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Joanna Fields
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Navigating Cybersecurity on a Stretch of "Regulatory Rapids"

In this shared commentary, Aplomb Strategies writes that when considering a firm’s governance structure, a holistic approach makes the most sense.

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March 23, 2005

In the Footsteps of Nasdaq At Chicago Stock Exchange

By Peter Chapman

The Chicago Stock Exchange may soon have a broker dealer affiliate as it pursues a new direction.

This comes as its organizational structure goes from a non-profit, non-stock, member-owned corporation to a wholly-owned subsidiary of CHX Holdings, a Delaware registered, for-profit stock holding company. The historic change occurred last month following approval of the CHX demutualization plan by the Securities and Exchange Commission.

The new structure gives the organization more flexibility, say CHX execs. For instance, it allows it to align itself with other financial concerns. One option is acquiring or creating a broker dealer, according to CHX Holdings chief executive Dave Herron. "It is becoming clear that every exchange will probably have some kind of broker dealer affiliate to route out to other places," Herron told a gathering of trading professionals in Chicago. "That is a direction our demutualization will allow us to pursue more easily."

The Archipelago Exchange became the first U.S. stock exchange to establish a facility like this when it created Archipelago Securities. The broker dealer is a member of the New York Stock Exchange, allowing ArcaEx to route orders there. Nasdaq also gained a broker dealer affiliate with its acquisition of the Brut ECN. The broker dealer is also expected to become a member of the New York. Nasdaq is not an exchange, but has applied to the SEC for exchange status.