regulatory organizations; proposed rule changes: Chicago Stock Exchange, Inc.,
[Federal Register: June 4, 2002 (Volume 67, Number 107)]
[Notices]
[Page 38531-38533]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04jn02-110]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-45988; File No. SR-CHX-2002-16]
Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Chicago Stock Exchange, Incorporated To Eliminate CHX Rule Provisions Governing Stop Order Bans
May 28, 2002.
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 May 24, 2002, the Chicago Stock Exchange, Incorporated (``CHX'' or ``Exchange'') filedwith the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Exchange filedthe 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
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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). The CHX provided the Commission written notice of its intent to file the proposal on November 21, 2001. The Exchange has asked the Commission to waive the 30-day operative delay to allow the proposal to be effective and operative upon filing with the Commission.
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Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend Article IX of the CHX Rules to eliminate CHX Rule 10B, which governs imposition of a stop order ban during periods of extraordinary market volatility. The text of the proposed rule change is below. Proposed deletions are in brackets. Article IX Trading Rules * * * * *
[Stop Order Ban Due to Extraordinary Market Volatility
Rule 10B. If the New York Stock Exchange (``NYSE'') institutes a stop and stop limit order ban pursuant to NYSE Rule 80A, no member or member organization shall enter any stop order or stop limit order in Dual Trading System issues traded both on the NYSE and the Exchange for the remainder of the trading day, except that a member or member organization may enter such a stop order or a stop limit order of 2,099 shares or less for the account of an individual investor pursuant to instructions received directly from the individual investor. * * * * *
Interpretations and Policies:
.01 Whenever the NYSE implements a stop order ban pursuant to NYSE Rule 80A, the Exchange will also ban such orders as follows:
(i) Upon notice, from the NYSE that all new stop and stop limit orders in all stocks are banned for the remainder of the day (except for orders up to 2099 shares for the account of an individual investor), the Exchange will announce to its floor and MAX customers that a stop order ban in all Dual Trading System issues traded both on the NYSE and the Exchange is in effect for the remainder of the day, except for such orders up to the 2099 shares for the accounts of individual investors.
(ii) The entry of such stop and stop limit orders (other than orders up to 2099 shares for the accounts of individual investors) will be banned on the Exchange for the remainder of the day. Such a stop or stop limit order received in the MAX system will be rejected and the message ``stop not accepted-ban in effect'' will be sent back to the entering firm unless the order includes the ``I'' designator, is for the account of an individual investor and is for 2099 shares.]
* * * * *
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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.
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Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
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Purpose
The CHX proposes to eliminate the CHX Rule that bans the receipt of stop orders during periods of extraordinary market volatility (CHX Article IX, Rule 10B--Stop Order Ban Due to Extraordinary Market Volatility).
In its current form, this CHX Rule bans acceptance or execution of stop orders by the CHX for the remainder of the trading day whenever the New York Stock Exchange (``NYSE'') implements a ``circuit breaker'' stop order ban pursuant to NYSE Rule 80A (and sends notice of such ban to the CHX).
In 1999, the NYSE eliminated NYSE Rule 80A.\5\ Because the CHX stop order ban rule is contingent on a primary market ban imposed pursuant to NYSE Rule 80A, in effect, elimination of NYSE Rule 80A rendered the corresponding CHX rule superfluous. To preclude any possible confusion, the Exchange believes the Rule should nevertheless be formally eliminated from the CHX Rules.
\5\ See Securities Exchange Act Release No. 41041 (February 11, 1999), 64 FR 8424 (February 19, 1999) (SR-NYSE-98-45) (order approving amendments to NYSE Rule 80A).
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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).\6\ In particular, the CHX believes the proposal is consistent with Section 6(b)(5) of the Act \7\ 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.
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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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.
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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.
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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 \8\ and Rule 19b-4(f)(6) thereunder.\9\ 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.
\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6).
The Exchange has requested that the Commission accelerate the operative date. The Commission finds good cause to designate the proposal both effective and operative upon filing with the Commission because such designation is consistent with the protection of investors and the public interest. Acceleration of the operative date will allow the CHX to eliminate CHX Rule 10B and the corresponding Interpretation and Policy from the CHX Rules immediately. The Commission finds no legitimate reason to delay the operation of this proposed rule change for 30 days. For these reasons, the Commission finds good cause to designate that the proposal is both effective and operative upon filing with the Commission.\10\
\10\ 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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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. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filedwith 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-2002-16 and should be submitted by June 25, 2002.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\11\
\11\ 17 CFR 200.30-3(a)(12).
Margaret H. McFarland, Deputy Secretary.
[FR Doc. 02-13868Filed6-3-02; 8:45 am]
BILLING CODE 8010-01-P
