[Federal Register Volume 67, Number 249 (Friday, December 27, 2002)]
[Notices]
[Pages 79218-79219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32642]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47018; File No. SR-OC-2002-03]


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

December 18, 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 November 7, 2002, OneChicago, LLC (``OneChicago'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change described in Items I and II below, which Items 
have been prepared by OneChicago. On December 12, 2002, OneChicago 
filed Amendment No. 1 to the proposed rule change.\3\ The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons. OneChicago also filed the proposed rule change 
with the Commodity Futures Trading Commission (``CFTC''). OneChicago 
filed written certifications with the CFTC under Section 5c(c) of the 
Commodity Exchange Act \4\ on November 6, 2002 and December 12, 2002.
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
    \3\ See letter dated December 12, 2002 from C. Robert Paul, 
General Counsel, OneChicago, to Division of Market Regulation, 
Commission.
    \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 OneChicago Rule 417, relating to 
block trades, in the following respects: (i) Paragraph (c) is amended 
to provide that the parties to a block trade must report specified 
information regarding such trade to OneChicago ``without delay,'' 
rather than ``promptly''; (ii) paragraph (d) is amended to add that 
clearing members and, if applicable, exchange members and access 
persons (as such terms are defined in the OneChicago rulebook) may 
execute orders for a non-discretionary customer account by means of a 
block trade only if the relevant customer has previously consented 
thereto; and (iii) paragraphs (e) and (f) are amended to clarify that a 
natural person who is associated with a clearing member, exchange 
member or access person is restricted from engaging in transactions for 
any account that he or she controls when he or she has knowledge of a 
pending block trade of the clearing member, exchange member or access 
person with which he or she is associated.

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 
statutory basis for, the proposed rule, 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
    The proposed rule change is designed to: (i) Clarify the timeframe 
within which information related to a block trade must be reported: 
(ii) make it clear that clearing members, exchange members and access 
persons must obtain a customer's consent prior to executing orders for 
a non-discretionary account by means of a block trade; and (iii) apply 
the restrictions on engaging in certain transactions related to a block 
trade to natural persons associated with a clearing member, exchange 
member or access person, and to clarify that the restriction on trading 
extends to any account that such natural person controls.
    The proposed change to paragraph (c) of OneChicago Rule 417 is 
meant to remove any ambiguity with respect to the timeframe within 
which market participants are required to report information related to 
block trades. OneChicago believes that obligating market participants 
to report block trades ``without delay'' 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

[[Page 79219]]

does not foresee that market participants will encounter practical 
difficulties in complying with this strict reporting requirement.
    The proposed change to paragraph (d) is intended to protect 
customers with non-discretionary accounts by making it clear that the 
clearing members, exchange members and access persons maintaining such 
accounts must obtain their customers' consent prior to executing 
customer orders by means of a block trade. OneChicago believes that 
customer protection in this area is warranted because block trades may 
be executed at prices that differ from those prevailing in the 
corresponding contract markets at the time.
    The proposed changes to paragraphs (e) and (f) of OneChicago Rule 
417 are intended to clarify that the restrictions on engaging in 
certain transactions related to a block trade prohibit all natural 
persons associated with market participants, including access persons, 
from taking advantage of non-public information with respect to a block 
trade, by entering orders for execution through OneChicago for any 
account that he or she controls if such orders relate to the same 
underlying securities as the block trade in question.
2. Statutory Basis
    OneChicago has filed this proposed rule change pursuant to section 
19(b)(7) of the Act.\5\ OneChicago believes that the proposed rule 
change is authorized by, and consistent with, section 6(b)(5) \6\ of 
the Act 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(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; (ii) customers with non-discretionary accounts are protected 
from unauthorized block trades; and (iii) natural persons associated 
with market 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 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 Rules and Timing for 
Commission Action

    Pursuant to section 19(b)(7)(B) of the Act,\7\ the proposed rule 
change, as filed with the Commission on November 7, 2002, became 
effective on that date. Amendment No. 1 to the proposed rule change 
became effective on December 13, 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.\8\
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    \7\ 15 U.S.C. 78s(b)(7)(B).
    \8\ 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 
rules conflict 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 rules that are filed with the Commission, and all written 
communications relating to the proposed rules 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 will also be available for inspection and 
copying at the principal office of OneChicago. Electronically submitted 
comments will be posted on the Commission's internet Web site (http://www.sec.gov). All submissions should refer to File No. SR-OC-2002-03 
and should be submitted by January 17, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(75).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 02-32642 Filed 12-26-02; 8:45 am]
BILLING CODE 8010-01-P