[Federal Register Volume 63, Number 67 (Wednesday, April 8, 1998)]
[Notices]
[Page 17248]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9131]
[[Page 17248]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39822; File No. SR-CHX-98-5]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Chicago Stock Exchange, Incorporated Relating to the
Utilization of Exempt Credit by Market Makers
March 31, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on February 18, 1998, the
Chicago Stock Exchange, Inc. (``CHX'' or ```Exchange'') filed with the
Securities and Exchange Commission (``Commission'' or ``SEC'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the self-regulatory organization. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend an interpretation to Article XXXIV,
Rule 16 of its rules relating to registered market makers' utilization
of exempt credit.\2\
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\2\ The Board of Governors of the Federal Reserve System is
authorized, pursuant to Section 7 of the Act, to establish initial
margin requirements and credit restrictions on margin financing. 12
CFR Sec. Sec. 220 and 221. Bona fide market making activity,
however, may be exempt from these credit restrictions. As a result,
a market maker may arrange for margin financing on the basis of its
credit worthiness.
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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 self-regulatory organization
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 self-regulatory organization
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
The purpose of the proposed rule change is to modify an
interpretation regarding market makers and exempt credit.
Interpretation .01 to Article XXXIV, Rule 16 sets forth certain
parameters that market makers must satisfy to obtain exempt credit for
financing their market maker transactions. The Interpretation specifies
that 50% of the quarterly share volume which creates or increases a
position in a market maker account must result from transactions
consummated on the Exchange or sent from the Exchange floor for
execution in another market via the Intermarket Trading System
(``ITS''). The Exchange seeks to modify this interpretation by
eliminating the reference to ``creating or increasing a position,''
thereby including all transactions consummated on the Exchange or sent
from the Exchange floor via ITS in determining a market maker's ability
to use exempt credit.
In providing assistance in maintaining a fair and orderly market, a
market maker may be required to decrease either a long or a short
position in a particular security. Thus, a market maker may from time
to time engage in transactions that decrease its position which
contributes to the depth and liquidity of the market. The proposed
change in interpretation would make it clear that transactions that
decrease a position in a market maker account will be treated the same
way as those that create or increase a position for purposes of
determining compliance with the 50% volume requirement in order to
obtain exempt credit.
The proposed interpretation is consistent with the policies of
other exchanges. For example, both the Pacific Exchange and the Chicago
Board Options Exchange consider total transactions in determining
whether a market maker has executed a certain percentage of its
transactions in person.\3\
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\3\ See Pacific Exchange Rule 6.32, Commentary .02; and Chicago
Board Options Exchange Rule 8.7, Interpretation .03.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b)(5) \4\ of
the Act 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.
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\4\ 15 U.S.C. 78f(b)(5).
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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
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. 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 self-regulatory organization consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the submission 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, D.C. 20549. Copies of
the submissions, 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.
Sec. 552, will be available for inspection and copying at the
Commission's Public Reference Room 450 Fifth Street, N.W., Washington,
D.C. 25049. 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 No. SR-CHX-98-5 and should be submitted by April 29,
1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.20-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-9131 Filed 4-7-98; 8:45 am]
BILLING CODE 8010-01-M