[Federal Register Volume 60, Number 15 (Tuesday, January 24, 1995)]
[Notices]
[Pages 4651-4652]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1685]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35233 File No. SR-CHX-94-22]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by Chicago Stock Exchange, Inc. Relating to Exclusive Issues
January 18, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on
November 10, 1994, the Chicago Stock Exchange, Inc. (``CHX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change and on January 4, and 9,
1995, filed Amendment Nos. 1 and 2, respectively, to the proposed rule
change,\1\ as described in Items I, II and III below, which Items have
been prepared by the self-regulatory organization. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
\1\See letters from David Rusoff, Foley & Lardner, to Amy
Bilbija, SEC, dated December 29, 1994; and to Glen Barrentine, SEC,
dated January 5, 1995. Amendment Nos. 1 and 2 made non-substantive
changes to the proposal.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Chicago Stock Exchange, Incorporated, pursuant to Rule 19b-4
promulgated under the Securities Exchange Act of 1934, as amended,
submits a proposed rule change relating to exclusive issue rules
(Article XXX, Rule 23).
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 self-regulatory organization
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. The self-regulatory organization
has prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements. [[Page 4652]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed change is to impose additional
requirements and prohibitions on specialists, and others, when the
Exchange is the primary market in a particular issue (``exclusive
issue''). The rule proposal is designed to prohibit specialist units
registered in an exclusive issue from engaging in business
transactions\2\ with the issuer.\3\ It is also intended to promote fair
dealings in exclusive issues by prohibiting certain types of
transactions\4\ without first securing the approval of floor officials.
Furthermore, the proposal makes the ``equalizing'' exemption in
paragraph (e)(5) of SEC Rule 10a-1 unavailable for specialists and
market makers when selling short an exclusive issue.\5\ Finally, the
proposal includes a definition of an exclusive issue.\6\ The CHX
specialists are provided a statistical report on a monthly basis
containing data regarding trade and share volume of each issue by
exchange. Thus, a specialist will be aware--by reviewing the monthly
report--if exclusive issue obligations have been triggered and will be
responsible for conducting his business accordingly.\7\
\2\The term ``business transaction'' is intended to be
interpreted broadly to include, for example: Loans, purchase of
assets from the issuer, and acquisition of any beneficial ownership
of shares of such issuer.
\3\In addition to the specialist unit, the proposed rule extends
to any co-specialist or other associated person, officer, director,
partner or employee of a specialist unit registered in the exclusive
issue.
\4\The specific types of transactions are listed in CHX proposed
Rule 23(b)(2), and include transactions such as a purchase at a
price above the last sale in the same session and a proposed
transaction involving a price movement of \1/2\ point or more.
\5\17 CFR Sec. 240.10a-1(e)(5). Rule 10a-1 generally prohibits
persons from effecting a short sale of a registered security (a)
below the price of the last sale, or (b) at such price if it is
lower than the last sale at a different price. the exception
provided for in paragraph (e)(5) permits registered specialists or
registered exchange market makers (or a third market maker for its
own account over-the-counter) to effect, for their own account, a
sale (a) at a price equal to or above the last sale, or (b) at a
price equal to the most recent offer communicated for the security
by such registered person if such offer, when communicated, was
equal to or above the last sale. In addition, the Rule expressly
provides that an exchange may prohibit its registered specialists
and market markers from availing themselves of the exemption if the
exchange determines that such action is necessary or appropriate in
its market, in the public interest, or for the protection of
investors.
\6\An ``exclusive'' issue is defined in the proposed rule as the
stock of any company traded on the Exchange not otherwise traded on
the New York or American Stock Exchanges or NASDAQ/NMS, and, where
there exists another market for such issue, the Exchange has
executed 25% or more of the transactions in the issue during the
three previous months.
\7\Conversation between Amy Bilbija, SEC, David Rusoff, Foley &
Lardner, and Dan Liberti, CHX, on January 13, 1995.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b)(5) of the
Act in that it is designed to promote just and equitable principles of
trade, to remove impediments and to perfect the mechanism of a free and
open market and a national market system, and, in general, to protect
investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose a burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the publication of this notice in the Federal
Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.
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 inspection and copying at the
Commission's Public Reference Section, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such filing will also be available for
inspection and copying at the principal office of the CHX. All
submissions should refer to File No. SR-CHX-94-22 and should be
submitted by February 14, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-1685 Filed 1-23-95; 8:45 am]
BILLING CODE 8010-01-M
