[Federal Register Volume 65, Number 60 (Tuesday, March 28, 2000)]
[Notices]
[Pages 16440-16442]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-7535]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42553; File No. SR-CHX-99-30]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval to a Proposed Rule Change by the Chicago 
Stock Exchange, Incorporated, Relating to Amendments to the Exchange's 
Procedures for Market-at-the-Close Orders

March 21, 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 28, 1999, the Chicago Stock Exchange, Incorporated (``CHX'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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 and to grant accelerated 
approval to the proposed rule change.
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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 Purposed Rule Change

    The Exchange proposes to amend its procedures for the cancellation 
of Market-at-the-Close orders (``MOC orders'') under CHX Article XX, 
Rule 44. 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 III 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
    On November 10, 1998, the Commission approved a rule change that 
established formal procedures governing the entry, executions and 
cancellation of MOC orders on the CHX.\3\ Those procedures were 
designed to mirror procedures in use by the New York Stock Exchange 
(``NYSE'') and the American Stock Exchange (``AMEX'') to ensure that 
MOC orders sent to the CHX receive treatment comparable to MOC orders 
sent to the NYSE or AMEX, and to prevent the entry, execution or 
cancellation of MOC orders on the CHX that would otherwise be 
prohibited on those primary markets.
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    \3\ See Securities Exchange Act Release No. 40655 (November 10, 
1998), 63 FR 64299 (November 19, 1998)(SR-CHX-97-19).
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    As defined in CHX Article XX, Rule 44, an MOC order is a market 
order which is to be executed in its entirety at the closing price on 
the primary market of the stock named in the order, and if not so 
executed, is to be treated as cancelled. MOC orders may not be entered 
on the CHX after 2:40 p.m. (Central Time) unless the specialist 
determines that an order could have been entered on the primary market. 
This is done by monitoring published MOC order imbalances on the 
primary

[[Page 16441]]

market. Current CHX MOC order procedures also prohibit Exchange members 
from canceling MOC orders after 2:40 p.m. (Central Time) except in the 
case of a legitimate error.
    On June 9, 1999, the Commission approved an NYSE rule change 
amending NYSE's MOC (and limit-on-close) order entry and cancellation 
procedures during regulatory halts.\4\ That change amended, among other 
things, the NYSE's MOC procedures to allow market participants to 
cancel MOC orders if a regulatory halt is in effect at 2:40 p.m. 
(Central Time) or later, until 2:50 p.m. (Central Time) or the 
reopening of the stock, whichever occurs first. The Commission, on 
September 14, 1999, approved a corresponding rule change submitted by 
the AMEX.\5\
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    \4\ See Securities Exchange Act Release No. 41497 (June 9, 
1999), 64 FR 32595 (June 17, 1999) SR-NYSE-98-42).
    \5\ See Securities Exchange Act Release No. 41877 (September 14, 
1999), 64 FR 51566 (September 23, 1999) (SR-AMEX-99-32).
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    On October 20, 1999, the Commission approved an additional NYSE 
rule change concerning MOC order cancellation procedures.\6\ That 
change further amended the NYSE's MOC cancellation procedures to 
prohibit the cancellation or reduction in size of MOC orders after 2:50 
p.m. (Central Time) for any reason.
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    \6\ See Securities Exchange Act Release No. 42040 (October 20, 
1999), 64 FR 57681 (October 26, 1999) (SR-NYSE-99-26).
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    Therefore, until recently, the NYSE only allowed cancellation of 
MOC orders after 2:40 p.m. (Central Time) to correct a legitimate 
error. However, under the revised NYSE procedures, if a regulatory halt 
has been instituted for a stock at or after 2:40 p.m., NYSE members 
will be permitted to cancel MOC orders between 2:40 p.m. and 2:50 p.m. 
(Central Time) or when the stock reopens, whichever occurs first. This 
allows market participants to react to news generated during a 
regulatory halt that could result in the stock reopening at a price 
substantially different from the last sale. Furthermore, the NYSE now 
prohibits cancellation or reduction in size of MOC Orders after 2:50 
p.m. for any reason, including legitimate error.
    The CHX proposal would amend the CHX policy to allow for 
cancellations if such cancellation would be allowed on the primary 
market (i.e., if a regulatory halt has been instituted at or after 2:40 
p.m. Central Time). The proposed rule change would also prohibit 
cancellation or reduction in size of MOC orders after 2:50 p.m. for any 
reason.
    While CHX Article XX, Rule 44 by its nature can only apply to Dual 
Trading System Issues,\7\ the proposed rule change also amends the 
title of Rule 44 to explicitly state that the rule only applies to MOC 
orders in Dual Trading System Issues.
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    \7\ Dual Trading System Issues are issues that are traded on the 
CHX, either through listing on the CHX or pursuant to unlisted 
trading privileges, and are also listed on either the NYSE or AMEX.
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2. Statutory Basis
    The CHX believes that the proposed rule change is consistent with 
Section 6(b)(5) of the Act,\8\ 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.
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    \8\ 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 burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    No written comments were either solicited or received.

III. 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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., 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 in 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 number SR-CHX-99-30 and 
should be submitted by April 18, 2000.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    The Commission has reviewed carefully the Exchange's proposed rule 
change and finds, for the reasons set forth below, the proposal is 
consistent with the requirements of Section 6 of the Act \9\ and the 
rules and regulations thereunder applicable to a national securities 
exchange. Specifically, the Commission finds the proposal is consistent 
with Section 6(b)(5) of the Act \10\ because the proposal will promote 
just and equitable principles of trade, remove impediments to, and 
perfect the mechanism of a free and open market, by (1) allowing for 
cancellations of MOC orders if such cancellation would be allowed on 
the primary market; and (2) prohibiting cancellation or reduction in 
the size of MOC orders after 2:50 p.m. for any reason consistent with 
primary market requirements. The Commission also finds the proposal is 
consistent with Section 6(b)(5) of the Act \11\ because it will allow 
the Exchange to handle MOC orders in conformity with procedures in 
place on other Exchanges.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Commission finds good cause for approving the proposed rule 
change prior to the 30th day after the date of publication of notice 
thereof in the Federal Register. The Commission notes that accelerated 
approval would afford investors the benefits to be realized under this 
proposal as soon as possible. Additionally, the Commission notes that 
the proposal is similar to proposals filed by other self-regulatory 
organizations that the Commission has approved.\12\ These were noticed 
for the full 21 day comment period, and no comments were received. For 
these reasons, and because the proposal is unlikely to raise new 
issues, the Commission deems it appropriate to approve the proposed 
rule change on an accelerated basis. The Commission finds, therefore, 
that good cause exists, consistent with Section 19(b) \13\ and Section 
6(b) \14\ of the Act, to grant accelerated approval of the proposed 
rule change.
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    \12\ See footnotes 4 and 6, supra.
    \13\ 15 U.S.C. 78s(b).
    \14\ 15 U.S.C. 78f(b).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\15\ that the proposed rule change (SR-CHX-99-30) is hereby 
approved on an accelerated basis.
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    \15\ 15 U.S.C. 78s(b)(2).


[[Page 16442]]


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    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-7535 Filed 3-27-00; 8:45 am]
BILLING CODE 8010-01-M