[Federal Register Volume 66, Number 226 (Friday, November 23, 2001)]
[Notices]
[Pages 58768-58769]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-29250]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45062; File No. SR-CHX-2001-21]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 by the 
Chicago Stock Exchange, Incorporated To Extend a Pilot Rule 
Interpretation Relating to Trading of Nasdaq/NM Securities in Subpenny 
Increments

November 15, 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 October 30, 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. On 
November 6, 2001, the Exchange filed an amendment that completely 
replaces and supersedes the original proposal.\3\ The Exchange filed 
the proposal pursuant to section 19(b)(3)(A) of the Act,\4\ and Rule 
19b-4(f)(6) \5\ thereunder, which renders the proposal effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See October 31, 2001 letter from Kathleen M. Boege, 
Associate General Counsel, CHX, to Alton S. Harvey, Division of 
Market Regulation (``Division''), Commission and attachments 
(``Amendment No. 1'') See November 13, 2001 telephone conversation 
between Kathleen M. Boege, CHX, and Joseph Morra, Special Counsel, 
Division, Commission.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6). The Commission waived the 5-day pre-
filing notice requirement.
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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 January 14, 2002, the pilot 
rule interpretation relating to the trading of

[[Page 58769]]

Nasdaq/NM securities in subpenny increments. The pilot is due to expire 
on November 5, 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 January 14, 2002. The text of 
the proposal 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 pilot rule interpretation (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 limit 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 was later extended through November 5, 2001.\7\ The CHX now 
proposes to extend the pilot through January 14, 2002. The CHX proposes 
no other changes to the pilot, other than extending it through January 
14, 2002.
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    \6\ See Securities Exchange Act Release No. 44164 (April 6, 
2001), 66 FR 19263 (April 13, 2001) (SR-CHX-2002-07).
    \7\ See Securities Exchange Act Release No. 44535 (July 10, 
2001), 66 FR 37251 (July 17, 2001 (SR-CHX-2001-15).
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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\ In particular, 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 to designate the 
proposal both effective and operative upon filing with the Commission 
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 January 14, 2002, 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-2001-21 and should be 
submitted by December 14, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
Margaret H. McFarland,
Deputy Secretary.
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    \13\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 01-29250 Filed 11-21-01; 8:45 am]
BILLING CODE 8010-01-M