[Federal Register Volume 62, Number 202 (Monday, October 20, 1997)]
[Notices]
[Page 54496]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27696]
[[Page 54496]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39230; File No. SR-CHX-97-24]
Self-Regulatory Organizations; Chicago Stock Exchange; Notice of
Filing of Proposed Rule Change Regarding A Ban on the Entry of Certain
Stop Orders and Stop Limit Orders
October 10, 1997.
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 September 22, 1997, the Chicago Stock Exchange, Inc. (``CHX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change 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.
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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
The Exchange proposes to add Article IX, Rule 10B (Stop Order Ban
Due to Extraordinary Market Volatility). The new rule would prohibit
the entry of certain stop orders and stop limit orders if the New York
Stock Exchange (``NYSE'') implements a stop order ban pursuant to NYSE
Rule 80A. The new rule would exempt stop orders and stop limit orders
of 2,099 shares or less for the account of an individual investor
pursuant to instructions received directly from the individual
investor. The text of the proposed rule change is available at the
Office of the Secretary, the CHX, and at the Commission.
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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Pursuant to its Rule 80A, the NYSE currently prohibits the entry of
stop orders and stop limit orders if the price of the primary Standard
and Poor's 500 Stock Price Index \3\ futures contract traded on the
Chicago Mercantile Exchange reaches a value 12 points below the
contract's closing value on the previous trading day. Likewise, the
Boston Stock Exchange (``BSE'') prohibits the entry of stop and stop
limit orders on the BSE when the NYSE has a ban in place.\4\
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\3\ Standard and Poor's 500 Stock Index is a service mark of
Standard and Poor's Corporation.
\4\ See Ch. II, Sec. 35(b) of the BSE's rules.
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The Exchange has previously adopted circuit breaker rules on a
pilot basis \5\ which parallel the circuit breaker rules of the
NYSE.\6\ Such rules are designed to dampen market volatility by
providing a ``time-out'' to permit investors and market professionals
to evaluate the state of the market. However, unlike the NYSE, the
Exchange has not previously prohibited the entry of stop and stop limit
orders during times of market stress.
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\5\ See Securities Exchange Act Release Nos. 26218 (October 26,
1988), 53 FR 44137 (November 1, 1988) (order approving File No. SR-
MSE-88-9); 27370 (October 23, 1989), 54 FR 43881 (October 27, 1989)
(order approving File No. SR-MSE-89-9); 28580 (October 25, 1990), 55
FR 45895 (October 31, 1990) (order approving File No. SR-MSE-90-16);
29868 (October 28, 1991), 56 FR 56535 (November 5, 1991) (order
approving File No. SR-MSE-91-14); 33120 (October 29, 1993), 58 FR
59503 (November 9, 1993) (order approving File No. SR-CHS-93-22);
36414 (October 25, 1995), 60 FR 55630 (November 1, 1995) (order
approving File No. SR-CHX-95-23); 37459 (July 19, 1996), 61 FR 39172
(July 26, 1996) (order approving File No. SR-CHX-96-20); and 38221
(January 31, 1997), 62 FR 5871 (February 7, 1997) (order approving
File No. SR-CHX-96-33).
\6\ See CHX Art. IX, Rule 10A.
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The Exchange believes that the prohibition of stop orders and stop
limit orders, except for individual investor orders of up to 2099
shares, during periods of market stress will facilitate the maintenance
of an orderly market and reduce market volatility.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the requirements of Section 6(b)(5) of the Act \7\ which requires that
the rules of the Exchange be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest.
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\7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposal does not impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of the Act.
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 such 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 Number SR-CHX-97-24 and should be
submitted by November 10, 1997.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-27696 Filed 10-17-97; 8:45 am]
BILLING CODE 8010-01-M
