[Federal Register: December 27, 2002 (Volume 67, Number 249)]
[Notices]
[Page 79218-79219]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27de02-169]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47018; File No. SR-OC-2002-03]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by OneChicago, LLC Relating to
Block Trades
December 18, 2002.
Pursuant to section 19(b)(7) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-7 under the Act,\2\ notice is hereby given
that on November 7, 2002, OneChicago, LLC (``OneChicago'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change described in Items I and II below, which Items
have been prepared by OneChicago. On December 12, 2002, OneChicago
filed Amendment No. 1 to the proposed rule change.\3\ The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons. OneChicago also filed the proposed rule change
with the Commodity Futures Trading Commission (``CFTC''). OneChicago
filed written certifications with the CFTC under Section 5c(c) of the
Commodity Exchange Act \4\ on November 6, 2002 and December 12, 2002.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(7).
\2\ 17 CFR 240.19b-7.
\3\ See letter dated December 12, 2002 from C. Robert Paul,
General Counsel, OneChicago, to Division of Market Regulation,
Commission.
\4\ 7 U.S.C. 7a-2(c).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Description of the Proposed Rule
Change
OneChicago is proposing to amend OneChicago Rule 417, relating to
block trades, in the following respects: (i) Paragraph (c) is amended
to provide that the parties to a block trade must report specified
information regarding such trade to OneChicago ``without delay,''
rather than ``promptly''; (ii) paragraph (d) is amended to add that
clearing members and, if applicable, exchange members and access
persons (as such terms are defined in the OneChicago rulebook) may
execute orders for a non-discretionary customer account by means of a
block trade only if the relevant customer has previously consented
thereto; and (iii) paragraphs (e) and (f) are amended to clarify that a
natural person who is associated with a clearing member, exchange
member or access person is restricted from engaging in transactions for
any account that he or she controls when he or she has knowledge of a
pending block trade of the clearing member, exchange member or access
person with which he or she is associated.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
OneChicago has prepared statements concerning the purpose of, and
statutory basis for, the proposed rule, burdens on competition, and
comments received from members, participants, and others. The text of
these statements may be examined at the places specified in Item IV
below. These statements are set forth in Sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The proposed rule change is designed to: (i) Clarify the timeframe
within which information related to a block trade must be reported:
(ii) make it clear that clearing members, exchange members and access
persons must obtain a customer's consent prior to executing orders for
a non-discretionary account by means of a block trade; and (iii) apply
the restrictions on engaging in certain transactions related to a block
trade to natural persons associated with a clearing member, exchange
member or access person, and to clarify that the restriction on trading
extends to any account that such natural person controls.
The proposed change to paragraph (c) of OneChicago Rule 417 is
meant to remove any ambiguity with respect to the timeframe within
which market participants are required to report information related to
block trades. OneChicago believes that obligating market participants
to report block trades ``without delay'' is warranted by the important
price discovery function that it expects its markets for security
futures products will serve. Given that all trading on OneChicago will
be conducted electronically, OneChicago
[[Page 79219]]
does not foresee that market participants will encounter practical
difficulties in complying with this strict reporting requirement.
The proposed change to paragraph (d) is intended to protect
customers with non-discretionary accounts by making it clear that the
clearing members, exchange members and access persons maintaining such
accounts must obtain their customers' consent prior to executing
customer orders by means of a block trade. OneChicago believes that
customer protection in this area is warranted because block trades may
be executed at prices that differ from those prevailing in the
corresponding contract markets at the time.
The proposed changes to paragraphs (e) and (f) of OneChicago Rule
417 are intended to clarify that the restrictions on engaging in
certain transactions related to a block trade prohibit all natural
persons associated with market participants, including access persons,
from taking advantage of non-public information with respect to a block
trade, by entering orders for execution through OneChicago for any
account that he or she controls if such orders relate to the same
underlying securities as the block trade in question.
2. Statutory Basis
OneChicago has filed this proposed rule change pursuant to section
19(b)(7) of the Act.\5\ OneChicago believes that the proposed rule
change is authorized by, and consistent with, section 6(b)(5) \6\ of
the Act because it is designed to prevent fraudulent and manipulative
acts and practices and to promote just and equitable principles of
trade.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78s(b)(7).
\6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
OneChicago believes that the proposed rule change is inherently
pro-competitive as it is designed to ensure that: (i) Relevant market
information becomes available to the public as expeditiously as
possible; (ii) customers with non-discretionary accounts are protected
from unauthorized block trades; and (iii) natural persons associated
with market participants are prevented from taking advantage of any
non-public information with respect to block trades.
C. Self-Regulatory Organization's Statement on Comments on Proposed
Rule Change Received From Members, Participants, or Others
Comments on the proposed rule change have not been solicited.
III. Date of Effectiveness of the Proposed Rules and Timing for
Commission Action
Pursuant to section 19(b)(7)(B) of the Act,\7\ the proposed rule
change, as filed with the Commission on November 7, 2002, became
effective on that date. Amendment No. 1 to the proposed rule change
became effective on December 13, 2002. Within 60 days of the date of
effectiveness of the proposed rule change, the Commission, after
consultation with the CFTC, may summarily abrogate the proposed rule
change and require that the proposed rule change be refiled in
accordance with the provisions of section 19(b)(1) of the Act.\8\
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78s(b)(7)(B).
\8\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed
rules conflict with the Act. Persons making written submissions should
file nine copies of the submission with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
Comments also may be submitted electronically to the following e-mail
address: rule-comments@sec.gov. Copies of the submission, all
subsequent amendments, all written statements with respect to the
proposed rules that are filed with the Commission, and all written
communications relating to the proposed rules 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 these filings will also be available for inspection and
copying at the principal office of OneChicago. Electronically submitted
comments will be posted on the Commission's internet Web site (http://www.sec.gov
). All submissions should refer to File No. SR-OC-2002-03
and should be submitted by January 17, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
---------------------------------------------------------------------------
\9\ 17 CFR 200.30-3(a)(75).
---------------------------------------------------------------------------
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 02-32642 Filed 12-26-02; 8:45 am]
BILLING CODE 8010-01-P