[Federal Register Volume 65, Number 42 (Thursday, March 2, 2000)]
[Notices]
[Pages 11352-11353]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-5062]



[[Page 11352]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42454; File No. SR-CHX-00-01]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Stock Exchange, 
Inc. to Amend its Rules Relating to the Filing of FOCUS Reports

February 24, 2000.
    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 January 31, 2000, the Chicago Stock Exchange, Inc. (the ``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 
Exchange. On February 16, 2000, the Exchange filed with the Commission 
Amendment No. 1, designating the proposed rule change as constituting a 
``non-controversial'' rule change under paragraph (f)(6) of Rule 19b-4 
under the Act.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons and to 
accelerate the operative date of the proposed rule change.
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    \1\15 U.S.C. 78s(b)(1).
    \2\17 CFR 240.19b-4.
    \3\The Exchange has represented that the proposed rule change: 
(i) Will not significantly affect the protection of investors or the 
public interest; (ii) will not impose any significant burden on the 
competition; and (iii) will not become operative for 30 days after 
the date of this filing, unless otherwise accelerated by the 
Commission. The Commission is waiving the five business day notice 
requirement as permitted by Rule 19b-4(f)(6) under the Act. Id. The 
Commission notes that the Exchange has requested that the Commission 
accelerate the operative date of the rule change to permit the 
Exchange to apply it to the January FOCUS Reports, which are due on 
or before February 24, 2000. Amendment No. 1 also confirmed 
information about security-related protections built into the 
software system. See Letter from Ellen Neely, Vice President and 
General Counsel, CHX, to Melinda Diller, Attorney, Division of 
Market Regulation (``Division''), Commission dated February 15, 2000 
(``Amendment No. 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 its rules to codify the CHX 
requirement that certain financial and operational reports be filed 
with the Exchange electronically, utilizing software provided by the 
Exchange for this purpose. Specifically, the CHX proposed to add 
Interpretation and Policy .03 to Article XI, Rule 4 of the Exchange's 
rules. The text of the proposed rule change is available at 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 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 Exchange's rules currently require members and member 
organizations to file with the Exchange, or to arrange for the timely 
submission to their designated examining authority (``DEA''), financial 
and operational reports (``FOCUS'' Reports'') pursuant to the 
provisions of Article XI, Rule 3 of the CHX Rules.\4\
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    \4\See 17 CFR 240.17a-5.
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    In 1999, the Exchange licensed software, and provided it to those 
CHX members for which the CHX acts as the DEA to permit these members 
to file their monthly and quarterly FOCUS Reports electronically. 
Specifically, the Exchange licensed the use of the WINJAMMERTM 
software developed by the Chicago Mercantile Exchange. Members install 
the software on a personal computer and enter the required FOCUS Report 
information. Members then send this information to the Exchange as a 
password-protected attachment to an e-mail message. The program 
contains an additional encryption tool to allow the Exchange to verify 
the authenticity of the sender. The Exchange believes that these 
precautions provide adequate protection to Exchange members in their 
filing of FOCUS Reports.\5\
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    \5\See Amendment No. 1, supra note 3.
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    Because these electronically-filed reports are much easier to file 
and maintain, most member firms immediately chose to file their FOCUS 
Reports electronically.\6\ The CHX is proposing this rule change to 
require that FOCUS Reports be filed electronically by all members for 
which the CHX acts as the DEA, to take advantage of the increased 
efficiency and the decreased errors associated with electronic filing. 
The proposed rule change would require the electronic filing of FOCUS 
beginning with the January 2000 FOCUS Reports, which are due on or 
before February 24, 2000. The Exchange represents that all members 
affected by this change have been notified that electronic filing of 
FOCUS Reports will be required.\7\ Because the Exchange has provided 
affected members with the necessary software and systems support to 
commence electronic filing, the Exchange believes that no affected 
member or member organization will sustain any burden as a result of 
this requirement. To the contrary, the Exchange believes that 
electronic filing of FOCUS Reports constitutes a long-awaited 
convenience.
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    \6\The Exchange represents that for the month of December 1999, 
82 members filed FOCUS Reports with the CHX. Of those 82 members, 64 
(78%) filed electronically, 18 (22%) filed manually. However, CHX is 
no longer the DEA for 4 of those members that filed their December 
1999 FOCUS Reports manually. Therefore, 14 members (17%) of the CHX 
would be affected by this proposed rule change. Voice Mail Message 
from Ellen Neely, Vice President and General Counsel, CHX, to 
Melinda Diller, Attorney, Division of Market Regulation, Commission, 
on February 14, 2000.
    \7\The Exchange represented to the Commission that a memo was 
sent to all firms for which the CHX acts as DEA on October 22, 1999, 
detailing the licensing agreement for the software and stating that 
the Exchange was proposing to make electronic filing a requirement 
beginning with the January 2000 FOCUS Reports. The Exchange also 
represented that it subsequently reiterated the proposed change 
through telephone conversations the Exchange conducted with the 
members affected by the change and during this inspections and 
testing of the software. Telephone conversation between Ellen J. 
Neeley, Vice President and General Counsel, CHX, and Melinda R. 
Diller, Attorney, Division of Market Regulation, Commission, on 
February 17, 2000.
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2. Statutory Basis
    For these reasons, the Exchange believes the proposed rule is 
consistent with the requirements of the Act and the rules and 
regulations thereunder that are applicable to a national securities 
exchange, and, in particular, with the requirements of Section 6(b) of 
the Act.\8\ In particular, the Exchange believes that that the proposed 
rule is consistent with Section 6(b)(5) of the Act/\9\ in that it is 
designed to promote just and equitable principles of trade, to remove 
impediments to and to perfect the mechanism of a free and open market 
and a national market system, and, in general, the protect investors 
and the public interest.
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    \8\15 U.S.C. 78f.
    \9\15 U.S.C. 78f(b)(5).

