[Federal Register Volume 66, Number 57 (Friday, March 23, 2001)]
[Notices]
[Pages 16304-16306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-7255]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44085; File No. SR-CHX-01-05]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Stock Exchange, Incorporated, Relating to the 
Exchange's SuperMAX 2000 Price Improvement Program

March 19, 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 March 16, 2001, 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, II 
and III 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.
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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 the CHX rules governing its 
voluntary price improvement program. Specifically, the Exchange 
proposes to amend Article XX, Rule 37(h) to reduce the determinative 
spread from $.03 to $.02, thereby increasing the opportunities for 
price improvement. The text of the proposed rule change is below. 
Additions are in italic. Deletions are in brackets.

ARTICLE XX

Regular Trading Sessions

* * * * *

Guaranteed Execution System and Midwest Automated Execution System

Rule 37
* * * * *
    (h) SuperMax 2000
    SuperMAX 2000 shall be a voluntary automatic execution program 
within the MAX System. SuperMAX 2000 shall be

[[Page 16305]]

available for any security trading on the Exchange in decimal price 
increments. A specialist may choose to enable this voluntary program 
within the MAX System on a security-by-security basis.
    (1) Pricing
    (i) In the event that an order to buy or sell at least 100 shares 
is received in a security in which SuperMAX 2000 has been enabled, such 
order shall be executed at the ITS Best Offer or NBO (for a buy order) 
or the ITS Best Bid or NBB (for a sell order) if the spread between the 
ITS Best Bid and the ITS Best Offer (or NBB and NBO, for Nasdaq/NM 
issues) in such security at the time the order is received is less than 
$.02 [.03].
    (ii) In the event that an order to buy or sell 100 shares is 
received in a security in which SuperMAX 2000 has been enabled, and the 
spread between the ITS Best Bid and the ITS Best Offer (or NBB and NBO, 
for Nasdaq/NM issues) in such security at the time the order is 
received is $.02 [.03] or greater, such order shall be executed 
(subject to the short sale rule) at a price at least $.01 lower than 
the ITS Best Offer or NBO (for a buy order) or at least $.01 higher 
than the ITS Best Bid or NBB (for a sell order).
    (iii) In the event that an order to buy or sell more than 100 
shares is received in a security in which SuperMAX 2000 has been 
enabled, such order shall be executed at the ITS Best Offer or NBO, or 
better (for a buy order) or the ITS Best Bid or NBB, or better (for a 
sell order) as the specialist may designate and as is approved by the 
Exchange.
* * * * *

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 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
    According to the CHX, the primary purpose of the proposed rule 
change is to increase the number of orders that are eligible for 
automated price improvement. To this end, the CHX proposes to amend the 
CHX rules governing its voluntary automated price improvement program, 
known as SuperMAX 2000, for issues quoting in decimal price increments. 
Specifically, the Exchange proposes to amend Article XX, Rule 37(h) to 
reduce the determinative spread from $.03 to $.02, thereby increasing 
the opportunities for price improvement.
    On December 19, 2000, the Commission approved (SR-CHX-00-37),\3\ 
implementing SuperMAX 2000, the CHX's new price improvement program, 
which will govern price improvement of all orders for issues quoting in 
decimal price increments. SuperMAX 2000 was designed to afford 
specialists the flexibility to provide a wide variety of price 
improvement alternatives, all of which will be equal to or more 
favorable than alternatives that existed previously. SuperMAX 2000 
originally provided for price improvement of at least $.01 on orders of 
100 shares where the spread between the national best bid and offer 
(``NBBO'') was $.03 or greater.
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    \3\ Securities Exchange Act Release No. 43742 (December 19, 
2000), 65 FR 83119 (December 29, 2000).
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    In assessing price improvement offered by other members of the 
securities industry, the Exchange believes that, in order to be 
competitive, its specialists must be permitted (but not obligated) to 
offer price improvement of $.01 or better where the NBBO spread is $.02 
or greater. The proposal would not impact orders for more than 100 
shares, in which case the specialist's price improvement options are 
not contingent on a determinative NBBO spread.
    The Exchange believes that the proposal will ensure that SuperMAX 
2000 provides CHX specialists with the requisite flexibility to respond 
to customer price improvement requirements in a decimal environment. 
The CHX also believes that, in a decimal trading environment, where 
spreads are anticipated to narrow significantly, the proposal will 
operate to increase the opportunities for price improvement. The 
proposal contemplates equality among order-sending firms (and their 
customers) by mandating that additional price improvement be provided 
by CHX specialists on an issue-by-issue basis; specialists would not be 
permitted to distinguish among order-sending firms when designating 
price improvement levels. Moreover, SuperMAX 2000 remains a strictly 
voluntary price improvement program; specialists who do not wish to 
participate are not obligated to enable SuperMAX 2000 for any or all 
issues traded by such specialists.
2. Statutory Basis
    The CHX believes the proposed rule change is consistent with 
Section 6(b)(5) of the Act \4\ 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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    \4\ 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 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.
    The CHX has requested accelerated approval of the proposed rule 
change. While the Commission will not grant accelerated approval at 
this time, the Commission will consider granting accelerated approval 
of the proposal at the close of an abbreviated comment period of 15 
days from the date of publication of the proposal in the Federal 
Register.

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

[[Page 16306]]

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 Exchange. All 
submissions should refer to file number SR-CHX-01-05 and should be 
submitted by April 9, 2001.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-7255 Filed 3-22-01; 8:45 am]
BILLING CODE 8010-01-M