[Federal Register: August 4, 1998 (Volume 63, Number 149)] [Notices] [Page 41609-41610] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr04au98-116] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-40271; File No. SR-CHX-98-18] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Chicago Stock Exchange, Inc. Relating to the Exchange's Withdrawal of Capital Provisions July 28, 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 26, 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 CHX. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1) (1994). \2\ 17 CFR 240.19b-4 (1997). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Article II, Rule 6(b) of the Exchange's rules relating to the Exchange's Withdrawal of Capital provisions. 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 CHX 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 Exchange proposes to amend Article II, Rule 6(b) of the Exchange's rules in order to limit the applicability of the Exchange's Withdrawal of Capital provisions to member firms for which the Exchange is the Designated Examining Authority (``DEA''). The Exchange's Withdrawal of Capital provisions limit the ability of a partner in a member firm to withdraw capital from the firm. Currently, this requirement applies to both member firms for which the Exchange is the DEA as well as firms subject to examination by a self-regulatory organization (``SRO'') other than the Exchange if the member's DEA does not have a comparable rule. The proposed rule change would eliminate this requirement for all firms for which the Exchange is not the DEA. The Exchange does not believe that, given the current regulatory scheme, it is necessary to review and analyze the rules of other SROs to determine whether such rules are comparable to the Exchange's rule on this particular issue. All other SROs have rules that have been approved by the SEC and that [[Page 41610]] are deemed to promote just and equitable principles of trade, to remove impediments and to perfect the mechanisms of a free and open market and a national market system and, in general, to protect investors and the public interest. As a result, the CHX believes imposing the Withdrawal of Capital Rule on member firms for which the Exchange is not the DEA, if the member's DEA does not have a comparable rule, only fosters unnecessary and duplicative regulation.\3\ The text of the proposed rule change is as follows: --------------------------------------------------------------------------- \3\ The New York Stock Exchange and the American Stock Exchange have rules regarding withdrawal of capital. The other exchanges do not. Telephone conversations between Patricia L. Levy, General Counsel, CHX, and Katherine A. England, Assistant Director, Division of Market Regulation, Commission (July 17, 1998). --------------------------------------------------------------------------- Deletions are [bracketed]. ARTICLE II Member Firms Subordination of Claims Rule 6. (a) No change in text. (b) Withdrawal of Capital--The partnership articles of each member firm for which this Exchange is the Designated Examining Authority [or of a member firm subject to examination by another self-regulatory organization not having a comparable rule] shall contain provisions that without prior written approval of the Exchange the capital contribution of any partner may not be withdrawn on less than six months' written notice of withdrawal given no sooner than six months after such contribution was first made. Each member firm shall promptly notify the Exchange of the receipt of any notice of withdrawal of any part of a partner's capital contribution or if any withdrawal is not made because prohibited under the provisions of Securities and Exchange Commission Rule 15c3-1 (see 15c3-1(e)). 2. Statutory Basis The proposed rule change is consistent with Section 6 of the Act,\4\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\5\ in particular, in that it is designed to perfect the mechanisms of a free and open market and a national market system, and to protect investors and the public interest. --------------------------------------------------------------------------- \4\ 15 U.S.C. 78f(b). \5\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- (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 Exchange 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 proposed rule change is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549. 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 CHX. All submissions should refer to File No. SR-CHX-98-18 and should be submitted by August 25, 1998. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\6\ --------------------------------------------------------------------------- \6\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Margaret H. McFarland, Deputy Secretary. [FR Doc. 98-20691 Filed 8-3-98; 8:45 am] BILLING CODE 8010-01-M