01-9963. Self-Regulatory Organizations; Order Granting Accelerated Approval of Proposed Rule Change by the Chicago Stock Exchange, Incorporated, Amending Its SuperMAX 2000 Price Improvement Algorithm To Permit Application of the Algorithm to Odd Lot ...

April 16, 2001.

I. Introduction

On March 19, 2001, the Chicago Stock Exchange, Incorporated (“CHX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”), 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 that would amend CHX Article XX, Rule 37(h) to permit application of the Exchange's SuperMAX 2000 price improvement algorithm to odd lot orders. Notice of the proposed rule change was published for comment in the Federal Register on March 28, 2001.^[3] This order approved the proposed rule change on an accelerated basis.

II. Description of the Proposal

According to the CHX, the primary purpose of the proposed rule change is to increase the number of orders that are eligible for automated price improvement.

On December 19, 2000, the Commission approved SR-CHX-00-37,^[4] implementing SuperMax 2000, the CHX's new price improvement program, which will govern price improvement of all orders for issues quoting in decimal price increments. SuperMAX 2000 was designed to afford specialists the flexibility to provide a wide variety of price improvement alternatives, all of which will be equal to or more favorable than alternatives that existed previously at the CHX. SuperMAX 2000 originally did not by its terms permit price improvement of odd lot orders.

To remain competitive, the CHX proposes that its specialists be permitted (but not obligated) to offer price improvement to odd lot orders. The proposal would permit odd lot dealers to provide price improvement of $.01 or better, in the case of odd lot orders received when the national best bid and offer spread is $.05 or larger.

III. Discussion

The Commission has reviewed carefully the proposed rule change and finds that it is consistent with the Act and the rules and regulations promulgated thereunder applicable to a national securities exchange and, in particular, with the requirements of Section 6(b).^[5] Specifically, the Commission finds that approval of the proposed rule change is consistent with Section 6(b)(5) ^[6] 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. The Commission believes that the proposed rule change may increase the opportunities for price improvement by allowing the Exchange's odd lot dealers to offer price improvement of odd lot orders, resulting in a benefit to investors. Additionally, the Commission believes the proposal is reasonable because it contemplates equality among order-sending firms and their customers by mandating that price improvement be provided by CHX odd lot dealers on an issue-by-issue basis, rather than allowing odd lot dealers to distinguish among order-sending firms when designating price improvement levels.

The Commission finds good cause for approving the proposed rule change before the thirtieth day after the date of publication of notice of filing thereof in the Federal Register. In the notice,^[7] the Commission indicated that it would consider granting accelerated approval of the proposal after a 15-day comment period. The Commission received no comments on the proposal during the 15-day comment period. The Commission believes it is reasonable to implement the proposal on an accelerated basis, given the anticipated benefits of the proposal. For these reasons, the Commission finds good cause for accelerating approval of the proposed rule change.

IV. Conclusion

For the above reasons, the Commission finds that the proposed rule change is consistent with the provisions of the Act, in general, and with Section 6(b)(5) ^[8] in particular.

In is therefore ordered, pursuant to Section 19(b)(2) of the Act,^[9] that the proposed rule change (SR-CHX-2001-06), be and hereby is approved.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[10]

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  Securities Exchange Act Release No. 44090 (March 21, 2001), 66 FR 16962. In the notice, the Commission stated it would consider granting accelerated approval of the proposed rule change after a 15-day comment period.

4.  Securities Exchange Act Release No. 43742 (December 19, 2000), 65 FR 83119 (December 29, 2000).

5.  15 U.S.C. 78f(b). In approving this proposal, the Commission has considered the proposed rule's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f).

6.  15 U.S.C. 78f(b)(5).

7.  See footnote 3, supra.

8.  15 U.S.C. 78f(b)(5).

9.  15 U.S.C. 78s(b)(2).

10.  17 CFR 200.30-3(a)(12).