[Federal Register Volume 66, Number 53 (Monday, March 19, 2001)]
[Notices]
[Pages 15514-15515]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6666]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44062; File No. SR-CHX-00-31]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the Chicago Stock Exchange, Incorporated Relating to 
Preopening Orders

March 12, 2001.

I. Introduction

    On October 18, 2000, the Chicago Stock Exchange, Incorporated 
(``Exchange'' or ``CHX''), filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission''), pursuant to section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend the CHX rule governing 
preopening orders in Nasdaq/NM securities \3\ 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. On December 20, 2000, the CHX filed 
Amendment No. 1 to the proposed rule change.\4\ The proposed rule 
change was published in the Federal Register on January 22, 2001.\5\ No 
comments were received on the proposal. This order approves the 
proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See CHX Article XX, Rule 37(a)(4).
    \4\ In Amendment No. 1, the CHX clarified the proposed rule text 
to reflect that the 8:25 a.m. cutoff time for preopening orders is 
``Central Time.'' 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'').
    \5\ See Securities Exchange Act Release No. 43835 (January 11, 
2001), 66 FR 6718.
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II. Description of the Proposed Rule Change

    The Exchange proposes 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 the price at which such orders will be filled. The Exchange 
represents that 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 proposes 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.''

III. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\6\ 
In particular, the Commission believes that the proposal is consistent 
with section 6(b)(5) of the Act,\7\ which requires, among other things, 
that the rules of an exchange be designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market,

[[Page 15515]]

and to protect investors and the public interest.
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    \6\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78(c)(f).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the Exchange's amendments to its rule 
governing preopening orders provides greater clarity and alleviates 
some confusion for investors as to what constitutes ``preopening 
orders'' in Nasdaq/NM securities and how such orders are priced. The 
CHX proposal explicitly defines preopening orders in Nasdaq/NM 
securities as those orders received at or prior to 8:25 a.m. (Central 
Time) on the date of the opening. The CHX proposal also specifies that 
each preopening order must be filled on a single price opening at or 
better than the NBBO at the first unlocked, uncrossed market.
    The Commission finds that the Exchange's proposed rule change is 
consistent with the Act because 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 to protect investors and the 
public interest, by providing more specificity and clarity for order-
sending firms and their customers regarding its rule governing 
preopening orders in Nasdaq/NM securities.

IV. Conclusion

    For the foregoing reasons, the Commission finds that the CHX's 
proposal to amend its rule governing preopening orders in Nasdaq/NM 
securities, as amended, is consistent with the requirements of the Act 
and rules and regulations thereunder.
    It is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-CHX-00-31), is approved.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-6666 Filed 3-16-01; 8:45 am]
BILLING CODE 8010-01-M