[Federal Register Volume 60, Number 65 (Wednesday, April 5, 1995)]
[Notices]
[Pages 17375-17376]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8260]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35547; File No. SR-CHX-95-08]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Chicago Stock Exchange, Inc., Relating to Order Execution
Guarantees
March 29, 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
March 2, 1995, the Chicago Stock Exchange, Incorporated (``CHX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Article XX, Rule 37 to add a new
subsection (d) thereunder. The text of the proposed rule change is as
follows [new text is italicized]:
Article XX
Rule 37(d) Notwithstanding anything herein to the contrary, a
specialist may voluntarily provide order execution guarantees more
favorable than those required pursuant to this Rule 37 (i.e.,
greater size, better price, limitations on partial executions,
etc.). At the request of a specialist, the Exchange may provide for
automatic execution of orders in accordance with such guarantees
upon such terms and conditions as the Exchange shall determine. In
either event, failure of a specialist to honor a promised guarantee
shall be deemed a violation of Exchange rules.
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
The purpose of the proposed rule change is to give specialists on
the Exchange the ability to provide order execution guarantees that are
more favorable than those required under the BEST Rule\1\ through the
Exchange's automated execution system (``MAX'').\2\ [[Page 17376]] The
automatic execution of these orders sent over the MAX System would only
occur if a specialist requests it, and then, only on those terms and
conditions set forth by the Exchange.\3\
\1\See Chicago Stock Exchange Guide, Article XX, Rule 37(a),
(CCH) 1714.
\2\The Exchange has indicated to the Commission that this
proposed rule change will have the effect of an ``enabling rule''
whereby specialists may provide better guarantees than currently is
required under the Rules through the Exchange's Midwest Automated
Execution System (``MAX''). The Exchange expects modifications to
the parameters of the automated execution system to be on a per
stock basis and the specific execution programs that are necessary
to implement these guarantees will be filed in the future under
Section 19(b)(3)(A). Telephone conversation with Craig Long and
David Rusoff, Foley & Lardner, and Julio Mojica, Susan Lee, and
Jennifer Choi, SEC, on March 10, 1995. The Exchange has indicated
that the number of parameters for the automated executions will be
limited. The Exchange anticipates that the options would include: a
system allowing thirty-second order exposure, the automated
execution system within MAX in which a Specialist may voluntarily
choose to participate on a stock by stock basis (``SuperMAX''), and
the enhanced version of SuperMAX (``Enhanced SuperMAX''), which is
available to CHX specialists as an addition or an alternative to
SuperMAX. The Exchange also has stated that a specialist will be
permitted to switch from one set of parameters to another once a
month. Telephone conversation with David Rusoff, Foley & Lardner and
Jennifer Choi, SEC, on March 20, 1995.
\3\The Exchange has indicated that the ``terms and conditions''
provision will provide the Exchange with veto power over a
specialists's particular request. Telephone conversation with Craig
Long and David Rusoff, Foley & Lardner, and Julio Mojica, Susan Lee,
and Jennifer Choi, SEC, on March 10, 1995.
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The BEST Rule requires specialists to execute agency market orders
of 2099 shares or less in Dual Trading System issues\4\ or NASDAQ/NMS
Securities at the national best bid or best offer (``NBBO'')\5\ if
certain conditions are satisfied. Orders greater than 2099 shares,
however, are not subject to the rule. Under this proposed rule change,
a specialist could, for example, increase the size of the guarantee, be
more flexible in providing partial executions, or obligate itself to
provide price improvement under certain circumstances.
\4\The Dual Trading System of the Exchange allows the execution
of both round-lot and odd-lot orders in certain issues assigned to
specialists on the Exchange and listed on either the New York Stock
Exchange or the American Stock Exchange.
\5\The term national best bid or best offer is defined under SEC
Rule 11Ac1-2 as the highest bid or lowest offer for a reported
security made available by any reporting market center pursuant to
Rule 11Ac1-1 or the highest bid or lowest offer for a security other
than a reported security disseminated by an over-the-counter market
maker in Level 2 or 3 of NASDAQ.
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Although nothing in the proposed rule change requires a specialist
to give more favorable guarantees, if such guarantees are provided
through the MAX System, the specialist must honor the more favorable
guarantee. Failure of a specialist to honor the more favorable
guarantee will be deemed to be a violation of Exchange Rules.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b)(5) of the
Act in that it is designed to prevent fraudulent and manipulative acts
and practices and to perfect the mechanism of a free and open market.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
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 other period (i) as the Commission may
designate up to 90 days of such date if it find 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, D.C. 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. Sec. 552, will be available for inspection and copying at
the Commission's Public Reference Section, 450 Fifth Street NW.,
Washington, D.C. 20549. Copies of such filing will also be available
for inspection and copying at the principal office of the Exchange. All
submissions should refer to File No. SR-CHX-95-08 and should be
submitted by April 26, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-8260 Filed 4-4-95; 8:45 am]
BILLING CODE 8010-01-M
