
[Federal Register Volume 80, Number 209 (Thursday, October 29, 2015)]
[Notices]
[Pages 66600-66603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27519]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76249; File No. SR-CHX-2015-06]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend the Fee Schedule To Adopt CHX SNAP Execution Fees

October 23, 2015.
    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 October 19, 2015, the Chicago Stock Exchange, Inc. (``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.
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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 adopt CHX SNAP execution fees. 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
    The Exchange proposes to adopt and amend fees for CHX SNAP 
(``SNAP''). On October 6, 2015, the SEC approved a proposed rule change 
to adopt SNAP, an intra-day, sub-second and on-demand auction 
service.\3\ A SNAP Cycle \4\ is comprised of the following five stages:
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    \3\ See Securities Exchange Act Release No. 76087 (October 6, 
2015), 80 FR 61540 (October 13, 2015); see also Securities Exchange 
Act Release No. 75346 (July 1, 2015), 80 FR 39172 (July 8, 2015) 
(SR-CHX-2015-03). The approved rule change is not yet operative and 
will become operative with two weeks' notice by the Exchange to its 
Participants.
    \4\ See supra note 3; see also CHX Article 18, Rule 1(b).
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     Stage one--Initiating the SNAP Cycle;
     Stage two--SNAP Order Acceptance Period;
     Stage three--Pricing and Satisfaction Period;
     Stage four--Order Matching Period; and
     Stage five--Transition to the Open Trading State.\5\
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    \5\ See supra note 3; see also CHX Article 1, Rule 1(qq).
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    In sum, SNAP Cycles will never be scheduled by the Exchange and 
will always be driven by market demand for bulk trading in a subject 
security. The key features of a SNAP Cycle are as follows: \6\
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    \6\ A complete description of SNAP may be found in the Approval 
Order and associated rule filing. See supra note 3.
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     The entire SNAP Cycle is designed to be completed in less 
than one second.
     SNAP Cycles could occur numerous times in a subject 
security during the regular trading session only.\7\
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    \7\ CHX Article 20, Rule 1(b) provides that the ``regular 
trading session--shall begin at 8:30 a.m. and shall end at 3:00 p.m. 
each day for all securities.'' All times are in central time, unless 
noted otherwise.

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[[Page 66601]]

