[Federal Register: January 13, 1998 (Volume 63, Number 8)] [Notices] [Page 1985-1986] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr13ja98-73] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-39519; File No. SR-CHX-97-28] Self-Regulatory Organizations; Order Approving Proposed Rule Change by the Chicago Stock Exchange, Incorporated Amending the Exchange's Clearing the Post Policy for Cabinet Securities January 6, 1998. On October 23, 1997, the Chicago Stock Exchange, Incorporated (``CHX'' or the ``Exchange'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ amending the Exchange's clearing the post policy for cabinet securities. The Commission published notice of the proposed rule change in the Federal Register on November 28, 1997. No comment letters were received. This order approves the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Description of the Proposal The Exchange proposes to amend its existing clearing the post policy for cabinet securities for a six-month pilot period. The clearing the post policy is contained in interpretation and policy .02 of CHX Article XX, Rule 10.\3\ The Exchange's clearing the post policies were previously contained in several Notices to Members which had been approved by the Commission.\4\ These Notices to Members, and their corresponding Approval Orders, explain the Exchange's clearing the post requirements. --------------------------------------------------------------------------- \3\ See Securities Exchange Act Release No. 39337 (November 19, 1997) granting immediate effectiveness to SR-CHX-97-30. \4\ Securities Exchange Act Release No. 33806 (March 23, 1994) 59 FR 15248 (Notice of Filing and Immediate Effectiveness of File No. SR-CHX-94-03); Securities Exchange Act Release No. 17766 (May 8, 1981) 46 FR 25745 (Order approving SR-MSE-81-3 and SR-MSE-81-5); and Securities Exchange Act Release No. 28638 (November 39, 1990) 55 FR 49731 (Order approving SR-MSE-90-7). --------------------------------------------------------------------------- In general, the clearing the post policy requires a floor broker or market maker to clear the post by his or her physical presence at the post. The purpose of this proposed rule change is to permit a floor broker or market maker to clear the post in cabinet securities by phone. The bids and offers made to clear the post by phone will be audibly announced at the cabinet post through a speaker system maintained by the Exchange. This new [[Page 1986]] policy will be effective for a six-month pilot period to permit the Exchange to determine the effectiveness of the new policy before implementing it on a permanent basis. II. Discussion The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, and in particular, the requirements of Sections 6(b)(5) \5\ in that it is designed to prevent fraudulent, manipulative acts and practices and to promote just and equitable principles of trade, and to remove impediments to and protect the mechanism of a free and open market and to protect investors and the public interest.\6\ --------------------------------------------------------------------------- \5\ 15 U.S.C. Sec. 78f(b)(5). \6\ In approving this rule, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). --------------------------------------------------------------------------- The Commission believes that allowing floor brokers or market makers to clear the post for cabinet securities while remaining at their post will ensure that these floor brokers or market makers will be at their posts when they need to respond to orders in more liquid securities at a much faster pace. The Commission believes that approving the proposed rule change on a pilot basis is reasonable under the Act because it will serve to protect investors and the public interest by providing the Exchange with the opportunity to evaluate the effects of allowing floor brokers and market makers to clear the post for cabinet securities by phone instead of in person, and to determine whether any modifications are necessary. The pilot program will expire on July 6, 1998. The Commission requests that the CHX submit a report on the effectiveness of the pilot program by June 6, 1998. It is therefore ordered, pursuant to Section 19(b)(2) of the Act \7\ that the proposed rule change (SR-CHX-97-28) is approved on a pilot basis through July 6, 1998. \7\ 15 U.S.C. 78s(b)(2). --------------------------------------------------------------------------- For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\8\ --------------------------------------------------------------------------- \8\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Jonathan G. Katz, Secretary. [FR Doc. 98-722 Filed 1-12-98; 8:45 am] BILLING CODE 8010-01-M