[Federal Register Volume 66, Number 14 (Monday, January 22, 2001)]
[Notices]
[Pages 6718-6719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-1749]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43835; File No. SR-CHX-00-31]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Stock Exchange, Incorporated Relating to 
Preopening Orders

January 11, 2001.
    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 October 18, 2000, the Chicago Stock Exchange, Incorporated 
(``Exchange'' or ``CHX'') 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 CHX. On December 20, 2000, the Phlx filed Amendment No. 
1 to the proposed rule change.\3\ The Commission is published this 
notice to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Kathleen M. Boege, Associate General 
Counsel, CHX, to Nancy, J. Sanow, Assistant Director, Division of 
Market Regulation, Commission, dated December 20, 2000 (``Amendment 
No. 1''). In Amendment No. 1, the CHX clarified the rule text to 
reflect that the 8:25 a.m. cutoff time for preopening orders is 
``Central Time''.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the CHX rule governing preopening 
orders in Nasdaq/NM securities to explicitly define ``preopening 
orders'' in Nasdaq/NM securities, and to explicitly provide for a 
single price opening at or better than the NBBO at the first unlocked, 
uncrossed market.
    Below is the text of the proposed rule change. Proposed new 
language is in italics  and proposed deletions are in brackets.
* * * * *

[[Page 6719]]

Chicago Stock Exchange Rules

Article XX, Rule 37(a)

* * * * *
    4. Preopenings. Preopening orders in Dual Trading System issues 
must be accepted and filled at the primary market opening trade price. 
In trading halt situations occurring in the primary market, orders will 
be executed based upon the reopening price. Preopening orders in 
NASDAQ/NM securities must be accepted and filled [at the Exchange 
opening trade price] on a single price opening at or better than the 
NBBO at the first unlocked, uncrossed market. In trading halt 
situations, order will be executed based on the Exchange reopening 
price. For purposes of this rule, (a) pre-opening orders in Dual 
Trading System Issues are orders that are received before a primary 
market opens a subject security based on a print or based on a quote 
and (b) preopening orders in NASDAQ/NM securities are orders received 
at or prior to 8:25 a.m. (Central Time) on the date of the opening.
* * * * *

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 concerns it received on 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 of, the Proposed Rule Change

1. Purpose
    The Exchange proposed to amend the CHX rule governing preopening 
orders in Nasdaq/NM securities to provide for additional clarity 
regarding the types of orders eligible for treatment as preopening 
orders and te price at which such orders will be filled. Because 
Article XX, Rule 37(a)(4) of the Exchange's rules does not explicitly 
define what constitutes a preopening order in the case of Nasdaq/NM 
securities, there has been some confusion as to which orders are 
eligible for treatment as preopening orders, and consequently, some 
unintended execution guarantees. The proposed rule change will 
expressly provide that for an order to be considered a preopening 
order, an order must be received at or prior to 8:25 a.m. (Central 
Time) of the date of the opening.
    The Exchange also proposed to provide additional clarity regarding 
the price at which each preopening order will be filled. Currently, the 
rule provides that preopening orders for Nasdaq/NM securities must be 
filled ``at the Exchange opening trade price.'' The Exchange believes 
that it is in the best interest of its order-sending firms and their 
customers to provide for greater specificity as to the parameters 
governing the fill price for preopening orders. Accordingly, the 
proposed rule change provides that each preopening order must be filled 
``on a single price opening at or better than the NBBO at the first 
unlocked, uncrossed market.''
2. Statutory Basis
    The proposed rule change 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).\4\ In particular, the proposed rule is consistent with 
Section 6(b)(5) 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.\5\
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on 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 on 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

    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 (ii) 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. 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 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 
CHX. All submissions should refer to File No. SR-CHX-00-31 and should 
be submitted by February 12, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jonathan G. Katz,
Secretary.
[FR Doc. 01-1749 Filed 1-19-01; 8:45 am]
BILLING CODE 8010-01-M