[Federal Register Volume 62, Number 127 (Wednesday, July 2, 1997)]
[Notices]
[Pages 35865-35866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17254]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38772; File No. SR-CHX-97-09]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Stock Exchange, 
Inc. Relating to an Amendment to Rule 37 of Article XX Concerning the 
Definition of Best Bid or Offer in the BEST and MAX Rules

June 25, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 9, 1997, as amended on 
June 24, 1997,\2\ the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission

[[Page 35866]]

(``Commission'') 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. 78s(b)(1).
    \2\ On June 24, 1997 the CHX filed Amendment No. 1 to its 
proposal with the Commission. The amendment removes the words ``size 
and price'' from the definition of the best bid or offer. See letter 
from David T. Rusoff, Foley & Lardner to Ivette Lopez, Assistant 
Director, SEC (June 24, 1997).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 37 of Article XX of the 
Exchange's Rules.

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
    As described below, the purpose of the proposed rule change is to 
amend Rule 37 of Article XX (the BEST Rule and the MAX Rule) to correct 
the definitions of best bid or offer found throughout this Rule so as 
to reflect existing Exchange practice.

Definition of Best Bid and Offer

    The Exchange's BEST Rule (Art. XX, Rule 37(a)) currently states 
that, subject to certain exceptions, all agency market orders are 
guaranteed an execution on the basis of the best bid disseminated 
pursuant to SEC Rule 11Ac1-1 \3\ on a sell order or the best offer 
disseminated pursuant to SEC Rule 11Ac1-1 on a buy order (collectively, 
the national best bid or offer (``NBBO'')). While the NBBO is utilized 
for NASDAQ/NM Securities traded on the Exchange, the Exchange has 
always utilized the Intermarket Trading System best bid or offer (``ITS 
BBO'') \4\ for Dual Trading System Securities (i.e., securities also 
traded on the NYSE or the Amex). As a result, instead of using the NBBO 
definition in the BEST Rule and MAX Rule,\5\ the Exchange believes that 
it is more accurate to describe the BEST Rule guarantee and the MAX 
Rule executions in terms of the ITS BBO for Dual Trading System issues.
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    \3\ 17 CFR 240.11Ac1-1.
    \4\ The ITS BBO is defined as the best bid/offer quote among the 
American, Boston, Cincinnati, Chicago, New York, Pacific, 
Philadelphia or the Intermarket Trading System/Computer Assisted 
Execution System quote, as appropriate.
    \5\ The MAX Rule (Art. XX, Rule 37(b)) sets forth the procedures 
applicable to the automated execution of orders entered into the MAX 
System.
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    This definitional change merely reflects an inadvertent error in 
the drafting of the BEST Rule and the MAX Rule and will not result in 
any systems changes.
2. Statutory Basis
    The Exchange represents that the proposed rule change is consistent 
with Section 6(b)(5) \6\ of the Act, 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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    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will not impose 
any inappropriate 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

    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 pursuant to Section 
19(b)(3)(A) of the Act \7\ and subparagraph (e) of Rule 19b-4 
thereunder.\8\
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    \7\ U.S.C. 78s(b)(3)(a).
    \8\ CFR 240.19b-4.
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    At any time within 60 days of the filing of the proposed rule 
change,\9\ the Commission may summarily abrogate such rule change if 
its 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.
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    \9\ The 60 day abrogation period commences from June 24, 1997, 
the date of the submission of the substantive amendment.
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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 
than 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 also will be available for 
inspection and copying at the principal office of the Chicago Stock 
Exchange. All submissions should refer to File No. SR-CHX-97-09 and 
should be submitted by July 23, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-17254 Filed 7-1-97; 8:45 am]
BILLING CODE 8010-01-M