[Federal Register Volume 62, Number 202 (Monday, October 20, 1997)]
[Notices]
[Page 54496]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27696]



[[Page 54496]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39230; File No. SR-CHX-97-24]


Self-Regulatory Organizations; Chicago Stock Exchange; Notice of 
Filing of Proposed Rule Change Regarding A Ban on the Entry of Certain 
Stop Orders and Stop Limit Orders

October 10, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 22, 1997, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to add Article IX, Rule 10B (Stop Order Ban 
Due to Extraordinary Market Volatility). The new rule would prohibit 
the entry of certain stop orders and stop limit orders if the New York 
Stock Exchange (``NYSE'') implements a stop order ban pursuant to NYSE 
Rule 80A. The new rule would exempt stop orders and stop limit orders 
of 2,099 shares or less for the account of an individual investor 
pursuant to instructions received directly from the individual 
investor. The text of the proposed rule change is available at the 
Office of the Secretary, the CHX, and at the Commission.

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
    Pursuant to its Rule 80A, the NYSE currently prohibits the entry of 
stop orders and stop limit orders if the price of the primary Standard 
and Poor's 500 Stock Price Index \3\ futures contract traded on the 
Chicago Mercantile Exchange reaches a value 12 points below the 
contract's closing value on the previous trading day. Likewise, the 
Boston Stock Exchange (``BSE'') prohibits the entry of stop and stop 
limit orders on the BSE when the NYSE has a ban in place.\4\
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    \3\ Standard and Poor's 500 Stock Index is a service mark of 
Standard and Poor's Corporation.
    \4\ See Ch. II, Sec. 35(b) of the BSE's rules.
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    The Exchange has previously adopted circuit breaker rules on a 
pilot basis \5\ which parallel the circuit breaker rules of the 
NYSE.\6\ Such rules are designed to dampen market volatility by 
providing a ``time-out'' to permit investors and market professionals 
to evaluate the state of the market. However, unlike the NYSE, the 
Exchange has not previously prohibited the entry of stop and stop limit 
orders during times of market stress.
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    \5\ See Securities Exchange Act Release Nos. 26218 (October 26, 
1988), 53 FR 44137 (November 1, 1988) (order approving File No. SR-
MSE-88-9); 27370 (October 23, 1989), 54 FR 43881 (October 27, 1989) 
(order approving File No. SR-MSE-89-9); 28580 (October 25, 1990), 55 
FR 45895 (October 31, 1990) (order approving File No. SR-MSE-90-16); 
29868 (October 28, 1991), 56 FR 56535 (November 5, 1991) (order 
approving File No. SR-MSE-91-14); 33120 (October 29, 1993), 58 FR 
59503 (November 9, 1993) (order approving File No. SR-CHS-93-22); 
36414 (October 25, 1995), 60 FR 55630 (November 1, 1995) (order 
approving File No. SR-CHX-95-23); 37459 (July 19, 1996), 61 FR 39172 
(July 26, 1996) (order approving File No. SR-CHX-96-20); and 38221 
(January 31, 1997), 62 FR 5871 (February 7, 1997) (order approving 
File No. SR-CHX-96-33).
    \6\ See CHX Art. IX, Rule 10A.
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    The Exchange believes that the prohibition of stop orders and stop 
limit orders, except for individual investor orders of up to 2099 
shares, during periods of market stress will facilitate the maintenance 
of an orderly market and reduce market volatility.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirements of Section 6(b)(5) of the Act \7\ which requires that 
the rules of the Exchange be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest.
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    \7\ 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 proposal does not impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of the Act.

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 such 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 Number SR-CHX-97-24 and should be 
submitted by November 10, 1997.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-27696 Filed 10-17-97; 8:45 am]
BILLING CODE 8010-01-M