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Notice

Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval to a Proposed Rule Change by the Chicago Stock Exchange, Incorporated, Relating to Amendments to the Exchange's Procedures for Market-at-the-Close Orders

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Start Preamble March 21, 2000.

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 December 28, 1999, 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 Commission is publishing this notice to solicit comments on the proposed rule change from interested persons and to grant accelerated approval to the proposed rule change.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Purposed Rule Change

The Exchange proposes to amend its procedures for the cancellation of Market-at-the-Close orders (“MOC orders”) under CHX Article XX, Rule 44. The text of the proposed rule change is available at the CHX and at the Commission.

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 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 III below. The Exchange 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

On November 10, 1998, the Commission approved a rule change that established formal procedures governing the entry, executions and cancellation of MOC orders on the CHX.[3] Those procedures were designed to mirror procedures in use by the New York Stock Exchange (“NYSE”) and the American Stock Exchange (“AMEX”) to ensure that MOC orders sent to the CHX receive treatment comparable to MOC orders sent to the NYSE or AMEX, and to prevent the entry, execution or cancellation of MOC orders on the CHX that would otherwise be prohibited on those primary markets.

As defined in CHX Article XX, Rule 44, an MOC order is a market order which is to be executed in its entirety at the closing price on the primary market of the stock named in the order, and if not so executed, is to be treated as cancelled. MOC orders may not be entered on the CHX after 2:40 p.m. (Central Time) unless the specialist determines that an order could have been entered on the primary market. This is done by monitoring published MOC order imbalances on the primary Start Printed Page 16441market. Current CHX MOC order procedures also prohibit Exchange members from canceling MOC orders after 2:40 p.m. (Central Time) except in the case of a legitimate error.

On June 9, 1999, the Commission approved an NYSE rule change amending NYSE's MOC (and limit-on-close) order entry and cancellation procedures during regulatory halts.[4] That change amended, among other things, the NYSE's MOC procedures to allow market participants to cancel MOC orders if a regulatory halt is in effect at 2:40 p.m. (Central Time) or later, until 2:50 p.m. (Central Time) or the reopening of the stock, whichever occurs first. The Commission, on September 14, 1999, approved a corresponding rule change submitted by the AMEX.[5]

On October 20, 1999, the Commission approved an additional NYSE rule change concerning MOC order cancellation procedures.[6] That change further amended the NYSE's MOC cancellation procedures to prohibit the cancellation or reduction in size of MOC orders after 2:50 p.m. (Central Time) for any reason.

Therefore, until recently, the NYSE only allowed cancellation of MOC orders after 2:40 p.m. (Central Time) to correct a legitimate error. However, under the revised NYSE procedures, if a regulatory halt has been instituted for a stock at or after 2:40 p.m., NYSE members will be permitted to cancel MOC orders between 2:40 p.m. and 2:50 p.m. (Central Time) or when the stock reopens, whichever occurs first. This allows market participants to react to news generated during a regulatory halt that could result in the stock reopening at a price substantially different from the last sale. Furthermore, the NYSE now prohibits cancellation or reduction in size of MOC Orders after 2:50 p.m. for any reason, including legitimate error.

The CHX proposal would amend the CHX policy to allow for cancellations if such cancellation would be allowed on the primary market (i.e., if a regulatory halt has been instituted at or after 2:40 p.m. Central Time). The proposed rule change would also prohibit cancellation or reduction in size of MOC orders after 2:50 p.m. for any reason.

While CHX Article XX, Rule 44 by its nature can only apply to Dual Trading System Issues,[7] the proposed rule change also amends the title of Rule 44 to explicitly state that the rule only applies to MOC orders in Dual Trading System Issues.

2. Statutory Basis

The CHX believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,[8] 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 interest.

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. 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 Commission, 450 Fifth Street, N.W., Washington, DC 20549-0609. 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 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-99-30 and should be submitted by April 18, 2000.

IV. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change

The Commission has reviewed carefully the Exchange's proposed rule change and finds, for the reasons set forth below, the proposal is consistent with the requirements of Section 6 of the Act [9] and the rules and regulations thereunder applicable to a national securities exchange. Specifically, the Commission finds the proposal is consistent with Section 6(b)(5) of the Act [10] because the proposal will promote just and equitable principles of trade, remove impediments to, and perfect the mechanism of a free and open market, by (1) allowing for cancellations of MOC orders if such cancellation would be allowed on the primary market; and (2) prohibiting cancellation or reduction in the size of MOC orders after 2:50 p.m. for any reason consistent with primary market requirements. The Commission also finds the proposal is consistent with Section 6(b)(5) of the Act [11] because it will allow the Exchange to handle MOC orders in conformity with procedures in place on other Exchanges.

The Commission finds good cause for approving the proposed rule change prior to the 30th day after the date of publication of notice thereof in the Federal Register. The Commission notes that accelerated approval would afford investors the benefits to be realized under this proposal as soon as possible. Additionally, the Commission notes that the proposal is similar to proposals filed by other self-regulatory organizations that the Commission has approved.[12] These were noticed for the full 21 day comment period, and no comments were received. For these reasons, and because the proposal is unlikely to raise new issues, the Commission deems it appropriate to approve the proposed rule change on an accelerated basis. The Commission finds, therefore, that good cause exists, consistent with Section 19(b) [13] and Section 6(b) [14] of the Act, to grant accelerated approval of the proposed rule change.

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,[15] that the proposed rule change (SR-CHX-99-30) is hereby approved on an accelerated basis.

Start Signature
Start Printed Page 16442

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[16]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  See Securities Exchange Act Release No. 40655 (November 10, 1998), 63 FR 64299 (November 19, 1998)(SR-CHX-97-19).

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4.  See Securities Exchange Act Release No. 41497 (June 9, 1999), 64 FR 32595 (June 17, 1999) SR-NYSE-98-42).

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5.  See Securities Exchange Act Release No. 41877 (September 14, 1999), 64 FR 51566 (September 23, 1999) (SR-AMEX-99-32).

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6.  See Securities Exchange Act Release No. 42040 (October 20, 1999), 64 FR 57681 (October 26, 1999) (SR-NYSE-99-26).

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7.  Dual Trading System Issues are issues that are traded on the CHX, either through listing on the CHX or pursuant to unlisted trading privileges, and are also listed on either the NYSE or AMEX.

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12.  See footnotes 4 and 6, supra.

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[FR Doc. 00-7535 Filed 3-27-00; 8:45 am]

BILLING CODE 8010-01-M