[Federal Register Volume 60, Number 214 (Monday, November 6, 1995)]
[Notices]
[Pages 56083-56084]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27428]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36440; File No. SR-CHX-95-19]
Self-Regulatory Organizations; New York Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change and Amendment No. 1 to
the Proposed Rule Change Relating to the Chicago Match
October 31, 1995.
I. Introduction
On July 27, 1995, the Chicago Stock Exchange, Inc. (``CHX'' or
``Exchange'') submitted to the Securities and Exchange Commission
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend Article XXXVII of the
Exchange's Rules to increase the number of daily matches in the Chicago
Match to two. On August 22, 1995, the CHX submitted Amendment No. 1 to
the proposed rule change.\3\
\1\ U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Letter from David T. Rusoff, Attorney, Foley & Lardner,
to Elisa Metzger, Attorney, SEC, dated August 22, 1995. In Amendment
No. 1 to the proposed rule change, the Exchange clarifies that there
will be two matches per day, which will occur midday during the
Exchange's primary trading session. Moreover, the Exchange defines
the term ``Cross Window'' to mean up to two ten minute intervals
during the Primary Trading Session.
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The proposed rule change, including Amendment No. 1, was published
for comment in Securities Exchange Act Release No. 36139 (August 23,
1995), 60 FR 45196 (August 30, 1995). No comments were received on the
proposal.
II. Background and Description of the Proposal
On November 30, 1994, the Commission approved a proposed rule of
the Exchange that created the Chicago Match, an institutional trading
system that integrates an electronic order match system with a facility
for brokering trades.\4\ The Chicago Match electronically crosses
orders entered by users during regular trading hours for securities
that are listed on the CHX or for which the CHX has unlisted trading
privileges.\5\ Orders that are matched electronically will be priced at
the market price, which is equal to the mid-point between the
Consolidated Best Bid and Offer, at a random time within a pre-
determined ten minute period and will be executed at that time.
Currently, the Chicago Match rules permit only one match to occur per
trading day.\6\
\4\ Securities Exchange Act Release No. 35030 (November 30,
1994), 59 FR 63141 (``Original Approval Order'').
\5\ Users may be CHX members or non-members. When a non-member,
however, is given access to Chicago match, it must enter into
several agreements to ensure that a member has responsibility and
control over the non-member's activities.
\6\ See Securities Exchange Act Release No. 35923 (June 30,
1995), 60 FR 35756 (approving an amendment to the Chicago Match that
lowered the disclosure threshold for display of orders from 10,000,
5,000 or 2,000 shares depending on the security involved to 500
shares so that more orders in the Chicago Match would be displayed).
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The proposed rule change amends the Chicago Match rules to
accommodate two matches per trading day.\7\ As before, the matches will
occur mid-day during the Exchange's primary trading session.
\7\ There will be two announced ten minute periods for matching
of orders. Orders that are entered by users prior to the first ten-
minute period will participate in the first match of the day and
orders that are entered by users after the first ten-minute period,
but before the second ten-minute period will participate in the
second match of the day. Orders that are not matched during the
first match of the day will not automatically participate in the
second match. Conversation between David Rusoff, Foley, & Lardner,
and Jennifer S. Choi, Division of Market Regulation, SEC, on October
31, 1995.
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III. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, with the requirements of Section 6(b).\8\ In particular,
the Commission believes the proposal is consistent with the Section
6(b)(5) requirements that the rules of an exchange be designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public.
\8\ 15 U.S.C. 78f(b).
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The Commission historically has encouraged the creation of new
electronic trading systems such as the Chicago Match that may
contribute to increased execution alternatives available to investors.
At the same time, the Commission requires that these exchange trading
systems be consistent with the investor protection and fair and orderly
market standards contained in the Act. In the Original Approval Order,
the Commission found that the Chicago Match was consistent with these
objectives. Nevertheless, in the Original Approval Order, the
Commission raised concerns over the issue of non-member access to the
Exchange. The Commission, however, found that several factors,
including the fact that CHX matches will occur only once a day, served
to assure sufficient control by CHX members over the activities of non-
members to satisfy the requirements of the Act. The Commission also
noted that any proposal increasing the number of matches would have to
be considered and approved by the Commission.
After careful review, the Commission believes that the amended
Chicago Match is consistent with the investor protection and fair and
orderly market standards contained in the Act for the same reasons that
are set forth in the Original Approval Order. The limited increase to
two matches per trading day will continue to assure that CHX members
have adequate controls over non-members to satisfy the requirements of
the Act.\9\ At the same time, the Commission believes that the
additional match each day will benefit investors by providing them with
an additional execution opportunity. In this context, the additional
match will provide more flexibility to investors and allow them to
utilize the Chicago Match one more time during the trading day in
response to changing market conditions.
\9\ The CHX has indicated that it may wish to add more matches,
upon Commission approval. The CHX would have to submit a proposal
pursuant to Section 19(b)(2) of the Act to add additional matches
during the trading day.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-CHX-95-19),
[[Page 56084]]
including Amendment No. 1, is approved.
\10\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
\11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27428 Filed 11-3-95; 8:45 am]
BILLING CODE 8010-01-M
