[Federal Register Volume 63, Number 131 (Thursday, July 9, 1998)]
[Notices]
[Pages 37159-37160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-18150]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40152; File No. SR-CHX-98-14]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by the Chicago Stock Exchange,
Inc. Relating to Exempt Credit by Market Makers
July 1, 1998.
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 June 10, 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
Exchange. 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).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange proposes to clarify an interpretation to Article
XXXIV, Rule 16 of CHX's Rules relating to registered market makers'
utilization of exempt credit.
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 CHX 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.
(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 clarify an
interpretation to the Exchange's rules regarding market makers and
exempt credit. The Exchange recently modified Interpretation .01 to
Article XXXIV, Rule 16, to eliminate a 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 makers' ability to use exempt credit.\3\
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\3\ Securities Exchange Act Release No. 40016 (May 20, 1998), 63
FR 29276 (May 28, 1998).
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In making such a change to the interpretation, the Exchange did not
intend to eliminate the requirement that volume be measured on an issue
by issue basis. To eliminate any possibility that the change may be
misinterpreted in that manner, the Exchange is clarifying the language
of the interpretation to make it clear that volume is measured for a
particular issue to determine a market makers' ability to use exempt
credit for that issue. The text of the proposed rule change is as
follows:
Additions are italicized.
ARTICLE XXXIV
Registered Market Makers--Equity Floor
Regulatory Status
RULE 16. No text change.
* * *Interpretations and Policies:
.01 Utilization of Exempt Credit. Exchange Members registered as
equity market makers are members registered as specialists for purposes
of the Securities Exchange Act of 1934 and as such are entitled to
obtain exempt credit for financing their market maker transactions.
Members and/or prospective members who are anticipating becoming
registered as equity market makers as well as those clearing firms who
are or will be carrying the accounts of market makers should be aware
of the following interpretation relative to the use of such credit:
1. Only those transactions initiated on the Exchange Floor qualify
as market maker transactions. This restriction prohibits the use of
exempt credit where market maker orders are routed to the Floor from
locations off the Floor.
[[Page 37160]]
2. Fifty percent (50%) of the quarterly share volume in an issue in
a market maker account must result from transactions which are either
consummated on the Exchange or sent from the Exchange Floor for
execution in another market via ITS in order for the market maker to be
entitled to exempt credit for such issue.
3. Only those positions which have been established as a direct
result of bonafide equity market maker activity qualify for exempt
credit treatment. This restriction precludes exempt credit financing
based on an equity market maker registration for positions resulting
from options exercises and assignments.
2. Statutory Basis
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 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
Because the foregoing rule change constitutes a stated policy,
practice or interpretation with respect to the meaning, administration,
or enforcement of an existing rule of the Exchange it has become
effective pursuant to Section 19(b)(3)(A) of the Act \5\ and Rule 19b-
4(e)(1) \6\ thereunder.\7\ At any time within 60 days of the filing of
such 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.
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\5\ 15 U.S.C. 78s(b)(3)(A).
\6\ 17 CFR 240.19b-4(e).
\7\ In reviewing the proposal, the Commission considered its
impact on efficiency, competition and capital formation. 15 U.S.C.
78f(b).
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IV. 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, NW., Washington, DC 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 Section, 450 Fifth Street, NW.,
Washington, DC 20549. 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-98-14 and should be
submitted by July 30, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-18150 Filed 7-8-98; 8:45 am]
BILLING CODE 8010-01-M