[Federal Register Volume 64, Number 194 (Thursday, October 7, 1999)]
[Notices]
[Pages 54702-54703]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-26157]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41969; File No. SR-CHX-99-14]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Chicago Stock Exchange, Inc. Relating to ``Stop'' and
``Stop Limit'' Orders
September 30, 1999.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice hereby is given
that on August 27, 1999, the Chicago Stock Exchange, Inc. (``CHX'' or
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') 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.
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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 XX, Rule 28A to the Exchange's
Rules relating to ``stop'' and ``stop limit'' orders to clarify that
the existing Rule 28 of Article XX relates solely to ``stopped''
orders. Below is the text of the proposed rule change. Proposed new
language is in italics.
Chicago Stock Exchange Rules
Article XX
Rule 28A Stop Orders
(a) Dual Trading System Issues.\3\
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\3\ Dual Trading Systems issues are issues traded on both the
CHX and either the New York Stock Exchange or the American Stock
Exchange.
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(1) Stop Orders. A ``stop'' order to buy shall be entered at a
price above the current primary market offer. A ``stop'' order to sell
shall only be entered at a price below the current primary market bid.
Once entered, a ``stop'' order may not be executed until a trade (the
``effective trade'') occurs in the primary market that is at or through
the price of the ``stop'' order. Once the effective trade occurs, the
``stop'' order shall be executed based upon the next primary market
trade, but at a price no better than the effective trade (i.e., the
``stop'' order shall be executed on a next-no better basis).
(2) Stop Limit Orders.
(a) Buy Stop Limit Orders. A buy stop limit order shall only be
entered at a price above the current primary market offer and shall
become a limit order when a round-lot transaction takes place in the
primary market at or above the stop price. The order shall then be
filled in the manner prescribed for handling a limit order to buy.
(b) Sell Stop Limit Orders. A sell stop limit order shall only be
entered at a price below the current primary market bid and shall
become a limit order when a round-lot transaction takes place in the
primary market at or below the stop price. The order shall then be
filled in the manner prescribed for handling a limit order to sell.
(b) Nasdaq/NM Issues:
A ``stop'' or ``stop limit'' order to buy shall only be entered at
a price above the then-current best offer disseminated pursuant to SEC
Rule 11Ac1-1 (the ``National Best Offer''). A ``stop'' or ``stop
limit'' order to sell shall only be entered at a price below the then-
current best bid disseminated pursuant to SEC Rule 11Ac1-1 (the
``National Best Bid''). Once entered, a stop or stop limit order may
not be executed until the price of the order is equal to (1) the
National Best Offer in the case of a buy order or (2) the National Best
Bid in the case of a sell order, at which time the member or member
organization that accepted the order shall be obligated to use its best
efforts to obtain the best available price to fill such order.
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 regarding 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 primary purpose of the proposed rule change is to add a
provision to the Exchange's Rules relating to ``stop'' orders, thereby
clarifying that the existing Rule 28 of Article XX relates solely to
``stopped'' orders.\4\ Under the
[[Page 54703]]
proposed Rule 28A, ``stop'' or ``stop limit'' orders for Dual Trading
System issues will only be permitted to be entered at a price above
(for buy orders) or below (for sell orders) the then-current offer or
bid, respectively, in the primary market. Stop or stop limit orders for
Nasdaq/NM Issues will only be permitted to be entered at a price above
(for buy orders) or below (for sell orders) the then-current National
Best Offer or National Best Bid, respectively.
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\4\ A ``stopped'' order is an order that is accepted by a member
and guaranteed a fill at a specific price, usually the price at the
time the order is received, unless the member can achieve price
improvement for the customer. Telephone conversation between Paul
O'Kelly, Executive Vice President, CHX, and Marc McKayle, Attorney,
Division of Market Regulation, Commission on September 30, 1999.
Also see CHX Rule 28 of Article XX.
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As set forth in the proposed Rule 28A, a specialist's obligations
with respect to incoming ``stop'' and ``stop limit'' orders are
distinct from liabilities relating to `'stopped'' orders, which under
Rule 28 are guaranteed execution at a specified price and size.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b)(5) of the
Act \5\ 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.
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\5\ 15 U.S.C. 78f(b)(5).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any inappropriate burden on competition
(C) Self-Regulatory Organization's Statement on Comments Regarding the
Proposed Rule Change Received From Members, Participants or Others
No written comments were either solicited or received.
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, including whether the foregoing is
consistent with the Act. Persons making written submissions should file
copies thereof with the Secretary, Securities and Exchange Commission,
450 Fifth Street, NW, Washington, DC 20549-0609. 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. 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-99-14 and should be
submitted by October 28, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 99-26157 Filed 10-6-99; 8:45 am]
BILLING CODE 8010-01-M