[Federal Register Volume 60, Number 15 (Tuesday, January 24, 1995)]
[Notices]
[Pages 4651-4652]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1685]



-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35233 File No. SR-CHX-94-22]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by Chicago Stock Exchange, Inc. Relating to Exclusive Issues

January 18, 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 
November 10, 1994, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change and on January 4, and 9, 
1995, filed Amendment Nos. 1 and 2, respectively, to the proposed rule 
change,\1\ 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.

    \1\See letters from David Rusoff, Foley & Lardner, to Amy 
Bilbija, SEC, dated December 29, 1994; and to Glen Barrentine, SEC, 
dated January 5, 1995. Amendment Nos. 1 and 2 made non-substantive 
changes to the proposal.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Chicago Stock Exchange, Incorporated, pursuant to Rule 19b-4 
promulgated under the Securities Exchange Act of 1934, as amended, 
submits a proposed rule change relating to exclusive issue rules 
(Article XXX, Rule 23).

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. [[Page 4652]] 

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 change is to impose additional 
requirements and prohibitions on specialists, and others, when the 
Exchange is the primary market in a particular issue (``exclusive 
issue''). The rule proposal is designed to prohibit specialist units 
registered in an exclusive issue from engaging in business 
transactions\2\ with the issuer.\3\ It is also intended to promote fair 
dealings in exclusive issues by prohibiting certain types of 
transactions\4\ without first securing the approval of floor officials. 
Furthermore, the proposal makes the ``equalizing'' exemption in 
paragraph (e)(5) of SEC Rule 10a-1 unavailable for specialists and 
market makers when selling short an exclusive issue.\5\ Finally, the 
proposal includes a definition of an exclusive issue.\6\ The CHX 
specialists are provided a statistical report on a monthly basis 
containing data regarding trade and share volume of each issue by 
exchange. Thus, a specialist will be aware--by reviewing the monthly 
report--if exclusive issue obligations have been triggered and will be 
responsible for conducting his business accordingly.\7\

    \2\The term ``business transaction'' is intended to be 
interpreted broadly to include, for example: Loans, purchase of 
assets from the issuer, and acquisition of any beneficial ownership 
of shares of such issuer.
    \3\In addition to the specialist unit, the proposed rule extends 
to any co-specialist or other associated person, officer, director, 
partner or employee of a specialist unit registered in the exclusive 
issue.
    \4\The specific types of transactions are listed in CHX proposed 
Rule 23(b)(2), and include transactions such as a purchase at a 
price above the last sale in the same session and a proposed 
transaction involving a price movement of \1/2\ point or more.
    \5\17 CFR Sec. 240.10a-1(e)(5). Rule 10a-1 generally prohibits 
persons from effecting a short sale of a registered security (a) 
below the price of the last sale, or (b) at such price if it is 
lower than the last sale at a different price. the exception 
provided for in paragraph (e)(5) permits registered specialists or 
registered exchange market makers (or a third market maker for its 
own account over-the-counter) to effect, for their own account, a 
sale (a) at a price equal to or above the last sale, or (b) at a 
price equal to the most recent offer communicated for the security 
by such registered person if such offer, when communicated, was 
equal to or above the last sale. In addition, the Rule expressly 
provides that an exchange may prohibit its registered specialists 
and market markers from availing themselves of the exemption if the 
exchange determines that such action is necessary or appropriate in 
its market, in the public interest, or for the protection of 
investors.
    \6\An ``exclusive'' issue is defined in the proposed rule as the 
stock of any company traded on the Exchange not otherwise traded on 
the New York or American Stock Exchanges or NASDAQ/NMS, and, where 
there exists another market for such issue, the Exchange has 
executed 25% or more of the transactions in the issue during the 
three previous months.
    \7\Conversation between Amy Bilbija, SEC, David Rusoff, Foley & 
Lardner, and Dan Liberti, CHX, on January 13, 1995.
---------------------------------------------------------------------------

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 a burden on competition.

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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 longer 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 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, 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 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-94-22 and should be 
submitted by February 14, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-1685 Filed 1-23-95; 8:45 am]
BILLING CODE 8010-01-M