[Federal Register Volume 67, Number 203 (Monday, October 21, 2002)]
[Notices]
[Pages 64688-64689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26688]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46633; File No. SR-OC-2002-02]


Self-Regulatory Organization; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by OneChicago, LLC Relating to 
Block Trades

October 10, 2002.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-7 under the Act,\2\ notice is hereby given 
that on September 6, 2002, OneChicago LLC (``OneChicago'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change described in Items 
I, II, and III below, which Items have been prepared by OneChicago. On 
September 30, 2002, the Exchange filed Amendment No. 1 to the proposed 
rule change.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons. OneChicago also has filed the proposed rule change with the 
Commodity Futures Trading Commission (``CFTC''). OneChicago filed a 
written certification with the CFTC under Section 5c(c) of the 
Commodity Exchange Act \4\ on September 5, 2002.
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
    \3\ See letter dated September 30, 2002, from C. Robert Paul, 
General Counsel, OneChicago, to Division of Market Regulation, 
Commission. In Amendment No. 1, the Exchange added language setting 
forth the statutory basis for the proposed rule change.
    \4\ 7 U.S.C. 7a-2(c).
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I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    OneChicago is proposing to amend its Rule 417, relating to block 
trades, in the following two respects: First, paragraph (c) of 
OneChicago Rule 417 is amended to provide that the parties to a block 
trade must report specified information regarding such trade to 
OneChicago promptly, rather than within a time period prescribed by 
OneChicago on a contract-by-contract basis. In addition, the Exchange 
proposes to add new paragraphs (e) and (f) into OneChicago Rule 417 to 
restrict the ability of market participants to engage in certain 
transactions related to a block trade until such trade has been 
reported. Finally, OneChicago proposes to redesignate existing 
paragraph (e) of OneChicago Rule 417 as paragraph (g). The text of the 
proposed rule change follows; additions are italicized; deletions are 
[bracketed].

Rule 417 Block Trading

* * * * *
    (c) Each Block Trade shall be designated as such, and cleared 
through the Clearing Corporation as if it were a transaction executed 
through the OneChicago System. Information identifying the relevant 
Contract, contract month, price, quantity, time of execution, 
counterparty Clearing Member for each Block Trade and, if applicable, 
the underlying commodity must be reported to the Exchange [within the 
time period set forth in the rules governing the relevant Contract] 
promptly. The Exchange will publicize information identifying the trade 
as a Block Trade and identifying the relevant Contract, contract month, 
price, quantity for each Block Trade and, if applicable, the underlying 
commodity immediately after such information has been reported to the 
Exchange.
    (d) No Change.
    (e) No Clearing Member or Exchange Member that is a party to a 
Block Trade or has knowledge of a pending Block Trade, may enter an 
Order or execute a transaction, whether for its own account or for the 
account of a Customer, for or in the Contract to which such Block Trade 
relates until after (i) such Block Trade has been reported to and 
published by the Exchange and (ii) any additional time period from time 
to time prescribed by the Exchange in its block trading procedures or 
contract specifications has expired.
    (f) No Clearing Member or Exchange Member that is a party to a 
block trade, or has knowledge of a pending block trade, on any other 
exchange or trading system, may enter an Order or execute a transaction 
on the Exchange for any Contract which has the same underlying security 
as the contract to which such block trade relates until after (i) such 
block trade is reported and published in accordance with the rules, 
procedures or contract specifications of such exchange or trading 
system and (ii) any additional time period prescribed by the Exchange 
in its block trading procedures or contract specifications has expired.
     (g) Any Block Trade in violation of these requirements shall 
constitute conduct which is inconsistent with just and equitable 
principles of trade.
* * * * *

[[Page 64689]]

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    OneChicago has prepared statements concerning the purpose of, and 
basis for, the proposed rule change, burdens on competition, and 
comments received from members, participants, and others. The text of 
these statements may be examined at the places specified in Item IV 
below. These statements are set forth in Sections A, B, and C below.

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

1. Purpose
    OneChicago proposes to amend its block trade rule as set forth in 
Item I above in order to (i) ensure prompt reporting of information 
related to block trades and (ii) restrict the ability of market 
participants to engage in certain transactions related to a block trade 
until such trade has been reported.
    The proposed change to paragraph (c) of OneChicago Rule 417 is 
designed to tighten the existing requirement relating to the reporting 
of block trades by market participants and to provide that the 
requirement applies uniformly to all block trades, regardless of 
contract type and transaction size. OneChicago believes that obligating 
market participants to report all block trades promptly is warranted by 
the important price discovery function that it expects its markets for 
security futures products will serve. Given that all trading on 
OneChicago will be conducted electronically, OneChicago does not 
foresee that market participants will encounter practical difficulties 
in complying with the tightened reporting requirement.
    New paragraphs (e) and (f) to OneChicago Rule 417 are intended to 
prevent market participants from taking advantage of any non-public 
information with respect to a block trade, by prohibiting market 
participants with access to such information from entering orders for 
execution through OneChicago if such orders relate to the same 
underlying securities as the block trade in question. This prohibition 
will generally apply until the block trade in question has been 
reported to and published by OneChicago. OneChicago expects that a 
positive side effect of the new paragraphs will be that they create an 
additional incentive for market participants to report block trades as 
soon as possible.
2. Statutory Basis
    OneChicago is proposing the Proposed Rule Change on the basis of 
its general rulemaking authority. OneChicago filed the Proposed Rule 
Change pursuant to Section 19(b)(7) of the Act \5\ because such section 
requires a self-regulatory organization that is an exchange registered 
with the Commission pursuant to Section 6(g) of the Act \6\ to file 
with the Commission, among other things, copies of any proposed rule 
change that relates to reporting. The Exchange believes that the 
proposed rule change is authorized by, and consistent with, Section 
6(b)(5) of the Act,\7\ because it is designed to prevent fraudulent and 
manipulative acts and practices and to promote just and equitable 
principles of trade.
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    \5\ 15 U.S.C. 78s(b)(7).
    \6\ 15 U.S.C. 78f(g).
    \7\ 15 U.S.C. 78(f)(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    OneChicago believes that the proposed rule change is inherently 
pro-competitive as it is designed to ensure that (i) relevant market 
information becomes available to the public as expeditiously as 
possible and (ii) participants are prevented from taking advantage of 
any non-public information with respect to block trades.

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

    Comments on the proposed rule change have not been solicited.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Pursuant to Section 19(b)(7)(B) of the Act,\8\ the proposed rule 
change became effective on September 5, 2002. Within 60 days of the 
date of effectiveness of the proposed rule change, the Commission, 
after consultation with the CFTC, may summarily abrogate the proposed 
rule change and require that the proposed rule change be refiled in 
accordance with the provisions of Section 19(b)(1) of the Act.\9\
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    \8\ 15 U.S.C. 78s(b)(7)(B).
    \9\ 15 U.S.C. 78s(b)(1).
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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 proposed rule 
change conflicts with the Act. Persons making written submissions 
should file nine copies of the submission with the Secretary, 
Securities and Exchange Commission, 450 Fifth Street, NW., Washington, 
DC 20549-0609. Comments also may be submitted electronically to the 
following e-mail address: [email protected]. 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 these filings also will be available 
for inspection and copying at the principal office of OneChicago. 
Electronically submitted comments will be posted on the Commission's 
Internet website (http://www.sec.gov). All submissions should refer to 
File No. SR-OC-2002-2 and should be submitted by November 12, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(75).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-26688 Filed 10-18-02; 8:45 am]
BILLING CODE 8010-01-P