[Federal Register Volume 59, Number 125 (Thursday, June 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15932]


[[Page Unknown]]

[Federal Register: June 30, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34256; File No. SR-CHX-94-07]
June 24, 1994.

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Stock Exchange, Inc. Relating to Utilization of 
Exempt Credit by Market Makers

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on March 15, 1994, the 
Chicago Stock Exchange, Inc. (``CHX'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'' or ``SEC'') 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. Sec. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CHX proposes to amend Interpretation and Policy .01 of Rule 17 
of Article XXXIV of the Exchange's Rules. The text of the proposed rule 
is as follows:

Additions italicized.

Article XXXIV
Rule 17
Interpretations and Policies
    .01 Utilization of Exempt Credit. Exchange Members registered as 
equity market makers are members registered as specialists for purposes 
of the Securities Exchange Act of 1934 and as such are entitled to 
obtain exempt credit for financing their market maker transactions. 
Members and/or prospective members who are anticipating becoming 
registered as equity market makers as well as those clearing firms who 
are or will be carrying the accounts of market makers should be aware 
of the following interpretation relative to the use of such credit:
    1. Only those transactions initiated on the Exchange Floor qualify 
as market transactions. This restriction prohibits the use of exempt 
credit where market maker orders are routed to the Floor from locations 
off the Floor.
    2. Fifty per cent (50%) of the quarterly share volume which creates 
or increases a position in a market maker account must result from 
transactions which are either consummated on the Exchange or sent from 
the Exchange Floor for execution in another market via ITS.
    3. Only those positions which have been established as a direct 
result of bona fide equity market maker activity qualify for exempt 
credit treatment. This restriction precludes exempt credit financing 
based on an equity market maker registration for positions resulting 
from options exercises and assignments.

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 proposed rule change relates to the utilization of exempt 
credit by market makers. Under current rules, in order for a market 
maker to obtain exempt credit for the financing of its market maker 
transactions, fifty percent (50%) of the quarterly share volume in its 
market maker account must result from transactions consummated on the 
Exchange.
    The proposed rule change would amend this interpretation and policy 
under the Exchange's rules so that the fifty percent (50%) volume test 
also would include orders that, although initiated on the Exchange 
Floor, are sent to another market for execution via the Intermarket 
Trading System (``ITS''). The Exchange believes that when a market 
maker initiates an order on the Exchange Floor and clears the post, the 
market maker should not be penalized when there is no order against 
which it can be executed or when the specialist does not accept the 
order for placement in his book. As a result, if a market maker clears 
the post, sends the order to another market via ITS and the order is 
executed, under the proposed rules, that transaction would count 
towards the fifty percent (50%) quarterly share volume requirement.
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 to 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 a burden on competition.

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

    No comments where 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 finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consent, 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, 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. Sec. 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 No. SR-CHX-94-07 and should be 
submitted by July 21, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-15932 Filed 6-29-94; 8:45 am]
BILLING CODE 8010-01-M