[Federal Register Volume 70, Number 216 (Wednesday, November 9, 2005)]
[Notices]
[Pages 68118-68120]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-22334]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52724; File No. SR-CHX-2005-26]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Permit Execution of Mixed Lot Cross and Cross With Size Orders in the 
Electronic Book

November 2, 2005.
    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 October 11, 2005, 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 
has designated the proposed rule change as constituting a ``non-
controversial'' rule change pursuant to section 19(b)(3)(A)(iii) of the 
Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission.\5\ 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)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ The Exchange has requested that the Commission waive the 30-
day operative delay, as specified in 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 XXA, Rule 2, to permit the 
execution of mixed lot cross and cross with size orders in the 
electronic book. The text of the proposed rule change is set forth 
below. Proposed new language is italicized; proposed deletions are in 
[brackets].
* * * * *

ARTICLE XXA

Operation of the Electronic Book

* * * * *

[[Page 68119]]

Eligible Orders

    RULE 2. (a) Except for cross and cross with size orders, which may 
be sent to the electronic book in mixed lot increments, a[A]ll orders 
sent to the electronic book must be round-lot limit orders, 
specifically designated in the manner specified by the Exchange to 
confirm that they are eligible for trading in the electronic book.
* * * * *

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 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
    The Exchange recently implemented a fully-automated electronic book 
for the display and execution of orders in securities that are not 
assigned to a specialist.\6\ These new rules replace the Exchange's 
manual cabinet and lead market maker trading procedures with a new 
fully automated electronic book that displays and matches eligible 
limit orders in eligible securities, without the participation of a 
specialist or lead market maker.
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    \6\ See Securities Exchange Act Release No. 52094 (July 21, 
2005), 70 FR 43913 (July 29, 2005). The Exchange has rolled out this 
technology for the trading of Nasdaq/NM securities and anticipates 
implementing its use for the trading of listed securities within the 
next two weeks. Telephone call between Ellen Neely, President, CHX 
and Sara Gillis, Attorney, Division of Market Regulation, Commission 
on October 27, 2005.
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    The electronic book was originally designed to accept only round 
lot orders. The Exchange now believes that it would be appropriate to 
allow CHX participants to submit mixed lot cross and cross with size 
orders for immediate execution in the electronic book. ``Cross'' and 
``cross with size'' orders permit the handling of orders to buy and 
sell the same security--within the electronic book, these orders are 
automatically executed if they meet the requirements for these types of 
orders, but are immediately cancelled if they do not meet applicable 
requirements.\7\ The Exchange believes that some of its participants 
would welcome the opportunity to submit mixed lot cross and cross with 
size orders to the electronic book. The Exchange believes that this 
relatively minor change to Exchange systems will permit its 
participants to execute additional transactions in this automated 
trading facility, but will not have any impact on the protection of 
investors or the public interest.
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    \7\ A ``cross'' order is an order to buy and sell the same 
security at a specific price that is better than the best bid and 
offer displayed in the electronic book and, for listed securities, 
equal to or better than the NBBO. A ``cross with size'' order is an 
order to buy and sell at least 25,000 shares of the same security 
(a) at a price equal to or better than the best bid or offer 
displayed in the electronic book and, for listed securities, equal 
to or better than the NBBO; (b) where the size of the order is 
larger than the aggregate size of all interest displayed in the 
electronic book at that price; and (c) where neither side of the 
order is for the account of the CHX participant sending the order to 
the electronic book. See CHX Rules, Article XXA, Rule 2(c) (3) and 
(4).
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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).\8\ The CHX believes the proposal is 
consistent with section 6(b)(5) of the Act \9\ in that it is designed 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system, and, in general, to protect investors and 
the public.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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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 either solicited or received.

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

    Because the proposed rule change: (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 for 30 days (or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest) after the date of the filing, the proposed rule change has 
become effective pursuant to section 19(b)(3)(A) of the Act \10\ and 
Rule 19b-4(f)(6) thereunder.\11\ 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. As required under Rule 19b-4(f)(6)(iii) under the Act,\12\ the 
Exchange provided with the Commission with written 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 the proposed rule change.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing.\13\ 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. The Exchange has asked the Commission to waive the 
30-day operative delay and allow the proposed rule change to become 
operative immediately. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Waiver of the 30-day operative delay will allow 
Exchange participants to make immediate use of the electronic book 
functionality for their mixed lot cross and cross with size orders, 
which may permit Exchange participants to access potentially larger 
pools of liquidity located in the electronic book. For the reasons 
stated above, the Commission finds good cause to designate that the 
proposal is operative immediately.\14\
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    \13\ Id.
    \14\ For purposes only 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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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:

[[Page 68120]]

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-2005-26 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.

    All submissions should refer to File No. SR-CHX-2005-26. 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 the 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 should submit only information that you wish to 
make available publicly. All submissions should refer to File No. SR-
CHX-2005-26 and should be submitted on or before November 30, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 05-22334 Filed 11-8-05; 8:45 am]
BILLING CODE 8010-01-P