[Federal Register Volume 68, Number 127 (Wednesday, July 2, 2003)]
[Notices]
[Pages 39603-39604]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-16715]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48086; File No. SR-CHX-2003-08]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the Chicago Stock Exchange, Incorporated Relating To 
Execution of Resting Limit Orders Following a Primary Market Block 
Trade-Through

June 25, 2003.
    On March 24, 2003, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to section 19(b)(1) of the 
Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to eliminate the requirement that 
a CHX specialist fill resting limit orders at the block price following 
a block trade trade-through in the primary market.\3\ The proposed rule 
change was published for comment in the Federal Register on May 13, 
2003.\4\ The Commission received no comments on the proposal. This 
order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ If, however, a specialist is representing an order in his or 
her quote that is traded through by a block trade from another 
market, and the specialist receives satisfaction from the other 
market, the specialist must give the higher price to the customer 
order. Further, because specialists may wish to continue filling 
such limit orders at the block price as a customer service 
accommodation, the proposed rule change would permit a CHX 
specialist to continue to have the option to engage an existing 
functionality of the Exchange's MAX automatic execution system that 
automatically executes designated limit orders at the block price 
when a block size trade-through occurs in the primary market.
    \4\ See Securities Exchange Act Release No. 47800 (May 6, 2003), 
68 FR 25667.
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    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder that are applicable to a national securities exchange.\5\ 
Specifically, the Commission finds that the proposal is consistent with 
the requirements of section 6(b) of the Act,\6\ in general, and section 
6(b)(5) of the Act,\7\ in particular, which requires that the rule of 
the Exchange be 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

[[Page 39604]]

general, to protect investors and the public interest.
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    \5\ In approving the proposal, the Commission has considered the 
rule's impact on efficiency, competition, and capital formation. See 
15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that eliminating the requirement that a CHX 
specialist fill resting limit orders at the block price following a 
block trade trade-through in the primary market will permit specialists 
to handle block orders more quickly and efficiently. Based on 
representations by the Exchange, the Commission believes that this 
obligation was one the CHX assumed voluntarily in order to make its 
market more attractive to sources of order flow. The Commission 
believes that the business decision to potentially forego order flow by 
no longer requiring specialist to provide such protection to block 
orders is a judgment the Act allows the CHX to make.
    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\8\ that the proposed rule change (File No. SR-CHX-2003-08) be, and 
hereby is, approved. 
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 9 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-16715 Filed 7-1-03; 8:45 am]
BILLING CODE 8010-01-P