Skip to Content

Self-Regulatory Organizations; Order Approving Proposed Rule Change by the Chicago Stock Exchange, Incorporated Relating To Execution of Resting Limit Orders Following a Primary Market Block Trade-Through


June 25, 2003.

On March 24, 2003, the Chicago Stock Exchange, Inc. (“CHX” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), [1] and Rule 19b-4 thereunder, [2] a proposed rule change to eliminate the requirement that a CHX specialist fill resting limit orders at the block price following a block trade trade-through in the primary market. [3] The proposed rule change was published for comment in the Federal Register on May 13, 2003. [4] The Commission received no comments on the proposal. This order approves the proposed rule change.

The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange. [5] Specifically, the Commission finds that the proposal is consistent with the requirements of section 6(b) of the Act, [6] in general, and section 6(b)(5) of the Act, [7] in particular, which requires that the rule of the Exchange be 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.

The Commission believes that eliminating the requirement that a CHX specialist fill resting limit orders at the block price following a block trade trade-through in the primary market will permit specialists to handle block orders more quickly and efficiently. Based on representations by the Exchange, the Commission believes that this obligation was one the CHX assumed voluntarily in order to make its market more attractive to sources of order flow. The Commission believes that the business decision to potentially forego order flow by no longer requiring specialist to provide such protection to block orders is a judgment the Act allows the CHX to make.

It is therefore ordered, pursuant to section 19(b)(2) of the Act, [8] that the proposed rule change (File No. SR-CHX-2003-08) be, and hereby is, approved.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority. [9]

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 03-16715 Filed 7-1-03; 8:45 am]


Footnotes Back to Top

3. If, however, a specialist is representing an order in his or her quote that is traded through by a block trade from another market, and the specialist receives satisfaction from the other market, the specialist must give the higher price to the customer order. Further, because specialists may wish to continue filling such limit orders at the block price as a customer service accommodation, the proposed rule change would permit a CHX specialist to continue to have the option to engage an existing functionality of the Exchange's MAX automatic execution system that automatically executes designated limit orders at the block price when a block size trade-through occurs in the primary market.

Back to Context

4. See Securities Exchange Act Release No. 47800 (May 6, 2003), 68 FR 25667.

Back to Context

5. In approving the proposal, the Commission has considered the rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).

Back to Context
Site Feedback