[Federal Register Volume 66, Number 130 (Friday, July 6, 2001)]
[Notices]
[Pages 35684-35685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-16884]



[[Page 35684]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44488; File No. SR-CHX-2001-13]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Stock Exchange, 
Incorporated To Extend Pilot Rules for Decimals

June 28, 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 June 26, 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 Exchange 
filed the proposal pursuant to Section 19(b)(3)(A) of the Act,\3\ and 
Rule 19b-4(f)(6)\4\ thereunder, which renders the proposal effective 
upon filing with the Commission.\5\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6)
    \5\ The Exchange provided the Commission with written notice of 
its intent to file the proposal on June 15, 2001, pursuant to Rule 
19b-4(f)(6). 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Term of 
Substance of the Proposal

    The Exchange proposes to extend through November 5, 2001 the pilot 
rule changes amending certain CHX rules that were impacted by the 
securities industry transition to a decimal pricing environment. the 
pilot currently is due to expire on July 9, 2001. The CHX does not 
propose to make any substantive changes to the pilot; the only change 
is an extension of the pilot's expiration date through November 5, 
2001.\6\ The text of the proposed rule change is available at the 
Commission and at the CHX.
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    \6\ Telephone conservation between Kathleen M. Boege, Associate 
General Counsel, CHX, and Joseph P. Morra, Special Counsel, Division 
of Market Regulation, SEC, June 28, 2001.
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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 CHX included statements 
concerning the purpose of and basis for its proposal and discussed any 
comments it received regarding the proposal. The text of these 
statements may be examined at the places specified in Item IV below. 
The CHX has prepared summaries, set for in Section 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 August 24, 2000, the Commission approved, on a pilot basis 
through February 28, 2001, changes proposed by the Exchange to amend 
certain CHX rules that would be impacted by the securities industry 
transition to a decimal pricing environment.\7\ Following one extension 
of the pilot through July 9, 2001,\8\ the Exchange now requests an 
extension of the same pilot through November 5, 2001.\9\
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    \7\ See Securities Exchange Act Release No. 43204 (August 24, 
2000), 65 FR 53065 (August 31, 2000)(SR-CHX-00-22).
    \8\ See Securities Exchange Act Release No. 43874 (February 16, 
2001), 66 FR 11621 (February 26, 2001)(SR-CHX-2001)(SR-CHX-03).
    \9\ As noted above, in February, 2001, the CHX extended the 
effective date of its decimal-related pilot rules through July 9, 
2001, the date by which national securities exchanges and the 
National Association of Securities Dealers, Inc. were required to 
submit their rule filings to establish minimum price variations for 
the quoting of equity securities or options. See Securities Exchange 
Act Release No. 42914 (June 8, 2000), 65 FR 38010 (June 19, 2000). 
These rule filings were scheduled to follow the submission of 
studies by each market that describe the impact of decimalization on 
trading behavior, capacity and liquidity and that likely would offer 
insights into any other rule changes that would be necessary to 
maintain fair and orderly markets. The Commission subsequently 
extended the dates by which both these studies and related rule 
filings must be submitted. See Securities Exchange Act Release No. 
44336 (May 22, 2001), 66 FR 29368 (May 30, 2001). The Exchange is 
now requesting that its decimalization-related pilot rules be 
extended through November 5, 2001, the new date for filing of 
exchange rule changes.
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    The pilot for which the Exchange seeks an extension amended certain 
CHX rules that were impacted by the securities industry transition to a 
decimal pricing environment. Specifically, the exchange proposed 
continued pilot approval of these groups of changes to CHX Article II, 
rule 37, which would (1) allow specialists to elect, on an issue by 
issue basis, to either manually or automatically execute limit orders 
when a trade-through occurs in the primary market; (2) remove the 
``pending auto-stop'' functionality in the Exchange's systems; and (3) 
allow a specialist, on an issue by issue basis, to establish an auto 
execution guarantee that is not dependent on the ITS Best Bid or Offer 
(``ITS BBO'') or National Best bid or Offer (``NBBO'') size, The 
Exchange believes that decimal pricing is likely to continue to affect 
the CHX trading environment, and the interaction between the CHX and 
the national market system, in a manner that necessitates extension of 
these pilot rule amendments, that are designed to minimize the adverse 
impact of decimalization on trading operations.\10\
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    \10\ This submission does not concern ``typographical'' 
amendments to CHX rules, where the sole change that was proposed by 
the Exchange was the substitution of a decimal price increment for 
the fractional price increment set forth in certain CHX rules. The 
proposed ``typographical'' amendments were the subject of a separate 
submission previously approved by the Commission on a permanent 
basis. See Securities Exchange Act Release No. 43256 (September 6, 
2000), 65 FR 55659 (September 14, 2000).
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2. Statutory Basis
    The CHX believes the proposal 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).\11\ The CHX believes the proposal is 
consistent with Section 6(b)(5) of the Act\12\ 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) Impose any significant burden on competition; and
    (iii) Become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \13\ and 
Rule 19b-4(f)(6)

[[Page 35685]]

thereunder.\14\ 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 Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furthermore of the purposes of the Act.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
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    The Exchange has requested that the Commission accelerate the 
operative date. The Commission finds good cause to designate the 
proposal to become operative immediately because such designation is 
consistent with the protection of investors and the public interest. 
Acceleration of the operative date will allow the pilot to continue 
uninterrupted through November 5, 2001, the deadline for which self-
regulatory organizations must file proposed rule changes to set the 
minimum price variation for quoting in a decimals environment. For 
these reasons, the Commission finds good cause to designate that the 
proposal is both effective and operative upon filing with the 
Commission.\15\
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    \15\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule'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 proposal is 
consistent with the Act. Persons making written submissions should file 
six copies thereof with the Secretary, Security and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Copies of 
the submission 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 number SR-CHX-2001-13 and should be 
submitted by July 27, 2001.
    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).

Jonathan G. Katz,
Secretary.
[FR Doc. 01-16884 Filed 7-5-01; 8:45 am]
BILLING CODE 8010-01-M