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[[Page 11353]]

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition 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 neither solicited nor received written comments with 
respect to the proposed rule change.

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

    This proposed rule filing has been filed by the Exchange as a 
``non-controversial'' rule change pursuant to Section 19(b)(3)(A) of 
the Act\10\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\11\ 
Because the foregoing proposed rule change: (1) Does not significantly 
affect the protection of investors or the public interest, (2) does not 
impose any significant burden on competition, (3) by its terms does not 
become operative for 30 days after the date of filing, or such shorter 
time as the Commission may designate, and (4) the Commission is waiving 
the required written notice of intent to file the proposed rule change 
at least five days prior to the filing date, it has become effective 
pursuant to Section 19(b)(3)(A) of the Act\12\ and Rule 19b-4(f)(6) 
thereunder.\13\
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    \10\15 U.S.C. 78s(b)(3)(A).
    \11\17 CFR 240.19b-4(f)(6).
    \12\15 U.S.C. 78s(b)(3)(A).
    \13\17 CFR 240.19b-4(f)(6).
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    The Commission has determined, consistent with the protection of 
investors and the public interest, to make the proposed rule change 
operative upon filing, pursuant to Section 19(b)(3)(A) of the Act and 
Rule 19b-4(f)(6)(iii).\14\ Under Rule 19b-4(f)(6)(iii), a proposed 
``non-controversial'' rule change does not become operative for 30 days 
after the date of filing, unless the Commission designates a shorter 
time.\15\ The Commission believes that it is consistent with the 
protection of investors and the public interest to make the proposed 
rule change operative upon filing because: (1) Members were notified in 
October that the Exchange would propose that the electronic filing 
requirement become effective beginning with the filing of the January 
2000 FOCUS Reports, (2) the Exchange provided the necessary software 
for electronic filing, and (3) the purpose of the electronic filing 
requirement is to facilitate the filing process for members.
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    \14\17 CFR 240.19b-4(f)(6)(iii).
    \15\Id.
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    At any time within 60 days of the filing of the amended proposed 
rule change, the Commission may summarily abrogate such rule 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.\16\
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    \16\In approving this rule change, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, is consistent with the Act. Persons making written 
submissions should file six copies thereof with the Secretary, 
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, 
D.C. 20549-0609. Copies of the submission, all subsequent amendments, 
all written statements with respect to the amended 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 in the Commission's Public Reference Room. 
Copies of such filing also will be available for inspection and copying 
at the principal office of the CHX. All submissions should refer to 
File No. SR-CHX-00-01 and should be submitted by March 23, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-5062 Filed 3-1-00; 8:45 am]
BILLING CODE 8010-01-M