[Federal Register Volume 66, Number 209 (Monday, October 29, 2001)]
[Notices]
[Pages 54560-54561]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-27129]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44967; File No. SR-CHX-2001-02]


Self-Regulatory Organizations; Chicago Stock Exchange; Notice of 
Filing and Order Granting Accelerated Approval of a Proposed Rule 
Change Relating to the Processing of Depository Eligible Transactions 
by Clearing Agencies Exempt From Registration and by Qualified Vendors

October 22, 2001.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 18, 2001, the 
Chicago Stock Exchange (``CHX'') filed with the Securities and Exchange 
Commission (``Commission'') and on August 31, October 10, and October 
18, 2001, amended a proposed rule change as described in Items I and II 
below, which items have been prepared primarily by the CHX. The 
Commission is publishing this notice and order to solicit comments from 
interested persons and to grant accelerated approval of the proposed 
rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

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

    The CHX is amending its rules governing the entities qualified to 
process electronic confirmations and affirmations of depository 
eligible transactions. Specifically, the CHX proposes to amend portions 
of Article XV, Rule 5 and related published interpretations and 
policies to provide that no members shall accept an order from a 
customer pursuant to an arrangement whereby payment for securities 
purchased or delivery of securities sold is to be made to or by an 
agent of the customer unless the facilities of a registered clearing 
agency, a clearing agency that is exempt from registration, or a 
qualified vendor shall be utilized for the electronic confirmation and 
affirmation of all depository eligible transactions.

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 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 CHX has prepared summaries, set forth in sections 
(A), (B), and (C) below, of the most significant aspects of these 
statements.\2\
---------------------------------------------------------------------------

    \2\ The Commission has modified the text of the summaries 
prepared by the CHX.
---------------------------------------------------------------------------

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The CHX is amending portions of Article XV, Rule 5 and related 
published interpretations and policies pertaining to the types of 
entities that may process confirmations and affirmations of depository 
eligible transactions. Under current CHX rules, CHX members may only 
accept an order from a customer pursuant to an agreement whereby 
payment for securities purchased or delivery of securities sold is to 
be made to or by an agent of the customer if that customer or its agent 
utilizes the facilities of a ``securities depository'' for comparison, 
acknowledgement, and book entry settlement of depository eligible 
transactions.\3\ CHX rules define a ``securities depository'' as a 
clearing agency registered with the Commission pursuant to section 
17A(b)(2) of the Act.
---------------------------------------------------------------------------

    \2\ CHX Rules, Article XV, Rule 5.
---------------------------------------------------------------------------

    The Depository Trust Company (``DTC'') is a clearing agency 
registered with the Commission. DTC has combined its TradeSuite family 
of institutional trade processing services with the institutional trade 
processing services offered by Thomson Financial ESG \4\ in a proposed 
joint venture, Omgeo, between The Depository Trust & Clearing 
Corporation (``DTCC''),\5\ Thomson Financial Inc.,\6\ and Interavia, 
A.G. (``Interavia'').\7\ Omgeo provides through its wholly owned 
subsidiary, Global Joint Venture Matching Services-US, LLC (``GJVMS''), 
post-trade, presettlement related services, including execution 
notification, allocation, confirmation, central matching service, 
operational and standing databases (i.e., trade enrichment), and 
communication facilities among trading parties and their settlement 
agents.
---------------------------------------------------------------------------

    \4\ Thomson Financial ESG is a division of Thomson Financial, a 
Thomson Corporation subsidiary.
    \5\ DTCC was created in 1999 as a holding company for DTC and 
the National Securities Clearing Corporation (``NSCC'').
    \6\ Thomson Financial Inc. is a wholly owned indirect subsidiary 
of Thomson Corporation. Thomson Corporation is a global electronic 
information company.
    \7\ Interavia is a Swiss corporate affiliate of Thomson 
Financial Inc.
---------------------------------------------------------------------------

    GJVMS has been granted an exemption from registration as a clearing 
agency under section 17A of the Exchange Act and thus would not 
constitute a ``securities depository'' under current CHX rules.\8\ 
Currently, GJVMS is the only U.S. provider of confirmation and 
affirmation services.
---------------------------------------------------------------------------

    \8\ Securities Exchange Act Release Nos. 44188 (April 17, 2001) 
[File No. 600-32] (order granting GJVMS an exemption from 
registration as a clearing agency) and 43540 (November 9, 2000), 65 
FR 69582 [File No. 600-32] (notice of filing of application for 
exemption from clearing agency registration).
---------------------------------------------------------------------------

    In order to permit CHX members and order sending firms to utilize 
the services of GJVMS, other exempt clearing agencies, or qualified 
vendors, several CHX rules must be amended.\9\ The CHX believes that 
use of an exempt entity or qualified vendor would not pose any threat 
to the integrity of processing depository eligible transactions given 
the significant technological and other requirements that such an 
exempt clearing agency or qualified vendor would need to satisfy under 
the proposed rule.
---------------------------------------------------------------------------

    \9\ ``Qualified vendor'' is defined by Art. XV, Rule 5 to mean a 
vendor of electronic confirmation and affirmation services that 
meets a series of specific requirements set forth in the rule.
---------------------------------------------------------------------------

    The CHX believes that the proposed rule 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)(5) in that it is designed to 
promote just and equitable principles of trade, remove impediments to, 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The CHX does not believe that the proposed rule change will impose 
any inappropriate burden on competition.

[[Page 54561]]

(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

    After careful consideration, the Commission finds that the proposal 
is consistent with section 6(b)(5) of the Act.\10\ Section 6(b)(5) of 
the Act requires that the rules of a national securities exchange 
promote just and equitable principles of trade, remove impediments to, 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest. The proposal is consistent with section 6(b)(5) because it 
will permit CHX members and order sending firms to utilize the services 
of GJVMS and other exempt clearing agencies to process depository 
eligible transactions.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice thereof in the Federal Register because approval prior to the 
thirtieth day after publication of notice will allow CHX members and 
order sending firms to be able to use the confirmation and affirmation 
services of GJVMS. Because GJVMS has received an exemption from 
registration as a clearing agency, it does not constitute a 
``securities depository'' under current CHX rules. Therefore, the CHX 
rules must be amended to allow CHX members and order sending firms to 
utilize the services of GJVMS, which is the only U.S. provider of 
confirmation and affirmation services. In addition, this rule change 
will make the CHX rule consistent with New York Stock Exchange Rule 
387, National Association of Securities Dealers Rule 11860, and 
Municipal Securities Rulemaking Board Rule G-15.

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 Section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing also will be available for 
inspection and copying at the principal office of the CHX. All 
submissions should refer to File No. SR-CHX-2001-02 and should be 
submitted by November 19, 2001.
    It Is Therefore Ordered, pursuant to section 19(b)(2) of the 
Act,\11\ that the proposed rule change (File No. SR-CHX-2001-02) be and 
hereby is approved.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(2).
    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\12\
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-27129 Filed 10-26-01; 8:45 am]
BILLING CODE 8010-01-M