[Federal Register Volume 73, Number 13 (Friday, January 18, 2008)]
[Notices]
[Pages 3499-3500]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-860]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57140; File No. SR-CHX-2007-23]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Order Approving a Proposed Rule Change To Allow the Exchange To Open at 
8:30 a.m. (Chicago Time) Without Regard to the Opening on the Primary 
Market

January 14, 2008.

I. Introduction

    On October 2, 2007, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to allow the Exchange to open at 8:30 a.m. 
(Chicago time) without regard to the opening on the primary market. To 
accommodate its implementation schedule for this proposal, the Exchange 
extended the time for Commission action to January 14, 2008. The 
Federal Register published the proposed rule change for comment on 
November 1, 2007.\3\ The Commission received no comments on the 
proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 56698 (October 24, 
2007), 72 FR 61919.
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II. Description

    Under existing rules, the Exchange generally opens for trading in a 
security once the primary market has done so.\4\ If the primary market 
announces that it will not open, or if the primary market has delayed 
its opening for reasons other than a regulatory halt, the rules permit 
two senior CHX officials to open the market.\5\ The Exchange has 
proposed to amend its rules to permit trading to begin at 8:30 a.m. 
(Chicago time), except for trading in specified exchange-traded funds, 
which would begin at 7:20 a.m. (Chicago time).\6\
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    \4\ See CHX Rules, Article 20, Rule 1(b).
    \5\ See CHX Rules, Article 20, Interpretation and Policy .01.
    \6\ See Proposed CHX Rules, Article 20, Rule 1(b). The Exchange 
represents that Exchange-traded funds that begin trading at 7:20 
a.m. would be announced, from time to time, by the Exchange in a 
customer service notification or other type of update. The only 
exchange-traded fund currently trading at 7:20 a.m. is the 
streetTRACKS [reg] Gold Trust. Telephone conversation 
between Ellen Neely, President and General Counsel, CHX, Richard 
Holley III, Senior Special Counsel, Division of Market Regulation 
(``Division''), Commission, and Sonia Trocchio, Special Counsel, 
Division, Commission (October 18, 2007).
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    In conjunction with this change to the opening time of the 
Exchange's market, the Exchange also proposes two other changes to its 
rules. First, the Exchange would eliminate the opening cross order 
type. According to the Exchange, these cross orders, which are designed 
to execute at the primary market opening price, likely could no longer 
be effectively executed on the Exchange, once the proposed change is 
made to the time of the Exchange's opening.\7\ In addition, the 
Exchange would add a new rule that prevents immediate or cancel 
(``IOC'') market orders from being accepted until either (i) the 
primary market in a security has opened trading in that security or 
(ii) two senior officers of the Exchange have determined that it is 
appropriate for the Exchange to accept IOC market orders.\8\ The

[[Page 3500]]

Exchange states that this change is designed to prevent market orders 
from being executed at prices that are far away from the primary market 
opening price, when that market ultimately opens.
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    \7\ If the Exchange's systems allow its participants to begin 
trading before the primary market opens trading in a particular 
security, an opening cross order (which must execute at the primary 
market opening price) might violate the protected quotations of 
other markets. To avoid this potential result, the Exchange believes 
that it is appropriate to eliminate this order type.
    \8\ See Proposed CHX Rules, Article 1, Rule 2(n) and Article 20, 
Rule 4(b)(13). For purposes of this rule, another exchange would be 
considered to have opened for trading in a security when the first 
trade in that security occurs in that market on or after 8:30 a.m. 
The Exchange has stated that two senior officers of the Exchange 
might decide that it is appropriate to allow IOC market orders to be 
accepted if, for example, the primary market has announced that it 
will open later than expected, but other markets are open to provide 
additional liquidity. Telephone conversation between Ellen Neely, 
President and General Counsel, CHX, Richard Holley III, Senior 
Special Counsel, Division, Commission, and Sonia Trocchio, Special 
Counsel, Division, Commission (October 18, 2007).
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III. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\9\ 
In particular, the Commission finds that the proposal is consistent 
with Section 6(b)(5) of the Act,\10\ which requires, among other 
things, that a national securities exchange's rules be 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. Previously, the Exchange opened for trading in a 
security once the primary market had opened in that security. The 
Exchange now proposes to permit trading to begin at 8:30 a.m. Chicago 
time (9:30 a.m. Eastern time), without regard to the whether the 
primary market opened in that security. The Commission believes that 
this proposed change is consistent with the Act and does not raise any 
new regulatory issues. Further, the proposal is consistent with the 
definition of ``regular trading hours'' under Rule 600(b)(64) of the 
Act.\11\ In addition, the Exchange has proposed a related change to 
eliminate the opening cross order type, which executes at the primary 
market opening price. As the Exchange will no longer link its opening 
to the primary market, the Commission believes that eliminating the 
cross order type is consistent with the Act as it eliminates the 
potential for those order types to violate the protected quotations of 
other markets. Finally, the Exchange's proposal to prevent IOC market 
orders from being accepted until the primary market opens in that 
security or two senior officers of the Exchange otherwise determine 
that it is appropriate to accept such orders is likewise consistent 
with the Act and the protection of investors and the public interest 
and should allow IOC market orders entered on CHX to be executed at 
prices that are closely related to the primary market opening price.
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    \9\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 17 CFR 242.600(b)(64).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-CHX-2007-23) is approved.
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    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-860 Filed 1-17-08; 8:45 am]
BILLING CODE 8011-01-P