[Federal Register Volume 67, Number 13 (Friday, January 18, 2002)]
[Notices]
[Pages 2711-2712]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-1355]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45268; File No. SR-CHX-2001-24]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Stock Exchange, Inc. Relating to Pricing of 
Preopening Orders for Nasdaq/NM Securities

January 11, 2002.
    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 November 14, 2001, the Chicago Stock Exchange, Inc. (``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 CHX. 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 Article XX, rule 37(a)(4) of the CHX 
Rules, which governs, among other things, pricing of preopening orders 
for Nasdaq/NM securities. The text of the proposed rule change is as 
follows. New text is italicized. Deleted text is bracketed.
    RULE 37.
    (a) No change to text.
    1-3. No change to text.
    4. Preopenings. Preopening orders in Dual Trading System issues 
must be accepted and filled at the primary market opening trade price. 
In trading halt situations occurring in the primary market, orders will 
be executed based upon the reopening price. Preopening orders in 
NASDAQ/NM securities must be accepted and filled [on a single price 
opening at or better than the NBBO] at or better than the first 
unlocked, uncrossed bid (for a sell order or offer (for a buy order) in 
the Nasdaq market. In trading halt situations, orders will be executed 
at or better than the first unlocked uncrossed bid or offer in the 
Nasdaq market after reopening. For purposes of this rule, (a) pre-
opening orders in Dual Trading System Issues are orders that are 
received before a primary market opens a subject security based on a 
print or based on a quote and (b) preopening orders in NASDAQ/NM 
securities are orders received at or prior to 8:25 a.m. (Central Time) 
on the date of the opening.
* * * * *

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 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
    The Exchange proposes to amend Article XX, rule 37(a)(4) of the CHX 
Rules, which governs, among other things, pricing of preopening orders 
for Nasdaq/NM securities. The proposed rule change would eliminate 
reference to a single price opening for such preopening orders. The 
amended rule would provide that opening prices would instead be 
determined based on the first unlocked, uncrossed bid and offer in the 
Nasdaq market. This standard would apply to both preopening orders and 
to orders executed at the opening following a trading halt.
    The rule change is being proposed in response to changing practices 
in the Nasdaq market relating to calculation of opening prices. The 
vast majority of the Exchange's competitors in the Nasdaq market now 
calculate opening prices in a manner consistent with the proposed rule 
change. The Exchange believes that this rule change is not only in line 
with market custom and practice, but is also responsive to customer 
preferences. Moreover, this rule change could incentivize specialists 
to provide greater price improvement intraday, thereby improving 
execution quality statistics, to the ultimate benefit of investors in 
Nasdaq/NM securities.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act \3\ in general, and furthers the 
objectives of Section 6(b)(5) \4\ in particular, 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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    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange represents that the proposed rule change will impose 
no burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange neither solicited nor received written comments with 
respect to the proposed rule change.

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 self-regulatory organization consents, the Commission will:
    A. By order approve the proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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

[[Page 2712]]

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 at 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 No. SR-CHX-2001-24 and should be 
submitted by February 8, 2002.

    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. 02-1355 Filed 1-17-02; 8:45 am]
BILLING CODE 8010-01-M