[Federal Register Volume 59, Number 30 (Monday, February 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-3360]


[[Page Unknown]]

[Federal Register: February 14, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33593; File No. SR-CHX-94-2]

 

Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Stock Exchange, 
Inc. to Establish a Temporary Policy Relating to the Automatic 
Execution Feature of the Midwest Automated Execution System.

February 8, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on January 
26, 1994, the Chicago Stock Exchange, Inc. (``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. On 
February 3, 1994, the CHX submitted to the Commission Amendment No. 1 
to the proposed rule change.\1\ The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\See letter from J. Craig Long, Foley & Lardner, to Louis A. 
Randazzo, Attorney, Commission, dated February 2, 1994. Amendment 
No. 1 modifies the CHX's proposal to provide for a ``sunset'' 
provision whereby the effectiveness of the filing will terminate 
sixty days from the release date of this notice.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CHX has published to its members a temporary policy\2\ relating 
to the automatic execution feature of the Midwest Automated Execution 
(``MAX'') System which, inter alia, automates The Exchange's Guaranteed 
Execution System (``BEST System'') pursuant to Article XX, Rule 37 of 
the CHX Rules.\3\
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    \2\The effectiveness of the proposal will terminate on April 9, 
1994. See Amendment No. 1, supra note 1.
    \3\The temporary policy states that in an effort to ensure 
accurate executions to the customers, the Committee on Floor 
Procedures has decided that once the analyst's report is broadcast, 
the auto-execution system will be turned off and all issues will be 
executed manually. After the issue is named, and two members from 
the Committee on Floor Procedure agree that there is no longer an 
influx of orders in this issue, the system will be set back to 
automatic execution. All specialists are reminded that during the 
period that the system is set to manual, it is their responsibility 
to properly price all orders within the context of the CHX rules. 
The Committee on Floor Procedure and Surveillance will review all 
trades in the affected issues to insure that proper reports are 
given to the customers. This will be on a trial procedure only.
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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 charge. 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
    Recently, the Exchange has experienced an abnormal influx of orders 
through the MAX system at the same time that a certain analyst' report 
is broadcast on cable T.V. Because of the near instantaneous automatic 
execution feature of the MAX system, the executions of those orders are 
taking place before the quotes for those stocks can be updated to 
reflect the analyst's comments.
    The MAX system automates the requirements of Rule 37 of Article XX 
which guarantees executions at the best market up to a certain size for 
agency orders. Paragraph 7 under Rule 37 allows specialists and floor 
brokers to seek relief from the requirements of the BEST system in 
unusual trading situations.\4\ The Committee on Floor Procedures has 
determined that the broadcast of the above described report creates 
unusual trading situations that warrant relief from the automatic 
execution feature for a short period of time so that proper quotes can 
be entered. As a result, the purpose of the proposed rule change is to 
published the Committee on Floor Procedure's determination to all 
trading floor members.\5\
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    \4\CHX Rule 37, Paragraph 7 states that in unusual trading 
situations, a specialist or floor broker may seek relief from the 
requirements of Rule 37, Paragraphs 1 through 6 from two members of 
the Committee on Floor Procedure or a designated member of the 
Exchange staff who would have authority to set execution prices.
    \5\As noted above, the proposal is in effect for a temporary 
sixty day period. By that time the Commission expects that CHX to 
develop systems capability to implement manual execution on a stock-
by-stock basis.
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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 any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    The proposed rule change has been endorsed by the Exchange's Floor 
Procedures Committee.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change constitutes a stated policy, practice or 
interpretation with respect to the meaning, administration or 
enforcement of an existing rule of the Exchange and therefore has 
become effective pursuant to Section 19(b)(3)(A) of the Act and 
subparagraph (e) of Rule 19b-4 thereunder. At any time within 60 days 
of the filing of such proposed rule change, the Commission may 
summarily abrogate such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise in furtherance of the 
purposes of the Act.

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 Room, 450 Fifth Street, NW., Washington, 
DC 20549. Copies of the 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-94-2 and should be submitted by March 7, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-3360 Filed 2-11-94; 8:45 am]
BILLING CODE 8010-01-M