[Federal Register Volume 69, Number 125 (Wednesday, June 30, 2004)]
[Notices]
[Pages 39529-39531]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-14756]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49900; File No. SR-CHX-2004-16]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change and Amendment No. 1 by the 
Chicago Stock Exchange, Inc. Relating to Minimum Price Variation for 
Issues Customarily Trading at a Per Share Price of $100,000 or Greater

June 22, 2004.
    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 June 16, 2004, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the CHX. The 
CHX submitted Amendment No. 1 to the proposal on June 17, 2004.\3\ The 
CHX filed the proposal pursuant to Section 19(b)(3)(A) under the 
Act,\4\ and Rule 19b-4(f)(6) thereunder,\5\ which renders the proposal 
effective upon filing with the Commission.\6\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Kathleen M. Boege, Vice President and 
Associate General Counsel, CHX, to Nancy J. Sanow, Division of 
Market Regulation, Commission, dated June 17, 2004 (``Amendment No. 
1''). In Amendment No. 1, the CHX stated that it had requested a 
waiver of the 30-day operative delay to help to avoid possible 
investor confusion by eliminating any inconsistency in the minimum 
price variation used by the primary market and the CHX. For purposes 
of calculating the 60-day abrogation period, the Commission 
considers the proposal to have been filed on June 17, 2004, the date 
the CHX filed Amendment No. 1. See Rule 19b-4(f)(6), 17 CFR 240.19b-
4(f)(6).
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
    \6\ The CHX has asked the Commission to waive the 30-day 
operative delay. See Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-
4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CHX proposes to amend CHX Article XX, Rule 22, ``Minimum 
Variations,'' which governs minimum variations for bids and offers. 
Specifically, the CHX seeks to add Interpretation and Policy .02, which 
provides that for issues that customarily trade at a per share price of 
$100,000 or greater, the minimum variation will be $.10. The text of 
the proposed rule change appears below; additions are italicized.
ARTICLE XX
Regular Trading Sessions
* * * * *
Minimum Variations
    RULE 22. Bids and offers in specific securities or classes of 
securities traded on the Exchange shall not be made in variations less 
than the minimum variation of $.01, or such other minimum variation as 
may be established for a security or class of security by the Board of 
Governors from time to time.
* * * Interpretations and Policies:
* * * * *
    .02 With respect to bids and offers for any issue that customarily 
trades at a per share price of $100,000 or greater, the minimum 
variation shall be $.10.
* * * * *

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 the proposed rule change and 
discussed any comments it received on the proposed rule change. 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 proposed rule change would add Interpretation and Policy .02 to 
CHX Article XX, Rule 22. Interpretation and Policy .02 provides that 
for issues that customarily trade at a per share price of $100,000 or 
greater, the minimum variation will be $.10.
    In 2000, the securities industry made the transition to decimal 
pricing. In connection with ``decimalization,'' the Exchange and all 
other national securities exchanges amended their rules to provide for 
a minimum variation of $.01.
    Recently, the New York Stock Exchange (``NYSE'') amended NYSE Rule 
62, ``Variations,'' to establish a minimum price variation of $.10 for 
issues that trade at a per share price of

[[Page 39530]]

$100,000 or greater.\7\ The CHX believes that the principal purpose of 
this change was to accommodate the NYSE's trading system technology. As 
of the date of this submission, the CHX is informed that only one issue 
is affected.
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    \7\ See Securities Exchange Act Release No. 49374 (March 8, 
2004), 69 FR 11923 (March 12, 2004) (notice of filing and immediate 
effectiveness of File No. SR-NYSE-2004-10). (``NYSE Notice'').
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    The CHX believes that to preserve consistency, and avoid potential 
investor confusion, the CHX should institute a similar interpretation. 
Accordingly, the language of the CHX's new Interpretation and Policy is 
substantially identical to the NYSE interpretation.\8\
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    \8\ To provide for further clarification, the CHX interpretation 
makes reference to issues that ``customarily'' trade at per share 
prices of $100,000 or greater. This reference contemplates the 
possibility that on a given trading day, an issue might spike above 
$100,000 per share; in such case, the CHX would not deem such an 
issue eligible for a minimum variation of $.10. As a corollary, to 
the extent that an issue customarily traded at a per share price of 
above $100,000 but dipped below $100,000 on a given trading day, the 
CHX would not reduce the minimum variation from $.10 to $.01 (the 
CHX's standard minimum variation) based on a typical share prices.
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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).\9\ The CHX believes the proposal is 
consistent with Section 6(b)(5) of the Act \10\ in that it is 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 general, to protect investors and the 
public interest.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that no burden will be placed on competition 
as a result of the proposed rule change.

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

    The CHX has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \11\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\12\ Because the foregoing proposed rule change: (1) Does 
not significantly affect the protection of investors or the public 
interest; (2) Does not impose any significant burden on competition; 
and (3) Does not become operative for 30 days from the date of filing, 
or such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
and Rule 19b-4(f)(6) thereunder.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. Rule 19b-4(f)(6)(iii) also requires 
a self-regulatory organization to provide the Commission with written 
notice of its intent to file a proposed rule change pursuant to Rule 
19b-4(f)(6), along with a brief description and text of the proposed 
rule change, at least five business days prior to filing the proposed 
rule change, or such shorter time as the Commission designates. The CHX 
provided the Commission with written notice of its intention to file 
the proposed rule change at least five business days prior to filing 
the proposed rule change.
    The CHX has asked the Commission to waive the 30-day operative 
delay. The CHX believes that waiving the 30-day operative delay will 
help to avoid possible investor confusion by eliminating any 
inconsistency in the minimum price variation utilized by the NYSE and 
the CHX.\13\
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    \13\ See Amendment No. 1, supra note 3.
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    Although the Commission ordinarily would expect a proposed rule 
change to modify the minimum price variation to be filed pursuant to 
Section 19(b)(2) of the Act,\14\ the Commission believes that, under 
the narrow circumstances presented by the current proposal, it is 
appropriate for the CHX to file the proposal pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder. In this regard, 
the Commission notes that the proposed ten-cent minimum price variation 
would apply solely to issues that customarily trade at a per share 
price of $100,000 or greater. In addition, the proposal is 
substantially identical to a rule adopted previously by the NYSE.\15\ 
For the same reasons, the Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest, and the Commission designates the proposal to be 
operative upon filing with the Commission.\16\
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    \14\ 15 U.S.C. 78s(b)(2).
    \15\ See NYSE Notice, supra note 7.
    \16\ For purposes of waiving the 30-day operative delay, 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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    At any time within 60 days of the filing of such 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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send E-mail to [email protected]. Please include File 
Number SR-CHX-2004-16 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.

    All submissions should refer to File Number SR-CHX-2004-16. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 also will be

[[Page 39531]]

available for inspection and copying at the principal office of the 
CHX.
    All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-CHX-2004-16 
and should be submitted on or before July 21, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-14756 Filed 6-29-04; 8:45 am]
BILLING CODE 8010-01-P