[Federal Register Volume 70, Number 122 (Monday, June 27, 2005)]
[Notices]
[Pages 36979-36981]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3334]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51889; File No. SR-CHX-2005-18]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Permit the Submission of Immediate or Cancel CHXpress Orders

June 20, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on June 3, 2005, the Chicago Stock Exchange, Inc. (``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) thereunder,\4\ 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules to permit the submission 
of immediate or cancel CHXpress orders. The text of the proposed rule 
change is included below. Italics indicate new text.
* * * * *

Article XX

Regular Trading Sessions
* * * * *
Guaranteed Execution System and Midwest Automated Execution System
    RULE 37. (a) No change to text.
    (b) No change to text.
* * * * *
    (11) CHXpress Orders. This section applies to the execution and 
display of orders through CHXpress, an automated functionality offered 
by the Exchange. All other rules of the Exchange are applicable, unless 
expressly superseded by this section.
    (A) Only an unconditional round lot limit order, or a round lot 
limit order with an ``immediate or cancel'' condition, is eligible for 
entry as a CHXpress order. A CHXpress order may not be entered until an 
order has been executed on the primary market in the subject issue. A 
CHXpress order is good only for the day on which it is submitted and 
will be automatically cancelled at the end of each day's trading 
session. CHXpress orders shall be identified with the designator 
``XPR.''
    (B) No change to text.
    (C) No change to text.
    (D) If a CHXpress order cannot be immediately executed, it will be 
placed in the specialist's book for display or later execution, in 
accordance with CHX rules, unless the CHXpress order is an ``immediate 
or cancel'' order, in which case it will be automatically cancelled. A 
CHXpress order will be instantaneously displayed, when it constitutes 
the best bid or offer in the CHX book. A CHXpress order, however, will 
not be displayed, if its display would improperly lock or cross another 
ITS market. If the display of a CHXpress order would improperly lock or 
cross another ITS market, the CHXpress order will be automatically 
cancelled.
* * * * *

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 Exchange 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 Exchange 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 Exchange is rolling out a new, automated functionality for the 
handling of particular orders, called CHXpressTM. According 
to the Exchange, the CHXpress functionality is designed to provide 
additional opportunities for the Exchange's participants to seek and 
receive liquidity through automated executions of orders at the 
Exchange.\5\ With a few exceptions, CHXpress orders will be executed 
immediately and

[[Page 36980]]

automatically against same or better-priced orders in the specialist's 
book, or against the specialist's quote (when that functionality is 
available).\6\ If a CHXpress order cannot be immediately executed, it 
will be placed in the specialist's book for instantaneous display or 
later execution.\7\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 50481 (September 30, 
2004); 69 FR 60197 (October 7, 2004).
    \6\ CHXpress orders will not be executed if those executions 
would improperly trade-through another ITS market or if trading in 
the issue had been halted. CHXpress orders that would improperly 
trade through an ITS market or that are received during a trading 
halt will be cancelled. If trading in an issue has been halted, 
CHXpress orders in the book will be cancelled.
    \7\ A CHXpress order will be instantaneously and automatically 
displayed when it constitutes the best bid or offer in the CHX book. 
See CHX Article XX, Rule 37(b)11(D). CHXpress orders, like all other 
orders at the Exchange, will not be eligible for automated display 
if that display would improperly lock or cross the National Best Bid 
or Offer (``NBBO''). A CHXpress order that would improperly lock or 
cross the NBBO will be cancelled. CHXpress orders cannot be excluded 
from the CHX's quote.
---------------------------------------------------------------------------

    The current rules relating to CHXpress orders require that the 
orders be unconditional round-lot limit orders.\8\ The Exchange now 
believes that it would be appropriate to also allow CHX participants to 
submit CHXpress orders with an ``immediate or cancel'' condition. 
According to the Exchange, allowing the submission of CHXpress orders 
with an ``immediate or cancel'' condition would reduce the amount of 
CHX systems capacity required to process CHXpress orders, by reducing 
the number of times that an order-sending firm would submit both an 
order and a later cancellation if the order was not immediately 
executed. The Exchange also believes that some order-sending firms 
might welcome the opportunity to submit immediate or cancel orders 
because of the reduced message traffic that they would otherwise be 
required to send to the Exchange. The Exchange therefore believes that 
this relatively minor change to its rules will increase the efficiency 
of the operation of its systems; at the same time, the Exchange does 
not believe that the proposal would have any impact on the protection 
of investors or the public interest.
---------------------------------------------------------------------------

    \8\ See CHX Article XX, Rule 37(b)(11)(A).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange 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) of the Act.\9\ The Exchange 
believes the proposal is consistent with Section 6(b)(5) of the 
Act,\10\ in that the proposal 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any 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 solicited or received.

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

    The foregoing proposed rule change is subject to Section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder \12\ 
because the proposal: (i) Does not significantly affect the protection 
of investors or the public interest; (ii) does not impose any 
significant burden on competition; and (iii) does not become operative 
prior to 30 days after the date of filing or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest; provided that the Exchange has given the 
Commission notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    The Exchange satisfied the five-day pre-filing requirement. The 
Exchange has requested that the Commission waive the 30-day operative 
delay. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest 
because such waiver would allow Exchange participants to submit an 
additional order type, which could increase the efficiency of their 
order submission and cancellation processes. For these reasons, the 
Commission designates the proposal to be effective and operative upon 
filing with the Commission.\13\
---------------------------------------------------------------------------

    \13\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the rule change if it 
appears to the Commission that the action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.\14\
---------------------------------------------------------------------------

    \14\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

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 an e-mail to [email protected]. Please include 
File Number SR-CHX-2005-18 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-CHX-2005-18. 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 Section, 100 F Street, 
NE., Washington, DC 20549. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You

[[Page 36981]]

should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-CHX-2005-18 
and should be submitted on or before July 18, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3334 Filed 6-24-05; 8:45 am]
BILLING CODE 8010-01-P