regulatory organizations; proposed rule changes: Chicago Stock Exchange, Inc.,
[Federal Register: March 23, 2001 (Volume 66, Number 57)]
[Notices]
[Page 16304-16306]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23mr01-157]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-44085; File No. SR-CHX-01-05]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Chicago Stock Exchange, Incorporated, Relating to the Exchange's SuperMAX 2000 Price Improvement Program
March 19, 2001.
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 March 16, 2001, 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 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.
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Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend the CHX rules governing its voluntary price improvement program. Specifically, the Exchange proposes to amend Article XX, Rule 37(h) to reduce the determinative spread from $.03 to $.02, thereby increasing the opportunities for price improvement. The text of the proposed rule change is below. Additions are in italic. Deletions are in brackets.
ARTICLE XX
Regular Trading Sessions
* * * * *
Guaranteed Execution System and Midwest Automated Execution System
Rule 37 * * * * *
(h) SuperMax 2000
SuperMAX 2000 shall be a voluntary automatic execution program within the MAX System. SuperMAX 2000 shall be
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available for any security trading on the Exchange in decimal price increments. A specialist may choose to enable this voluntary program within the MAX System on a security-by-security basis.
(1) Pricing
(i) In the event that an order to buy or sell at least 100 shares is received in a security in which SuperMAX 2000 has been enabled, such order shall be executed at the ITS Best Offer or NBO (for a buy order) or the ITS Best Bid or NBB (for a sell order) if the spread between the ITS Best Bid and the ITS Best Offer (or NBB and NBO, for Nasdaq/NM issues) in such security at the time the order is received is less than $.02 [.03].
(ii) In the event that an order to buy or sell 100 shares is received in a security in which SuperMAX 2000 has been enabled, and the spread between the ITS Best Bid and the ITS Best Offer (or NBB and NBO, for Nasdaq/NM issues) in such security at the time the order is received is $.02 [.03] or greater, such order shall be executed (subject to the short sale rule) at a price at least $.01lower than the ITS Best Offer or NBO (for a buy order) or at least $.01higher than the ITS Best Bid or NBB (for a sell order).
(iii) In the event that an order to buy or sell more than 100 shares is received in a security in which SuperMAX 2000 has been enabled, such order shall be executed at the ITS Best Offer or NBO, or better (for a buy order) or the ITS Best Bid or NBB, or better (for a sell order) as the specialist may designate and as is approved by the Exchange. * * * * *
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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 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.
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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
According to the CHX, the primary purpose of the proposed rule change is to increase the number of orders that are eligible for automated price improvement. To this end, the CHX proposes to amend the CHX rules governing its voluntary automated price improvement program, known as SuperMAX 2000, for issues quoting in decimal price increments. Specifically, the Exchange proposes to amend Article XX, Rule 37(h) to reduce the determinative spread from $.03 to $.02, thereby increasing the opportunities for price improvement.
On December 19, 2000, the Commission approved (SR-CHX-00-37),\3\ implementing SuperMAX 2000, the CHX's new price improvement program, which will govern price improvement of all orders for issues quoting in decimal price increments. SuperMAX 2000 was designed to afford specialists the flexibility to provide a wide variety of price improvement alternatives, all of which will be equal to or more favorable than alternatives that existed previously. SuperMAX 2000 originally provided for price improvement of at least $.01on orders of 100 shares where the spread between the national best bid and offer (``NBBO'') was $.03 or greater.
\3\ Securities Exchange Act Release No. 43742 (December 19, 2000), 65 FR 83119 (December 29, 2000).
In assessing price improvement offered by other members of the securities industry, the Exchange believes that, in order to be competitive, its specialists must be permitted (but not obligated) to offer price improvement of $.01or better where the NBBO spread is $.02 or greater. The proposal would not impact orders for more than 100 shares, in which case the specialist's price improvement options are not contingent on a determinative NBBO spread.
The Exchange believes that the proposal will ensure that SuperMAX 2000 provides CHX specialists with the requisite flexibility to respond to customer price improvement requirements in a decimal environment. The CHX also believes that, in a decimal trading environment, where spreads are anticipated to narrow significantly, the proposal will operate to increase the opportunities for price improvement. The proposal contemplates equality among order-sending firms (and their customers) by mandating that additional price improvement be provided by CHX specialists on an issue-by-issue basis; specialists would not be permitted to distinguish among order-sending firms when designating price improvement levels. Moreover, SuperMAX 2000 remains a strictly voluntary price improvement program; specialists who do not wish to participate are not obligated to enable SuperMAX 2000 for any or all issues traded by such specialists. 2. Statutory Basis
The CHX believes the proposed rule change is consistent with Section 6(b)(5) of the Act \4\ 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.
\4\ 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
Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will:
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By order approve such proposed rule change, or
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institute proceedings to determine whether the proposed rule change should be disapproved.
The CHX has requested accelerated approval of the proposed rule change. While the Commission will not grant accelerated approval at this time, the Commission will consider granting accelerated approval of the proposal at the close of an abbreviated comment period of 15 days from the date of publication of the proposal in the Federal Register.
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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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange
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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 Exchange. All submissions should refer to file number SR-CHX-01-05 and should be submitted by April 9, 2001.
For the Commission by the Division of Market Regulation, pursuant to delegated authority.\5\
\5\ 17 CFR 200.30-3(a)(12).
Margaret H. McFarland, Deputy Secretary.
[FR Doc. 01-7255Filed3-22-01; 8:45 am]
BILLING CODE 8010-01-M