     Order cancellations would be prohibited during a SNAP 
Cycle.
     Only limit orders marked Start SNAP \8\ that meet minimum 
size, price and time of receipt requirements could initiate a SNAP 
Cycle.
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    \8\ See supra note 3; CHX Article 1, Rule 2(h)(1).
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    [cir] During the stage one Initiating the SNAP Cycle, automated 
trading in the subject security on the Exchange would be suspended and 
remain suspended for the duration of the SNAP Cycle; provided, however, 
automated trading in the subject security may continue to occur 
simultaneously elsewhere in the national market system.
     During the stage two SNAP Order Acceptance Period, the 
Exchange will transition precedent SNAP Eligible Orders \9\ to the SNAP 
CHX book and accept new SNAP Eligible Orders for a randomized time 
period for inclusion on the SNAP CHX book.\10\ During the stage three 
Pricing and Satisfaction Period, the Exchange will attempt to ascertain 
a single auction price (i.e., ``SNAP Price'') \11\ from SNAP Eligible 
Orders resting on the SNAP CHX book.
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    \9\ See supra note 3; see also CHX Article 1, Rule 1(ss).
    \10\ See supra note 3; see also CHX Article 18, Rule 1(b)(2); 
see also CHX Article 20, Rule 8(b)(3).
    \11\ See supra note 3; see also CHX Article 1, Rule 1(rr).
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    [cir] If the SNAP Price is determined to be at a price that would 
require orders to be routed away, the Exchange would route away SNAP 
Eligible Orders resting on the SNAP CHX book.\12\ Immediately after the 
necessary orders are routed away, the SNAP Cycle would enter the 
Satisfaction Period, during which time the Exchange would delay 
proceeding to the stage four Order Matching Period for a period of time 
not to exceed 200 milliseconds to allow for confirmations of routed 
orders to be received from away markets.
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    \12\ See supra note 3; see also CHX Article 19, Rule 3(a)(4) and 
(5).
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    [cir] If the SNAP Price does not require orders to be routed away, 
the SNAP Cycle would immediately proceed to the stage four Order 
Matching Period.
     During the stage four Order Matching Period, SNAP Eligible 
Orders on the SNAP CHX book would execute at the SNAP Price within the 
Matching System.\13\
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    \13\ See supra note 3; see also CHX Article 18, Rule 1(b)(4).
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     During the stage five Transition to the Open Trading 
State,\14\ unexecuted SNAP Eligible Orders, as well as other orders and 
cancel messages that have been queued during the SNAP Cycle, would be 
transitioned to the CHX book for automated trading.\15\ During the 
transition, orders may, among other things, be executed within the 
Matching System or be routed away in a manner consistent with how 
orders are currently executed and routed during automated trading.\16\
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    \14\ See supra note 3; see also CHX Article 1, Rule 1(qq).
    \15\ See supra note 3; see also CHX Article 18, Rule 1(b)(5).
    \16\ See CHX Article 19, Rule 3(a)(1)-(3); see also CHX Article 
20, Rule 8(e)(1).
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    As such, during a SNAP Cycle, orders may execute within the 
Matching System during either the stage four Order Matching Period 
(``stage four executions'') or the stage five Transition to the Open 
Trading State (``stage five executions''), whereas orders may be routed 
away during either the stage three Pricing and Satisfaction Period or 
the stage five Transition to the Open Trading State.\17\
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    \17\ See CHX Article 19, Rule 3(a)(1)-(3).
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    The Exchange now proposes the following SNAP execution fees:
     All away executions resulting from orders routed away 
during a SNAP Cycle shall be assessed the current CHX Routing Services 
fee, pursuant to Section E.6 of the Fee Schedule, without amendment.
     Stage four executions within the Matching System shall be 
assessed new fees, pursuant to proposed Section E.9.\18\
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    \18\ The Exchange will continue to assess fees related to 
Section 31 of the Act for all Matching System executions, pursuant 
to Section E.5 of the Fee Schedule.
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     Stage five executions within the Matching System shall be 
assessed the current CHX fees and credits pursuant to Sections E.1-4, 
without amendment.\19\
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    \19\ Id.
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    Proposed Section E.9 outlines these proposed SNAP execution fees, 
as discussed below.
    In order to incentivize Participants to initiate and participate in 
SNAP Cycles, the Exchange proposes to assess no fee for stage four 
executions.\20\ However, the Exchange proposes to adopt a fee structure 
for stage four executions so that market participants would be notified 
as to how the Exchange would charge fees for stage four executions if 
it decides to assess such fees in the future.\21\ To this end, proposed 
Section E.9(a) provides as follows:
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    \20\ The Exchange would continue to assess the CHX Section 31 
fees, pursuant to Section E.5 of the Fee Schedule.
    \21\ Any change to proposed Section E.9 of the Fee Schedule 
would be effected through a proposed rule filing, pursuant to Rule 
19b-4 under the Act.

