[Federal Register Volume 66, Number 137 (Tuesday, July 17, 2001)]
[Notices]
[Pages 37251-37252]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-17766]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44535; File No. SR-CHX-2001-15]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Stock Exchange, 
Incorporated to Extend Pilot Rule Interpretation Relating to Trading of 
Nasdaq/NM Securities in Subpenny Increments

July 10, 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 July 6, 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 has asked the Commission to waive the 5-day 
pre-filing requirement and the 30-day operative delay to allow the 
proposal to be effective upon filing with the Commission. The 
Commission has agreed to do both. See Rule 19b-4(f)(6). 17 CFR 
250.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to extend through November 5, 2001 the pilot 
rule interpretation relating to the trading of Nasdaq/NM securities in 
subpenny increments. The pilot is due to expire on July 9, 2001. The 
CHX does not propose to make any substantive or typographical changes 
to the pilot; the only change is an extension of the pilot's expiration 
date through November 5, 2001. The text of the proposed rule change is 
available at the Commission and at the CHX.

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 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 April 6, 2001, the Commission approved, on a pilot basis through 
July 9, 2001, a proposed rule change (CHX Article XXX, Rule 2, 
Interpretation and Policy .06 ``Trading in Nasdaq/NM Securities in 
Subpenny Increments'')\6\ that requires a CHX specialist (including a 
market maker who holds customer limits orders) to better the price of a 
customer limit order in his book which is priced at the national best 
bid or offer (``NBBO'') by at least one penny if the specialist 
determines to trade with an incoming market or marketable limit order. 
The pilot, which was approved in conjunction with exemptive relief 
granted by the Commission to allow for trading in Nasdaq/NM securities 
in subpenny increments, is due to expire on July 9, 2001.
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    \6\ See Securities Exchange Act Release No. 44164 (April 6, 
2001), 66 FR 19263 (April 11, 2001) (SR-CHX-2001-07).
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    The Exchange is not proposing any substantive or typographical 
changes in the pilot; rather, the Exchange merely proposes that the 
pilot remain in effect through November 5, 2001.\7\
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    \7\ In February, 2001, the Commission extended the effective 
date of the Exchange's 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 Nos. 43974 (February 16, 2001), 66 FR 11621 (February 
26, 2001) (SR-CHX-2001-03) and 42914 (June 8, 2000), 65 FR 38010 
(June 19, 2001). These July 9th rule filings were scheduled to 
follow the submission of studies by each market that describe the 
impact of decimalization of 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. In a 
recent order, the Commission extended the dates by which both these 
studies and related rule filings must be submitted. See Securities 
Exchange Act Review Release No. 44336 (May 22, 2001), 66 FR 29368 
(May 30, 2001). The Exchange is now requesting that its 
decimalization-related pilot rule interpretation relating to trading 
of Nasdaq/NM securities in subpenny increments be extended through 
November 5, 2001, the new date for filing of exchange proposed rule 
changes.
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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).\8\ The CHX believes the proposal is 
consistent with Section 6(b)(5) of the Act \9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 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 \10\ and 
Rule 19b-4(f)(6) thereunder.\11\ 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 furtherance of the purposes of 
the Act.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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

[[Page 37252]]

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.\12\
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    \12\ 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, 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 number SR-CHX-2001-15 and should be 
submitted by August 7, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-17766 Filed 7-16-01; 8:45 am]
BILLING CODE 8010-01-M