[Federal Register Volume 62, Number 206 (Friday, October 24, 1997)]
[Notices]
[Pages 55443-55444]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-28178]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39249; File No. SR-CHX-97-20]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Stock Exchange, Incorporated Relating to the 
Exchange's BEST Rule

October 16, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 12, 1997, the 
Chicago Stock Exchange, Incorporated (``CHX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'' or ``SEC'') 
the proposed rule change, as described in Items I, II, and III below, 
which Items have been prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. Sec. 78s(b)(1).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Rule 37(a) of Article XX of the 
Exchange's Rules to clarify that the Exchange's BEST Rule guarantee is 
limited to both the size and price associated with the best bid and 
offer.
    The text of the proposed rule change is available at the Office of 
the Secretary, the Exchange, 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 Exchange 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 Exchange 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
    The purpose of the proposed rule change is to amend the Exchange's 
BEST Rule (Article XX, Rule 37) to clarify an ambiguity concerning the 
application of the BEST Rule. Currently, the Exchange's BEST Rule 
states that, subject to certain exceptions, all agency market orders 
are guaranteed an execution on the basis of the ITS BBO \2\ for Dual 
Trading System issues and the NBBO \3\ for Nasdaq/NM issues.
---------------------------------------------------------------------------

    \2\ The ITS BBO is the best bid/offer quote among the American, 
Boston, Cincinnati, Chicago, New York, Pacific, Philadelphia 
exchanges or the Intermarket Trading System/Computer Assisted 
Execution System, as appropriate.
    \3\ The NBBO is the best bid or offer disseminated pursuant to 
SEC Rule 11Ac1-1.
---------------------------------------------------------------------------

    Each best bid and offer, including the ITS BBO and NBBO, contains 
two components--price and size. Because the BEST Rule requires a 
specialist to guarantee an execution on the basis of the best bid or 
offer, the Exchange has consistently interpreted this guarantee as 
applying to both the size and price associated with that best bid or 
offer. In this rule change, the Exchange proposes to add the words 
``size and price associated with'' to the beginning of the BEST Rule to 
clarify that the BEST Rule guarantee is limited to both the size and 
price associated with the best bid and offer.
    This change is consistent with the Exchange's existing MAX Rule 
(Article XX, Rule 37(b)(11)) which states that ``notwithstanding 
anything in this Rule to the contrary, no market order or limit order 
that is marketable when entered into the MAX System will be 
automatically executed if the size associated with the ITS BBO or NBBO, 
as the case may be, is of a size less than such market order or limit 
order.''
2. Statutory Basis
    The Exchange represents that proposed rule change is consistent 
with Section 6(b)(5) \4\ 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.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. Sec. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose

[[Page 55444]]

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 did not solicit or receive written comments with 
respect to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of 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 Exchange consents, the Commission will:
    (A) By order approve the 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, N.W., Washington, D.C. 20549. 
Copies of the submissions, 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 an any persons, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. Sec. 522, will be available for inspection and copying at 
the Commission's Public Reference Section, 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 Exchange. All 
submissions should refer to File No. SR-CHX-97-20 and should be 
submitted by November 14, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
---------------------------------------------------------------------------

    \5\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-28178 Filed 10-23-97; 8:45 am]
BILLING CODE 8010-01-M