Stage four executions. For all executions within the Matching System 
during a stage four Order Matching Period, as described under 
Article 18, Rule 1(b)(4), the Exchange shall charge a fee for each 
buy order per share executed and a fee for each sell order per share 
executed, regardless of the original size of the orders, depending 
on the single SNAP Price, as defined under Article 1, Rule 1(rr), at 
which the orders executed relative to the National Best Bid and 
Offer (``NBBO'') at the time the SNAP Price was calculated. Only one 
of the following rows shall apply per SNAP Cycle.\22\

------------------------------------------------------------------------
             SNAP Price                  Buy  order        Sell order
------------------------------------------------------------------------
1. SNAP Price < NBB................  No Fee...........  No Fee.
2. SNAP Price = NBB................  No Fee...........  No Fee.
3. NBB < SNAP Price < NBO..........  No Fee...........  No Fee.
4. SNAP Price = NBO................  No Fee...........  No Fee.
5. SNAP Price > NBO................  No Fee...........  No Fee.
6. SNAP Price = Locked NBBO........  No Fee...........  No Fee.
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    The following examples illustrate how the proposed Section E.9(a) 
fee would be applied:
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    \22\ Pursuant to CHX Article 18, Rule 1(b)(2)(E), a SNAP Cycle 
would only proceed to the stage three Pricing and Satisfaction 
Period if the market snapshot taken to establish the SNAP Price 
shows that a two-sided NBBO exists and the CHX Routing Services are 
available. In calculating the NBBO for this purpose, the Exchange 
would utilize its current CHX NBBO calculation protocol to ascertain 
the first uncrossed NBBO. See supra note 3; see also paragraph 
.01(d) of CHX Article 20, Rule 5. Thus, the NBBO utilized to 
establish the SNAP Price may be uncrossed or locked, but never 
crossed.
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     Example 1. Assume that stage four executions occurred at a 
SNAP Price of $50.00/share and the relevant NBBO was 50.01 x 50.03. 
Under this Example 1, since the SNAP Price is less than the NBB, the 
Exchange would charge fees to all buy and sell orders per share 
executed, pursuant to proposed Section E.9(a)(1).
     Example 2. Assume the same as Example 1, except that the 
SNAP Price was $50.01/share. Under this Example 2, since the SNAP Price 
is equal to the NBB, the Exchange would charge fees to all buy and sell 
orders per share executed, pursuant to proposed Section E.9(a)(2)
     Example 3. Assume the same as Example 1, except that the 
SNAP Price was $50.02. Under this Example 3, since the SNAP Price is in 
between the NBBO, the Exchange would charge fees to all buy and sell 
orders per share executed, pursuant to proposed Section E.9(a)(3).
     Example 4. Assume the same as Example 1, except that the 
SNAP Price was $50.03. Under this Example 4, since the SNAP Price is 
equal to the NBO, the Exchange would charge fees to all buy and sell 
orders per share executed, pursuant to proposed Section E.9(a)(4).
     Example 5. Assume the same as Example 1, except that the 
SNAP Price

[[Page 66602]]

was $50.04. Under this Example 5, since the SNAP Price is greater than 
the NBO, the Exchange would charge fees to all buy and sell orders per 
share executed, pursuant to proposed Section E.9(a)(5).
     Example 6. Assume the same as Example 1, except that the 
relevant NBBO is locked at 50.00 x 50.00. Under this Example 5 [sic], 
since the SNAP Price is locked than the NBO [sic], the Exchange would 
charge fees to all buy and sell orders per share executed, pursuant to 
proposed Section E.9(a)(6).
    Also, the Exchange proposes to amend current Sections E.1, E.3 and 
E.4 to provide that each of those sections are subject to proposed 
Section E.9.\23\ The Exchange does not propose to substantively modify 
Sections E.1, E.3 or E.4 in any other way.
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    \23\ Section E.1 of the Fee Schedule provides fees and credits 
for Matching System executions resulting from single-sided orders 
submitted as at least a Round Lot. Section E.2 of the Fee Schedule 
provides fees and credits for Matching System executions from orders 
submitted by Institutional Brokers registered with the Exchange 
pursuant CHX Article 17, which includes fees for both single-sided 
and cross orders. See CHX Article 1, Rule 2(a)(2). Section E.4 of 
the Fee Schedule provides fees for Matching System executions 
resulting from single-sided orders submitted as Odd Lots.
    The Exchange notes that it does not propose to amend Section E.2 
of the Fee Schedule, which addresses cross orders executed within 
the Matching System, to contemplate proposed Section E.9 because 
cross orders cannot be executed within the Matching System during 
the stage four Order Matching Period. See CHX Article 1, Rule 
2(a)(2); see also supra note 3; see also CHX Article 18, Rule 
1(b)(2)(C)(iv).
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    Proposed Section E.9(b) provides as follows:

