[Federal Register Volume 67, Number 107 (Tuesday, June 4, 2002)]
[Notices]
[Pages 38531-38533]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-13868]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45988; File No. SR-CHX-2002-16]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Stock Exchange, 
Incorporated To Eliminate CHX Rule Provisions Governing Stop Order Bans

May 28, 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 May 24, 2002, 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. The Commission is publishing 
this notice to

[[Page 38532]]

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). The CHX provided the Commission 
written notice of its intent to file the proposal on November 21, 
2001. The Exchange has asked the Commission to waive the 30-day 
operative delay to allow the proposal to be effective and operative 
upon filing with the Commission.
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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 IX of the CHX Rules to 
eliminate CHX Rule 10B, which governs imposition of a stop order ban 
during periods of extraordinary market volatility. The text of the 
proposed rule change is below. Proposed deletions are in brackets.
Article IX
Trading Rules
* * * * *
[Stop Order Ban Due to Extraordinary Market Volatility
    Rule 10B. If the New York Stock Exchange (``NYSE'') institutes a 
stop and stop limit order ban pursuant to NYSE Rule 80A, no member or 
member organization shall enter any stop order or stop limit order in 
Dual Trading System issues traded both on the NYSE and the Exchange for 
the remainder of the trading day, except that a member or member 
organization may enter such a stop order or a stop limit order of 2,099 
shares or less for the account of an individual investor pursuant to 
instructions received directly from the individual investor.
* * * * *
    Interpretations and Policies:
    .01  Whenever the NYSE implements a stop order ban pursuant to NYSE 
Rule 80A, the Exchange will also ban such orders as follows:
    (i) Upon notice, from the NYSE that all new stop and stop limit 
orders in all stocks are banned for the remainder of the day (except 
for orders up to 2099 shares for the account of an individual 
investor), the Exchange will announce to its floor and MAX customers 
that a stop order ban in all Dual Trading System issues traded both on 
the NYSE and the Exchange is in effect for the remainder of the day, 
except for such orders up to the 2099 shares for the accounts of 
individual investors.
    (ii) The entry of such stop and stop limit orders (other than 
orders up to 2099 shares for the accounts of individual investors) will 
be banned on the Exchange for the remainder of the day. Such a stop or 
stop limit order received in the MAX system will be rejected and the 
message ``stop not accepted-ban in effect'' will be sent back to the 
entering firm unless the order includes the ``I'' designator, is for 
the account of an individual investor and is for 2099 shares.]
* * * * *

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
    The CHX proposes to eliminate the CHX Rule that bans the receipt of 
stop orders during periods of extraordinary market volatility (CHX 
Article IX, Rule 10B--Stop Order Ban Due to Extraordinary Market 
Volatility).
    In its current form, this CHX Rule bans acceptance or execution of 
stop orders by the CHX for the remainder of the trading day whenever 
the New York Stock Exchange (``NYSE'') implements a ``circuit breaker'' 
stop order ban pursuant to NYSE Rule 80A (and sends notice of such ban 
to the CHX).
    In 1999, the NYSE eliminated NYSE Rule 80A.\5\ Because the CHX stop 
order ban rule is contingent on a primary market ban imposed pursuant 
to NYSE Rule 80A, in effect, elimination of NYSE Rule 80A rendered the 
corresponding CHX rule superfluous. To preclude any possible confusion, 
the Exchange believes the Rule should nevertheless be formally 
eliminated from the CHX Rules.
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    \5\ See Securities Exchange Act Release No. 41041 (February 11, 
1999), 64 FR 8424 (February 19, 1999) (SR-NYSE-98-45) (order 
approving amendments to NYSE Rule 80A).
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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).\6\ In particular, the CHX believes the 
proposal is consistent with Section 6(b)(5) of the Act \7\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 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 \8\ and 
Rule 19b-4(f)(6) thereunder.\9\ 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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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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 CHX to eliminate CHX Rule 10B and the corresponding Interpretation 
and Policy from the CHX Rules immediately. The Commission finds no 
legitimate reason to delay the operation of this proposed rule change 
for 30 days. For these reasons, the Commission finds good cause to 
designate that the proposal is both effective and operative upon filing 
with the Commission.\10\
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    \10\ 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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[[Page 38533]]

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-2002-16 and should be 
submitted by June 25, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-13868 Filed 6-3-02; 8:45 am]
BILLING CODE 8010-01-P