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May 10, 2006

Chicago Plans TRF

By Nina Mehta

The Chicago Stock Exchange plans to partner with the NASD to build a trade reporting facility. The plan is dependent on the Securities and Exchange Commission's approval of Nasdaq's proposed trade reporting facility.

"We'll ensure that market makers have the same ability to internalize their business through this facility that NASD market-makers currently have," says John Kerin, senior vice president and chief technology officer at the Chicago.

The exchange's facility could be ready as early as June, Kerin adds.

All of the securities exchanges are watching to see how the SEC rules on Nasdaq's plan to set up a trade reporting facility jointly with NASD. The TRF would be administered by NASD while market data revenues from off-exchange prints would flow to Nasdaq. A number of exchanges have said this would create an uneven playing field by allowing an exchange to benefit from internalized order flow. Any market participants that use the CHX's planned TRF would need to be off-exchange and regulated by NASD. Those market makers would have to build and maintain their own systems to interact with agency orders, instead of getting those systems from the CHX, Kerin adds.The CHX will have a separate category of market-maker that can post bids and offers but will not handle agency orders directly.