[Federal Register Volume 62, Number 113 (Thursday, June 12, 1997)]
[Notices]
[Pages 32134-32135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-15405]
[[Page 32134]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38717; File No. SR-CHX-97-12]
Self-Regulatory Organizations; Notice of Filing of and Order
Granting Temporary Accelerated Approval to a Proposed Rule Change by
the Chicago Stock Exchange, Incorporated Relating to Trading Variations
June 5, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), \1\ notice is hereby given that on May 29, 1997, the Chicago
Stock Exchange, Incorporated (``CHX'' or ``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I and II 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 and to grant accelerated approval on a
temporary basis to the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify Article XX, Rule 22 of the CHX's
Rules, relating to trading variations.
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 III 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
Artical XX, Rule 22 of the Exchange's Rules gives the Exchange's
Committee on Floor Procedure the authority to fix minimum variations
for bids and offers in specific securities or classes of securities.
Pursuant to this authority, the Exchange proposes to change its minimum
variation \1/16\ of $1.00 per share for securities traded both on the
Exchange and the New York Stock Exchange (``NYSE'') that are selling at
or greater than $1.00 and to \1/32\ of $1.00 per share for such
securities that are selling below $1.00.
The Exchange proposes that the proposed rule change become
effective at such time as enhancement to the Intermarket Trading System
(``ITS'') is made to permit trading in Tape A issues in minimum
variations of a sixteenth through ITS. \2\ The proposed rule change
will only be effective until such time as the Commission approves File
No. SR-CHX-97-13, a proposed rule change regarding general changes to
the Exchange's Rules on trading variations.
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\2\ Tape A disseminates last sale information for securities
listed on the NYSE, while Tape B disseminates last sale information
for securities listed on any other national securities exchange.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b)(5) of the Act \3\ in that it is 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 interest.
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\3\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes the proposed rule change will not 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 Exchange has neither solicited nor received written comments.
III. 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, N.W., Washington, D.C. 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 Room, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Also, copies of such filing will be available
for inspection and copying at the principal office of the CHX. All
submissions should refer to File No. SR-CHX-97-12 and should be
submitted by July 3, 1997.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
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 and Section 11A of the
Act.\4\
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\4\ 15 U.S.C. Secs. 78f(b) and 78k-1. In approving this rule
change, the Commission notes that it has considered the proposal's
impact on efficiency, competition, and capital formation, consistent
with Section 3 of the Act. Id. Sec. 78c(f).
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The Commission believes the proposed rule change will likely
enhance the quality of the market for the affected NYSE securities. The
NYSE and CHX currently only allow quotes in eighths for NYSE securities
whose bid price is above $1.00. Allowing the CHX to quote these
securities in increments finer than eighths will facilitate quote
competition.\5\ This should help to produce more accurate pricing of
such securities and can result in tighter quotations.\6\ In addition,
if the quoted markets are improved by reducing the minimum increment,
the change could result in added benefits to the market such as reduced
transaction costs.
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\5\ The rule change is consistent with the recommendation of the
Division of Market Regulation (``Division'') in its Market 2000
Study, in which the Division noted that the \1/8\ minimum variation
can cause artificially wide spreads and hinder quote competition by
preventing offers to buy or sell at prices inside the prevailing
quote. See SEC, Division of Market Regulation, Market 2000: An
Examination of Current Equity Market Developments 18-19 (Jan. 1994).
\6\ A study that analyzed the reduction in the minimum tick size
from \1/8\ to \1/16\ for securities listed on the American Stock
Exchange priced between $1.00 and $5.00 found that, in general, the
spreads for those securities decreased significantly while trading
activity and market depth were relatively unaffected. See Hee-Joon
Ahn, Charles Q. Chao, and Hyuk Choe, Tick Size, Spread, and Volume,
5 J. Fin. Intermediation 2 (1996).
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The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice thereof in the Federal Register. Currently, bids and offers for
NYSE securities selling at or above $1.00 are publicly displayed in
eighths. On May 12, 1997, the ITS
[[Page 32135]]
Operating Committee agreed to modify ITS to permit Tape A securities to
be quoted and traded in sixteenths. Shortly thereafter, several market
centers publicly announced that they will allow the affected NYSE
securities to be quoted in sixteenths as soon as modifications to ITS
are implemented.\7\ The proposed rule change will enable the CHX to
continue to competitively quote such securities. Requiring the Exchange
to wait the full statutory review period for the proposed rule change
could place the CHX at a significant competitive disadvantage vis-a-vis
other markets. At the same time, the proposal is effective only until
the Commission acts on File No. SR-CHX-97-13.\8\ This will provide the
Commission with a sufficient period to receive and assess comments on
SR-CHX-97-12. Therefore, the Commission believes it is consistent with
Section 6(b)(5) and Section 19(b)(2) of the Act to grant accelerated
approval on a temporary basis to the proposed rule change.\9\
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\7\ ITS estimates that the implementation date for this change
is late June.
\8\ File No. SR-CHX-97-13 is a companion filing that requests
permanent approval of the procedures described herein. Securities
Exchange Act Release No. 38718 (June 5, 1997). File Nos. SR-CHX-97-
11 and SR-CHX-97-14 are related filings whose effectiveness is
linked to SR-CHX-97-13. See Securities Exchange Act Release Nos.
38704 (May 30, 1997) (approving File No. SR-CHX-97-11 on a temporary
basis; reducing the trading increment from eighths to sixteenths for
securities that are traded on the Exchange and on Nasdaq) and 38719
(June 5, 1997) (approving File No. SR-CHX-97-14 on a temporary
basis; a similar reduction in the trading increment for securities
that are traded only on the Exchange).
\9\ 15 U.S.C. Secs. 78f(b)(5) and 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-CHX-97-12) is hereby
approved on an accelerated basis until the Commission acts on File No.
SR-CHX-97-13.
\10\ 15U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 C.F.R. 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-15405 Filed 6-11-97; 8:45 am]
BILLING CODE 8010-01-M