[Federal Register Volume 64, Number 194 (Thursday, October 7, 1999)]
[Notices]
[Pages 54702-54703]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-26157]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41969; File No. SR-CHX-99-14]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Stock Exchange, Inc. Relating to ``Stop'' and 
``Stop Limit'' Orders

September 30, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice hereby is given 
that on August 27, 1999, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``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.
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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 add Article XX, Rule 28A to the Exchange's 
Rules relating to ``stop'' and ``stop limit'' orders to clarify that 
the existing Rule 28 of Article XX relates solely to ``stopped'' 
orders. Below is the text of the proposed rule change. Proposed new 
language is in italics.

Chicago Stock Exchange Rules

Article XX

Rule 28A  Stop Orders

    (a) Dual Trading System Issues.\3\
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    \3\ Dual Trading Systems issues are issues traded on both the 
CHX and either the New York Stock Exchange or the American Stock 
Exchange.
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    (1) Stop Orders. A ``stop'' order to buy shall be entered at a 
price above the current primary market offer. A ``stop'' order to sell 
shall only be entered at a price below the current primary market bid. 
Once entered, a ``stop'' order may not be executed until a trade (the 
``effective trade'') occurs in the primary market that is at or through 
the price of the ``stop'' order. Once the effective trade occurs, the 
``stop'' order shall be executed based upon the next primary market 
trade, but at a price no better than the effective trade (i.e., the 
``stop'' order shall be executed on a next-no better basis).
    (2) Stop Limit Orders.
    (a) Buy Stop Limit Orders. A buy stop limit order shall only be 
entered at a price above the current primary market offer and shall 
become a limit order when a round-lot transaction takes place in the 
primary market at or above the stop price. The order shall then be 
filled in the manner prescribed for handling a limit order to buy.
    (b) Sell Stop Limit Orders. A sell stop limit order shall only be 
entered at a price below the current primary market bid and shall 
become a limit order when a round-lot transaction takes place in the 
primary market at or below the stop price. The order shall then be 
filled in the manner prescribed for handling a limit order to sell.
    (b) Nasdaq/NM Issues:
    A ``stop'' or ``stop limit'' order to buy shall only be entered at 
a price above the then-current best offer disseminated pursuant to SEC 
Rule 11Ac1-1 (the ``National Best Offer''). A ``stop'' or ``stop 
limit'' order to sell shall only be entered at a price below the then-
current best bid disseminated pursuant to SEC Rule 11Ac1-1 (the 
``National Best Bid''). Once entered, a stop or stop limit order may 
not be executed until the price of the order is equal to (1) the 
National Best Offer in the case of a buy order or (2) the National Best 
Bid in the case of a sell order, at which time the member or member 
organization that accepted the order shall be obligated to use its best 
efforts to obtain the best available price to fill such order.

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 regarding 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 primary purpose of the proposed rule change is to add a 
provision to the Exchange's Rules relating to ``stop'' orders, thereby 
clarifying that the existing Rule 28 of Article XX relates solely to 
``stopped'' orders.\4\ Under the

[[Page 54703]]

proposed Rule 28A, ``stop'' or ``stop limit'' orders for Dual Trading 
System issues will only be permitted to be entered at a price above 
(for buy orders) or below (for sell orders) the then-current offer or 
bid, respectively, in the primary market. Stop or stop limit orders for 
Nasdaq/NM Issues will only be permitted to be entered at a price above 
(for buy orders) or below (for sell orders) the then-current National 
Best Offer or National Best Bid, respectively.
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    \4\ A ``stopped'' order is an order that is accepted by a member 
and guaranteed a fill at a specific price, usually the price at the 
time the order is received, unless the member can achieve price 
improvement for the customer. Telephone conversation between Paul 
O'Kelly, Executive Vice President, CHX, and Marc McKayle, Attorney, 
Division of Market Regulation, Commission on September 30, 1999. 
Also see CHX Rule 28 of Article XX.
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    As set forth in the proposed Rule 28A, a specialist's obligations 
with respect to incoming ``stop'' and ``stop limit'' orders are 
distinct from liabilities relating to `'stopped'' orders, which under 
Rule 28 are guaranteed execution at a specified price and size.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b)(5) of the 
Act \5\ 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.
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    \5\ 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 inappropriate burden on competition

(C) Self-Regulatory Organization's Statement on Comments Regarding the 
Proposed Rule Change Received From Members, Participants or Others

    No written comments were either solicited or received.

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 Exchange consents, the Commission will:
    (A) by order approve the 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 foregoing is 
consistent with the Act. Persons making written submissions should file 
copies thereof with the Secretary, Securities and Exchange 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 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 at 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 No. SR-CHX-99-14 and should be 
submitted by October 28, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 99-26157 Filed 10-6-99; 8:45 am]
BILLING CODE 8010-01-M