[Federal Register Volume 65, Number 43 (Friday, March 3, 2000)]
[Notices]
[Pages 11619-11620]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-5184]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42459; File No. SR-CHX-99-28]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Stock Exchange, Incorporated To Delete Certain 
Exchange Provisions That Prohibit Off-Floor Transactions by Exchange 
Members

February 25, 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 December 27, 1999, the Chicago Stock Exchange, Incorporated 
(``Exchange'' or ``CHX'') 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The Exchange's proposed rule change raises issues similar to those 
raised by the New York Stock Exchange's (``NYSE'') proposal to repeal 
NYSE Rule 390, which rule generally prohibits NYSE members and their 
affiliates from effecting transactions in certain NYSE-listed 
securities away from a national securities exchange. The Commission 
recently issued the notice of filing for the NYSE's proposal (``NYSE 
Notice'') and solicited comment on a number of important issues that 
have broad implications for the structure of the U.S. securities 
markets. \3\ Specifically, the

[[Page 11620]]

Commission requested comment on market fragmentation--the trading of 
orders in multiple locations without interaction among those orders--
and on several options for addressing market fragmentation. To promote 
a comprehensive discussion of off-board trading restrictions and 
related market fragmentation issues, the Commission requests that 
persons interested in the Exchange's proposal refer to the NYSE Notice 
and submit comments that respond to the questions presented in the NYSE 
Notice.\4\
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    \3\ See Securities Exchange Act Release No. 42450 (Feb. 23, 
2000) (File No. SR-NYSE-99-48). The Commission notes that similar 
proposals have been filed by the American Stock Exchange and the 
Philadelphia Stock Exchange. See Securities Exchange Act Release 
Nos. 42460 (Feb. 25, 2000) (File No. SR-Amex-00-05) and 42458 (Feb. 
25, 2000) (File No. SR-Phlix-00-12).
    \4\ The Commission notes that the NYSE Notice is available on 
the Commission's website at: (http://www.sec.gov/rules/sros/ny9948n.htm).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange seeks to delete provisions in Article VIII, Exchange 
rule 9, ``Transactions Off the Floor,'' that restrict off-floor 
transactions by Exchange members. The text of the proposed rule change 
is available at the Exchange and at the Commission.

II. Self-Reuglatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commisison, 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
    In December 1999, the NYSE proposed to repeal NYSE Rule 390, which 
restricts NYSE members from effecting certain off-floor transactions in 
specific securities (``19c-3 securities''). Furthermore, on December 9, 
1999, the Commission adopted amendments to the Intermarket Trading 
System Plan (``ITS Plan'') to expand the ITS linkage with the NASD's 
Computer Assisted Execution System to all listed securities, including 
19c-3 securities.\5\ The ITS Plan amendment became effective on 
February 14, 2000. To confirm the Exchange's commitment to the 
competitive ideals on which those actions are based, the Exchange 
believes it is appropriate to delete portions of Article VIII, Exchange 
Rule 9 to remove any restrictions that might potentially limit a 
member's ability to engage in certain off-floor transactions.
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    \5\ See Securities Exchange Act Release No. 42212 (Dec. 9, 
1999), 64 FR 70297 (Dec. 16, 1999).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(5) of the Act \6\ in that it is designed to promote 
just and equitable principles of trade, remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, protect investors and the public interest.
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    \6\ 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 proposed rule change will 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 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 (i) as to 
which the Exchange 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, including whether the proposed rule 
change is consistent with the Act. The Commission also invites 
interested persons to submit written data, views, and arguments on the 
market fragmentation issues presented in the NYSE Notice. \7\ Persons 
making written submissions should file six 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 communications relating to the proposed rule 
change between the Commission and any persons, 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 Section, 450 Fifth Street, NW, 
Washington, DC 20549-0609. 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-99-28 and should be 
submitted by March 24, 2000. Comments responding to the Commission's 
request for comment on market fragmentation issues should refer to File 
No. SR-NYSE-99-48 and should be submitted by April 28, 2000.
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    \7\ See supra notes 3 and 4.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.20-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 00-5184 Filed 3-2-00; 8:45 am]
BILLING CODE 8010-01-M