[Federal Register Volume 65, Number 81 (Wednesday, April 26, 2000)]
[Notices]
[Pages 24521-24523]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-10368]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42706; File No. SR-CHX-00-09]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by The Chicago Stock Exchange, 
Inc. Relating to Operating Times of Price Improvement Programs

April 19, 2000.
    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 April 10, 2000, 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 CHX. 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 amend Article XX, rule 37 of the 
Exchange's rules to change the starting time of each of the Exchange's 
automatic price improvement programs from 8:45 a.m., Central Time to 
the beginning of the Exchange's primary trading session, which occurs 
at 8:30 a.m., Central Time. The text of the proposed rule change is as 
follows:
    Additions are italicized; deletions [bracketed]

ARTICLE XX

Regular Trading Sessions

* * * * *

Guaranteed Execution System and Midwest Automated Execution System

    Rule 37.
* * * * *
    (b) Automated Executions. The Exchange's Midwest Automated 
Execution System (the MAX System) may be used to provide an 
automated delivery and execution facility for orders that are 
eligible for execution under the Exchange's BEST Rule (Article XX, 
Rule 37(a)) and certain other orders. In the event that an order 
that is subject to the BEST Rule is sent through MAX, it shall be 
executed in accordance with the parameters of the BEST Rule and the 
following. In the event that an order that is not subject to the 
BEST Rule is sent through MAX, it shall be executed in accordance 
with the parameters of the following:
* * * * *
    (d) Super MAX Plus. Super MAX Plus shall be a voluntary 
automatic execution program within the MAX System. SuperMax Plus 
shall be available for Dual Trading System securities and Nasdaz/NM 
Securities. * * *
* * * * *
    (3) Operating Time. SuperMax Plus will operate each day that the 
Exchange is open for trading from [8:45 a.m. (C.T.)] the 
commencement of the Primary Trading Session until the close of the 
Primary Trading Session; provided, however, that preopening orders 
shall not be eligible for SuperMax Plus price improvement. * * *
* * * * *
    (e) SuperMAX. Except as provided below where SuperMAX is 
required to be enabled, SuperMAX shall be a voluntary automatic 
execution program within the MAX system. SuperMAX shall be avaiable 
for Dual Trading System securities for which SuperMAX plus has been 
enabled. In the event that SuperMAX Plus has been enabled for a 
particular Dual Trading System security and the maximum order size 
has been set at an amount that is less than 499 shares, SuperMAX 
shall be automatically enabled. * * *
* * * * *
    (2) Operating Time. SuperMAX will operate each day that the 
Exchange is open

[[Page 24522]]

for trading from [8:45 a.m. (C.T.)] the commencement of the Primary 
Trading Session until the close of the Primary Trading Session; 
provided, however, that preopening orders shall not be eligible for 
SuperMAX price improvement. * * *
* * * * *
    (f) Enhanced SuperMAX. Enhanced SuperMAX shall be a voluntary 
automatic execution program within the MAX System. Enhanced SuperMAX 
shall be available for (i) any Dual Trading System security in which 
SuperMAX Plus and SuperMAX have both been enabled, or (ii) any Dual 
Trading System security in which SuperMAX Plus has been enabled for 
499 shares or greater. * * *
* * * * *
    (3) Operating Time. Enhanced SuperMAX will operate each day that 
the Exchange is open for trading from [8:45 a.m. (C.T.)]  the 
commencement of the Primary Trading Session until the close of the 
Primary Trading Session; provided, however, the preopening orders 
shall not be eligible for Enhanced SuperMAX price improvement. * * *
* * * * *
    (g) Derivative SuperMAX. Derivative SuperMAX shall be a 
voluntary automatic execution program within the MAX System. 
Derivative SuperMAX shall be available for securities that trade on 
the Exchange in minimum price variations of \1/64\ of $1.00. A 
specialist may choose to enable this voluntary program within the 
MAX system on a security-by-security basis. If Derivative SuperMAX 
has been enabled for a particular security and the maximum order has 
been set at an amount that is less than or equal to 599 shares (or 
such greater amount designated by the specialist and approved by the 
Exchange), Derivative SuperMAX shall be automatically enabled. If 
the security is eligible for Derivative SuperMAX and the specialist 
in such security has chosen to engage Derivative SuperMAX for such 
security, all small agency market orders in that security will 
automatically be executed in accordance with the Derivative SuperMAX 
algorithm set forth below. For purposes of this subsection (g), the 
term ``small agency market order'' shall mean an agency order from 
100 shares up to and including 599 shares (or such greater amount 
designated by the specialist and approved by the Exchange).
* * * * *
    (2) Operating Time. Derivative SuperMAX will operate each day 
that the Exchange is open for trading from [8:45 a.m. (Central 
Time)] the commencement of the Primary Trading Session until the 
close of the Primary Trading Session; provided, however, that 
preopening orders shall not be eligible for Derivative SuperMAX 
price improvement. A specialist may enable or remove Derivative 
SuperMAX for a particular security only on one given day each month, 
as determined by the Exchange from time to time. Notwithstanding the 
previous sentence, during unusual market conditions, individual 
securities or all securities may be removed from Derivative SuperMAX 
with the approval of two members of the Committee on Floor 
Procedure.

