[Federal Register Volume 63, Number 171 (Thursday, September 3, 1998)]
[Notices]
[Pages 47056-47057]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23765]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40369; File No. SR-CHX-98-13]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Order Approving Proposed Rule Change Relating to the Exchange's 
Clearing the Post Policy

August 26, 1998.

I. Introduction

    On June 10, 1998, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to make the Exchange's clearing 
the post policy permanent.\3\ The proposed rule change was published 
for comment in the Federal Register on July 16, 1998.\4\ The Commission 
received no comments on the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release Nos. 39519 (January 6, 
1998), 63 FR 1985 (January 13, 1998) (order approving proposed rule 
change CHX-97-28 amending the Exchange's clearing the post policy 
for cabinet securities for a six-month pilot program) and 40144 
(June 30, 1998), 63 FR 27157 (July 9, 1998) (order approving 
proposed rule change CHX-98-17 extending the Exchange's pilot 
program relating to the clearing the post policy for cabinet 
securities for a five-month period or until the approval of the 
instant proposed rule change).
    \4\ See Securities Exchange Act Release No. 40187 (July 9, 
1998), 63 FR 38442.
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II. Description of the Proposal

    The Exchange proposes to amend interpretation and policy .02 of CHX 
Rule 10 of Article XX and amend CHX Rule 11 of Article XX relating to 
clearing the post and to make permanent the policy contained in Article 
XX, Rule 11 regarding the ability of oral bids and offers on cabinet 
securities \5\ to clear the post by phone. Prior to the pilot program's 
approval, the Exchange's clearing the post policy required a floor 
broker or market maker to clear the post by his or her physical 
presence at the post. The proposed rule change does not require the 
floor broker's or market maker's physical presence to clear the post. 
Instead, a floor broker or market maker may clear the post by phone. 
The bids and offer made to clear the post by phone are audibly 
announced at the cabinet post through a speaker system maintained by 
the Exchange.
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    \5\ A cabinet security is any security that is either listed or 
available to be traded on the CHX pursuant to unlisted trading 
privileges that is not assigned a specialist. Telephone conversation 
between Andrea Svehala, Manager, Equity Floor Surveillance, CHX, and 
Marc McKayle, Attorney, Division of Market Regulation, Commission 
(July 24, 1998).
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    The proposed rule change will also expand the clearing the post 
policy to bids and offers in all securities traded on the trading 
floor. Interpretation and policy .02 of CHX Rule 10 of Article XX, as 
amended, will allow a floor broker or market maker to clear the post by 
phone for bids and offers in any security traded on the trading floor 
provided they are audibly announced at the post through a speaker 
system maintained by the Exchange, and the floor broker or market maker 
is physically present on the Exchange floor.

III. Discussion

    After careful review, 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. The Commission believes that the proposed rule change is 
consistent with Section 6 of the Act, in general,\6\ and Section 
6(b)(5),\7\ in particular, in that it is designed to promote just and 
equitable principles of trade to prevent fraudulent and manipulative 
acts and practices, to foster cooperation and coordination with persons 
engaged in regulating and facilitating transactions in securities, 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.\8\
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ In approving this rule, the Commission has considered the 
proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
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    The Commission believes that allowing floor brokers or market 
makers to clear the post for cabinet securities while remaining at 
their post will ensure that these floor brokers or market makers will 
be at their post when they need to respond to orders in more liquid 
securities at a much faster pace. The Commission also believes that 
expending the policy to all securities traded on the trading floor, 
provided that the bid or offer is audibly announced at the post and 
floor broker or market maker is physical present on the Exchange floor, 
is consistent with the Act. Expanding the policy should extend the 
efficiencies experienced during the clearing the post for cabinet 
securities pilot program to all securities on the CHX floor.\9\ The 
Commission

[[Page 47057]]

believes that the proposed rule change should augment the ability of 
floor brokers and market makers to respectively seek best price 
execution for orders and provide depth and liquidity to the Exchange 
market.
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    \9\ The CHX submitted a report to the Commission representing 
that the policy has been well received by the floor brokers and 
market makers of the Exchange, and that no adverse effects have been 
experienced since the implementation of the pilot program. The 
report was filed pursuant to Securities Exchange Act Release No. 
39519 (January 6, 1998), 63 FR 1985 (January 13, 1998) (order 
approving amendment to the Exchange's clearing the post policy for 
cabinet securities). See Report on the Effectiveness of the Pilot 
Program for Clearing the Cabinet Post by Phone, dated June 5, 1998.
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 IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-CHX-98-19) is approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-23765 Filed 9-2-98; 8:45 am]
BILLING CODE 8010-01--M