[Federal Register Volume 68, Number 238 (Thursday, December 11, 2003)]
[Notices]
[Pages 69097-69098]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-30704]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48871; File No. SR-CHX-2003-38]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Stock Exchange, 
Incorporated To Extend a Pilot Rule Interpretation Relating to Trading 
of Nasdaq/NM Securities in Subpenny Increments

December 3, 2003.
    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 December 1, 2003, 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 and 
II 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 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 Commission waived the 5-day pre-
filing notice requirement.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend through June 30, 2004, the pilot 
rule interpretation relating to the trading of Nasdaq/NM securities in 
subpenny increments. The pilot is due to expire on December 1, 2003. 
The CHX does not propose to make any substantive or typographical 
changes to the pilot; the only change is an extension of the pilot's 
expiration date through June 30, 2004. The text of the proposal is 
available at the Commission and at the CHX.

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
    On April 6, 2001, the Commission approved, on a pilot basis through 
July 9, 2001, a pilot rule interpretation (CHX Article XXX, Rule 2, 
Interpretation and Policy .06 ``Trading in Nasdaq/NM Securities in 
Subpenny Increments'') \5\ that requires a CHX specialist (including a 
market maker who holds customer limit orders) to better the price of a 
customer limit order in his book which is priced at the national best 
bid or offer (``NBBO'') by at least one penny if the specialist 
determines to trade with an incoming market or marketable limit order. 
The pilot has been extended several times and is now due to expire on 
December 1, 2003.\6\ The CHX now proposes to extend the pilot through 
June 30, 2004. The CHX proposes no other changes to the pilot, other 
than extending it through June 30, 2004.
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    \5\ See Securities Exchange Act Release No. 44164 (April 6, 
2001), 66 FR 19263 (April 13, 2001) (SR-CHX-2001-07).
    \6\ See Securities Exchange Act Release Nos. 44535 (July 10, 
2001), 66 FR 37251 (July 17, 2001) (extending the pilot through 
November 5, 2001); 45062 (November 15, 2001), 66 FR 58768 (November 
23, 2001) (extending the pilot through January 14, 2002); 45386 
(February 1, 2002), 67 FR 6062 (February 8, 2002) (extending the 
pilot through April 15, 2002); 45755 (April 15, 2002), 67 FR 19607 
(April 22, 2002) (extending the pilot through September 30, 2002); 
46587 (October 2, 2002), 67 FR 63180 (October 10, 2002) (extending 
the pilot through January 31, 2003); and 47372 (February 14, 2003), 
68 FR 8955 (February 26, 2003) (extending the pilot through May 31, 
2003); 47961 (May 30, 2003), 68 FR 34448 (June 9, 2003) (extending 
the pilot through December 1, 2003).
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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).\7\ In particular, the CHX believes the 
proposal is consistent with Section 6(b)(5) of the Act \8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).

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[[Page 69098]]

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 \9\ and 
Rule 19b-4(f)(6) thereunder.\10\ 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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest. Acceleration of the operative date will allow the pilot to 
continue uninterrupted through June 30, 2004, and allow the Commission 
to further study the trading of Nasdaq/NM securities in subpenny 
increments. For these reasons, the Commission designates the proposal 
to be effective and operative upon filing with the Commission.\11\
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    \11\ 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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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. Comments 
may also be submitted electronically at the following e-mail address: 
[email protected]. All comment letters should refer to SR-CHX-2003-
38. This file number should be included on the subject line if e-mail 
is used. To help us process and review comments more efficiently, 
comments should be sent in hardcopy or by e-mail but not by both 
methods. 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-2003-38 and should be submitted by January 2, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-30704 Filed 12-10-03; 8:45 am]
BILLING CODE 8010-01-P