[Federal Register Volume 62, Number 133 (Friday, July 11, 1997)]
[Notices]
[Pages 37325-37326]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-18227]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38816; File No. SR-CHX-97-18]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Stock Exchange, 
Incorporated Relating to Trading in Sixteenths

July 3, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 25, 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, 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).
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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 (c) and (e) of Article XX of 
the Exchange's Rules. The text of the proposed rule change is as 
follows (additions are italicized; deletions are [bracketed]):

Article XX

Rule 37
    (c) No change in text of introductory paragraph.
    (1) Pricing.
    (i) Both buy and sell orders in markets quoted with [a minimum 
variation (\1/8\ spread)] less than \1/4\ point spread or orders which 
do not meet the criteria in (ii) or (iii) below will be executed based 
on the ITS BBO.
    (ii) Buy orders in markets quoted with [more than an \1/8\ spread] 
a \1/4\ point spread or wider will be executed at a price \1/8\ point 
better than the ITS Best Offer if (i) an execution at the ITS Best 
Offer would create a double up tick based upon the last sale in the 
primary market or (2) an execution at the ITS Best Offer would result 
in a greater than a \1/8\ point price change from the last sale in the 
primary market.
    (iii) Sell orders in markets quoted with [more than a \1/8\ spread] 
a \1/4\ point spread or wider will be executed at a price \1/8\th point 
better than the ITS Best Bid if (i) an execution at the ITS Best Bid 
would create a double down tick based upon the last sale in the primary 
market or (2) an execution at the ITS Best Bid would result in a 
greater than \1/8\th point price change from the last sale in the 
primary market.
    For example, the execution price for a market buy order in a \1/4\-
\1/2\ quoted market is as follows:
    No change in the text of the example.
    (2)-(5) No change in text.
    (d) No change in text.
    (e) No change in text of introductory paragraph.
    (1) Stopping. If an agency market order eligible for Enhanced 
SuperMAX would create either a double up tick (buy order) or double 
down tick (sell order) if the order was executed at the ITS BBO, the 
Exchanged SuperMAX program will ``stop'' the order. Once stopped, the 
order will not received an execution that is worse than the stopped 
price. Notwithstanding anything in the previous sentence to the 
contrary, agency market orders in markets quoted in less than a \1/4\ 
point market [with a minimum variation (usually \1/8\ spread)] will not 
be stopped. Orders not stopped will be immediately executed based upon 
the ITS BBO as the case may be.

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 
describe the conditions under which the SuperMAX and Enhanced SuperMAX 
price improvement algorithms will apply, given the recent changes in 
the minimum trading increment.\2\ The intent of the Exchange has been, 
and continues to be, to provide price improvement in a market with a 
spread of \1/4\ point or wider. The prior language used to describe 
this intent was ``more than a \1/8\th spread,'' and thereby assumed a 
minimum trading increment of \1/8\th. The proposed rule change 
eliminates the need for any assumptions or interpretations regarding a 
minimum trading increment.
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    \2\ See, e.g.,Securities Exchange Act Release No. 38590 (May 9, 
1997), 62 FR 26832 (May 15, 1997)(SR-CHX-97-08, changing the minimum 
variation for issues traded on the American Stock Exchange and the 
CHX to sixteenths); Securities Exchange Act Release No. 38717 (June 
5, 1997), 62 FR 32134 (June 12, 1997)(SR-CHX-97-12, changing the 
minimum variation for issues traded on the New York Stock Exchange 
and CHX to sixteenths).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6 \3\ 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.\4\
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    \3\ 15 U.S.C. Sec. 78f(b).
    \4\ Id. Sec. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed rule change does not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

[[Page 37326]]

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 and, therefore, has 
become effective pursuant to Section 19(b)(3)(A) of the Act \5\ and 
subparagraph (e) of Rule 19b-4 thereunder.\6\
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    \5\ Id. Section 78s(b)(3)(A).
    \6\ 17 CFR 240.19b-4.
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    At any time within sixty days of the filing of such proposed rule 
change, the Commission may summarily abrogate such rule change if it 
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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file fix 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. 552, will be available for inspection and copying at the 
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, 
D.C. 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-97-18 and should be submitted by August 1, 
1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-18227 Filed 7-10-97; 8:45 am]
BILLING CODE 8010-01-M