
the Matching System will utilize the NBBO calculated from the SIP data 
feed and internal CHX book data in the subject security to identify the 
NBBO midpoint price. The Matching System utilizes the internal CHX book 
data in the subject security, in addition to the SIP data feed, because 
the internal CHX book data always reflects the most recent CHX quote(s) 
in the subject security, which may not yet be reflected in the SIP data 
feed. Assuming that the order is otherwise executable within the CHX 
book, the Matching System will immediately execute the order at the 
NBBO midpoint. Incidentally, the Exchange clarifies that it does not 
ignore or modify SIP quote data concerning away market quotes under any 
circumstances where the SIP data feed shows an uncrossed market. The 
Exchange may, however, ignore SIP quote data regarding its own market 
if the Exchange's internal data in the subject security is different 
from what is received from the SIP, such as when pricing the Midpoint 
Cross order.
2. Statutory Basis
    The Exchange believes that its proposal 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) of the Act.\18\ In particular, 
the proposal is consistent with Section 6(b)(5) of the Act,\19\ because 
it would promote just and equitable principles of trade, remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system. Specifically, the Exchange believes that 
the proposed update and clarifications concerning the Exchange's use of 
the SIP data feeds in the context of the CHX Routing Services and the 
Midpoint Cross order modifier will enhance transparency concerning the 
operation of the Exchange. This will, in turn, promote the public 
confidence and strengthen the national market system.
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    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change 
implicates any competitive issues. To the contrary, the Exchange 
anticipates that other national securities exchanges will also make 
similar clarifications concerning their respective use of data feeds 
and this proposed rule will ensure consistent treatment of this subject 
matter in the respective rulebooks.

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

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \20\ and Rule 19b-4(f)(6) 
thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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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 rule-comments@sec.gov. Please include 
File Number SR-CHX-2015-01 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-2015-01. 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 the filing also will 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-

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2015-01 and should be submitted on or before March 23, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-04181 Filed 2-27-15; 8:45 am]
BILLING CODE 8011-01-P