    Stage five executions. For all executions within the Matching 
System during a stage five Transition to the Open Trading State, as 
described under Article 18, Rule 1(b)(5), the Exchange shall charge 
fees and attribute credits, pursuant to Sections E.1-4 above.

Since stage five executions within the Matching System will occur in a 
manner similar to the current automated execution of orders within the 
Matching System,\24\ the Exchange proposes to apply the current 
Matching System execution fees and credits to such executions. The 
Exchange notes that current Sections E.1-4 apply to all Matching System 
executions and, thus, Sections E.1-4 do not need to be amended to 
contemplate stage five executions, in particular.
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    \24\ See supra note 3.
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    Proposed Section E.9(c) provides as follows:

    Away executions. For all away executions resulting from orders 
routed away during a SNAP Cycle, the Exchange shall charge the CHX 
Routing Services fee, pursuant to Section E.6 of the Fee Schedule.

    The proposed language clarifies that all away executions resulting 
from orders routed away during a SNAP Cycle will be subject to the 
current CHX Routing Services fee.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \25\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \26\ 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.
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    \25\ 15 U.S.C. 78f.
    \26\ 15 U.S.C. 78f(b)(4).
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    Specifically, the Exchange believes that proposed Section E.9(a) 
equitably allocates fees among Participants in a non-discriminatory 
manner because no Participant will be charged an execution fee for 
stage four executions. Moreover, in the event that the Exchange decides 
to adopt stage four executions fees,\27\ the Exchange believes that 
proposed Section E.9(a) will allocate fees among Participants in a non-
discriminatory manner because the same fees would be assessed to all 
orders executed during the stage four Order Matching Period.
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    \27\ See supra note 21.
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    The Exchange also believes that applying the current Matching 
System execution fees and credits for stage five executions, pursuant 
to current Sections E.1-4 and the current CHX Routing Services fees for 
all away executions resulting from orders routed away during a SNAP 
Cycle, pursuant to current Section E.6, equitably allocates fees among 
Participants in a non-discriminatory manner, as such fees and credits 
will continue to apply equally to all Participants that submit orders 
to the Matching System pursuant to current fees and credits.

B. Self-Regulatory Organization's Statement on 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 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 
SNAP execution fees will encourage Participants to utilize SNAP, which 
is an innovative trading functionality that addresses a market 
need.\28\ Thus, the proposed rule change is a competitive proposal that 
is intended to add additional liquidity and order executions to the 
Exchange, which will, in turn, benefit the Exchange and all 
Participants.
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    \28\ See supra note 3; see also Mary Jo White, Chair, Securities 
and Exchange Commission, Speech at Sandler O'Neil & Partners L.P. 
Global Exchange and Brokerage Conference (June 5, 2014).
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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

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A)(ii) of the Act \29\ and subparagraph(f)(2) of Rule 
19b-4 thereunder \30\ because it establishes or changes a due, fee or 
other charge imposed by the Exchange.
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    \29\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \30\ 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 rule-comments@sec.gov. Please include 
File Number SR-CHX-2015-06 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CHX-2015-06. 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

[[Page 66603]]

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 Section, 100 F Street NE., Washington, DC 20549-1090. Copies 
of the filing will also be available for inspection and copying at the 
Exchange's principal office. 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-2015-06 and should be submitted on or before 
November 19, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
Robert W. Errett,
Deputy Secretary.
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    \31\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-27519 Filed 10-28-15; 8:45 am]
 BILLING CODE 8011-01-P


