[Federal Register Volume 60, Number 214 (Monday, November 6, 1995)]
[Notices]
[Pages 56083-56084]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27428]



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

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36440; File No. SR-CHX-95-19]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change and Amendment No. 1 to 
the Proposed Rule Change Relating to the Chicago Match

October 31, 1995.

I. Introduction

    On July 27, 1995, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``SEC'' or ``Commission''), 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 to amend Article XXXVII of the 
Exchange's Rules to increase the number of daily matches in the Chicago 
Match to two. On August 22, 1995, the CHX submitted Amendment No. 1 to 
the proposed rule change.\3\

    \1\ U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from David T. Rusoff, Attorney, Foley & Lardner, 
to Elisa Metzger, Attorney, SEC, dated August 22, 1995. In Amendment 
No. 1 to the proposed rule change, the Exchange clarifies that there 
will be two matches per day, which will occur midday during the 
Exchange's primary trading session. Moreover, the Exchange defines 
the term ``Cross Window'' to mean up to two ten minute intervals 
during the Primary Trading Session.
---------------------------------------------------------------------------

    The proposed rule change, including Amendment No. 1, was published 
for comment in Securities Exchange Act Release No. 36139 (August 23, 
1995), 60 FR 45196 (August 30, 1995). No comments were received on the 
proposal.

II. Background and Description of the Proposal

    On November 30, 1994, the Commission approved a proposed rule of 
the Exchange that created the Chicago Match, an institutional trading 
system that integrates an electronic order match system with a facility 
for brokering trades.\4\ The Chicago Match electronically crosses 
orders entered by users during regular trading hours for securities 
that are listed on the CHX or for which the CHX has unlisted trading 
privileges.\5\ Orders that are matched electronically will be priced at 
the market price, which is equal to the mid-point between the 
Consolidated Best Bid and Offer, at a random time within a pre-
determined ten minute period and will be executed at that time. 
Currently, the Chicago Match rules permit only one match to occur per 
trading day.\6\

    \4\ Securities Exchange Act Release No. 35030 (November 30, 
1994), 59 FR 63141 (``Original Approval Order'').
    \5\ Users may be CHX members or non-members. When a non-member, 
however, is given access to Chicago match, it must enter into 
several agreements to ensure that a member has responsibility and 
control over the non-member's activities.
    \6\ See Securities Exchange Act Release No. 35923 (June 30, 
1995), 60 FR 35756 (approving an amendment to the Chicago Match that 
lowered the disclosure threshold for display of orders from 10,000, 
5,000 or 2,000 shares depending on the security involved to 500 
shares so that more orders in the Chicago Match would be displayed).
---------------------------------------------------------------------------

    The proposed rule change amends the Chicago Match rules to 
accommodate two matches per trading day.\7\ As before, the matches will 
occur mid-day during the Exchange's primary trading session.

    \7\ There will be two announced ten minute periods for matching 
of orders. Orders that are entered by users prior to the first ten-
minute period will participate in the first match of the day and 
orders that are entered by users after the first ten-minute period, 
but before the second ten-minute period will participate in the 
second match of the day. Orders that are not matched during the 
first match of the day will not automatically participate in the 
second match. Conversation between David Rusoff, Foley, & Lardner, 
and Jennifer S. Choi, Division of Market Regulation, SEC, on October 
31, 1995.
---------------------------------------------------------------------------

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange, and, in 
particular, with the requirements of Section 6(b).\8\ In particular, 
the Commission believes the proposal is consistent with the Section 
6(b)(5) requirements that the rules of an exchange be designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public.

    \8\ 15 U.S.C. 78f(b).
---------------------------------------------------------------------------

    The Commission historically has encouraged the creation of new 
electronic trading systems such as the Chicago Match that may 
contribute to increased execution alternatives available to investors. 
At the same time, the Commission requires that these exchange trading 
systems be consistent with the investor protection and fair and orderly 
market standards contained in the Act. In the Original Approval Order, 
the Commission found that the Chicago Match was consistent with these 
objectives. Nevertheless, in the Original Approval Order, the 
Commission raised concerns over the issue of non-member access to the 
Exchange. The Commission, however, found that several factors, 
including the fact that CHX matches will occur only once a day, served 
to assure sufficient control by CHX members over the activities of non-
members to satisfy the requirements of the Act. The Commission also 
noted that any proposal increasing the number of matches would have to 
be considered and approved by the Commission.
    After careful review, the Commission believes that the amended 
Chicago Match is consistent with the investor protection and fair and 
orderly market standards contained in the Act for the same reasons that 
are set forth in the Original Approval Order. The limited increase to 
two matches per trading day will continue to assure that CHX members 
have adequate controls over non-members to satisfy the requirements of 
the Act.\9\ At the same time, the Commission believes that the 
additional match each day will benefit investors by providing them with 
an additional execution opportunity. In this context, the additional 
match will provide more flexibility to investors and allow them to 
utilize the Chicago Match one more time during the trading day in 
response to changing market conditions.

    \9\ The CHX has indicated that it may wish to add more matches, 
upon Commission approval. The CHX would have to submit a proposal 
pursuant to Section 19(b)(2) of the Act to add additional matches 
during the trading day.
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-CHX-95-19), 

[[Page 56084]]
including Amendment No. 1, is approved.

    \10\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27428 Filed 11-3-95; 8:45 am]
BILLING CODE 8010-01-M