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 CHX 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 CHX 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 proposes to amend Article XX, Rule 37 of the 
Exchange's rules to allow the Exchange's automatic price improvement 
programs to begin operating when CHX trading begins.\3\ The Exchange 
proposes that this change take effect on May 10, 2000.\4\
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    \3\ Preopening orders, however, would not be entitled to 
participate in these automated price improvement programs.
    \4\ Telephone conversation between Ellen J. Neely, Vice 
President and General Counsel, CHX, and Katherine England, Assistant 
Director, Division of Market Regulation, Commission, on April 17, 
2000.
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    Under the Exchange's current rules, each of the Exchange's 
automatic price improvement programs, SuperMAX, SuperMAX Plus, 
Enhanced SuperMAX and Derivative SuperMAX, become available to 
specialists at 8:45 a.m., Central Time, fifteen minutes after the 
Exchange begins trading. The Exchange believes that the proposed 
rule change, which would permit automated price improvement during 
the first fifteen minutes of trading, will enhance CHX specialists' 
efficiency by automating a previously-manual process. This change 
will permit the CHX to better complete with other market centers at 
a critical juncture in the trading day by giving its specialists the 
opportunity to provide price improvement to a greater number of 
investors. Further, the Exchange represents that the 8:45 a.m., 
Central Time was originally chosen as the starting time for the 
price improvement programs to allow the Exchange to gain experience 
with the operation of such programs before extending their 
application to the first fifteen minutes of Exchange trading, which 
are ordinarily quite busy. Now that the Exchange has gained 
experience, and seen the benefits of the continuing evolution of 
technology, the Exchange is confident that the automatic price 
improvement programs can successfully operate during the opening of 
Exchange trading.

2. Statutory Basis

    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).\5\ In particular, the proposed rule is 
consistent with section 6(b)(5) of the Act \6\ 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, to 
protect investors and the public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement of 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

    Because the foregoing proposed rule change should increase the 
CHX's ability to provide customers with price improvement, and to 
compete with other market centers, and: (1) Does not significantly 
affected the protection of investors or the public interest; (2) 
does not impose any significant burden on competition; and (3) does 
not become operative for 30 days from April 10, 2000, the date on 
which it was filed, and the Exchange provided the Commission with 
written notice of its intent to file the proposed rule change at 
least five business days prior to the filing date, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 
19b-4(f)(6) \8\ thereunder. At any time within 60 days of the filing 
of the proposed rule change, the Commission may summarily abrogate 
such rule change if it appears to the Committee that such action is 
necessary or appropriate in the public interest, for the protection 
of investor, or otherwise in the furtherance of the purposes of the 
Act.\9\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ In reviewing this proposal, the Commission has considered 
the proposal's 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 is consistent with the Act. 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 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 maybe 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 in Washington, DC. Copies of the filing will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should

[[Page 24523]]

refer to File No. SR-CHX-00-09 and should be submitted by May 17, 
2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ See 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.

[FR Doc. 00-10368 Filed 4-25-00; 8:45 am]
BILLING CODE 8010-01-M