[Federal Register Volume 65, Number 166 (Friday, August 25, 2000)]
[Notices]
[Pages 51886-51887]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-21745]



[[Page 51886]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43175; File No. SR-CHX-00-24]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the Chicago 
Stock Exchange, Inc., Relating to the Exchange's SuperMAX Plus Price 
Improvement Program and Amendment No. 1 Thereto

August 18, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder \2\ notice hereby is given that 
on July 21, 2000, the Chicago Stock Exchange, Inc. (``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 August 8, 2000, the Exchange filed Amendment No. 1 to the 
proposal.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Ellen J. Neely, Vice President and General 
Counsel, CHX, to Jennifer Colihan, Attorney, Division of Market 
Regulation, Commission, dated August 7, 2000. (``Amendment No. 1'') 
In Amendment No. 1, the Exchange revised the proposed rule language 
for clarity. No substantive changes were made.
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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 the current CHX rule governing its 
SuperMAX Plus price improvement program. Specifically, the Exchange 
proposes to amend Article XX, Rule 37(d) to provide for additional 
price improvement opportunities, by deleting the requirement that the 
last primary market sale be at least \1/16\th of a point 
away from the ITS Best Bid or Offer (``ITS BBO''). The text of the 
proposed rule change is available upon request from the Commission or 
the CHX.\4\
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    \4\ Certain provisions of Article XX, Rule 37(d) are the subject 
of a CHX submission currently pending before the Commission as part 
of the CHX's decimalization-related rule filings. See SR-CHX-00-22 
(filed July 17, 2000).
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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
    On May 22, 1995, the Commission approved a proposed CHX rule change 
that allows specialists on the Exchange, through the Exchange's MAX 
system, to provide order execution guarantees that are more favorable 
than those required under CHX Rule 37(a), Article XX.\5\ That approval 
order contemplated that the CHX would file with the Commission specific 
modifications to the parameters of MAX that are required to implement 
various options under this new rule.
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    \5\ See Securities Exchange Act Release No. 35753 (May 22, 
1995), 60 FR 28007 (May 26, 1995) (File No. SR-CHX-95-08).
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    SuperMAX, Enhanced SuperMAX, SuperMAX Plus and Derivative SuperMAX 
are four existing CHX programs within the MAX system that use 
computerized algorithms to provide automated price improvement.\6\ The 
primary purpose of this proposed rule change is to increase the number 
of orders that are eligible for SuperMAX Plus price improvement.
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    \6\ Each of these price improvement programs has been approved 
by the Commission on a permanent basis. See Securities Exchange Act 
Release Nos. 40017 (May 20, 1998), 63 FR 29277 (May 28, 1998); 40235 
(July 17, 1998), 63 FR 40147 (July 27, 1998) (File No. SR-CHX-98-9) 
(orders approving revised SuperMAX and Enhanced SuperMAX 
algorithms); 41480 (June 4, 1999), 64 FR 32570 (June 17, 1999) 
(order approving revised SuperMAX Plus algorithm); and 42565 (March 
22, 2000), 65 FR 16442 (March 28, 2000) (order approving Derivative 
SuperMAX algorithm).
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    The Exchange believes that it is important to remain competitive by 
increasing, where possible, opportunities for price improvement and by 
responding in a swift and meaningful fashion to the price improvement 
considerations articulated by the Exchange's order sending firms and 
their customers. To this end, the Exchange proposes the following 
change to its SuperMAX Plus price improvement program.
    Under the current version of SuperMAX Plus, agency market orders of 
100-199 shares for Dual Trading System issues \7\ are eligible for 
automatic price improvement of \1/16\th of a point if: (a) The spread 
between the ITS Best Bid and ITS Best Offer is \1/8\th of a point or 
greater; and (b) the last primary market sale is at least \1/16\th of a 
point away from the ITS Best Bid or Offer (``BBO''). The proposal would 
delete the conditions relating to last primary market sales and thereby 
increase the number of orders eligible for price improvement.\8\
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    \7\ Dual Trading System issues are issues that are traded on the 
Chicago Stock Exchange and either the New York Stock Exchange or the 
American Stock Exchange.
    \8\ After this change, the SuperMAX Plus algorithm would provide 
equivalent levels of price improvement for Dual Trading System and 
Nasdaq/NM issues. Nasdaq/NM issues are already entitled to price 
improvement under this algorithm if the spread between the National 
Best Bid and National Best Offer is \1/8\th of a point or greater, 
without reference to the last sale in another market.
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    If approved, the amended SuperMAX Plus algorithm would become 
operative when systems changes are implemented in late August or early 
September. The Exchange will announce the effective date of this new 
algorithm in a Notice to Members.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b)(5) \9\ of 
the Act 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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    \9\ 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

    Written comments were neither solicited nor received.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing including whether the proposal is 
consistent with the Act. Persons making written submission 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 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

[[Page 51887]]

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 filings will also be available for 
inspection and copying at the principal office of the Exchange. All 
submissions should refer to File No. SR-CHX-00-24 and should be 
submitted by September 15, 2000.

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

    The Exchange believes the accelerated implementation of the amended 
SuperMAX Plus algorithm will insure to the benefit of investors by 
providing a greater number of investors with an enhanced opportunity 
for price improvement, and has therefore requested that the Commission 
grant accelerated approval of the proposed rule change. After careful 
review, the Commission finds that the proposed rule change is 
consistent with the Act and the rules and regulations under the Act 
applicable to a national securities exchange,\10\ and that accelerated 
approval is appropriate.
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    \10\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation.
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    Specifically, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act \11\ which requires, among 
other things, that the rules of an exchange be designed to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, 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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    \11\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed SuperMax Plus price 
improvement algorithm will provide investors with enhanced investment 
opportunities because price improvement from the ITS BBO will be 
available regardless of the last primary market sale price in both Dual 
Trading System issues and Nasdaq NM securities. The Commission notes 
that while SuperMax Plus is a voluntary program that specialists choose 
to participate in, providing a greater number of investors an 
opportunity to achieve price improvement is compatible with the views 
expressed in the Order Handling Release.\12\ Because price improvement 
should encourage small investor participation in the securities market 
without sacrificing investor protection and the public interest, the 
Commission finds good cause for approving the proposed rule change 
prior to the thirtieth day after the date of publication of notice 
thereof in the Federal Register.
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    \12\ See Securities Exchange Release No. 37619A (September 6, 
1996), FR 48290 (September 12, 1996).
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    It Is Therefore Ordered, pursuant to Section 19(b)(2) \13\ of the 
Act that the proposed rule change (SR-CHX-00-24) be, and hereby is, 
approved.
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    \13\ 15 U.S.C. 78s(b)(2).

    For Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-21745 Filed 8-24-00; 8:45 am]
BILLING CODE 8010-01-M