[Federal Register: April 12, 2007 (Volume 72, Number 70)]
[Notices]
[Page 18497]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12ap07-89]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55584; File No. SR-CHX-2006-38]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change to Extend the Late
Trading Session and to Permit Only the Execution of Cross Orders During
That Session
April 5, 2007.
I. Introduction
On December 22, 2006, the Chicago Stock Exchange, Inc. (the ``CHX''
or ``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities
Exchange Act (``Act''), and Rule 19b-4 thereunder,\2\ a proposed rule
change (i) To extend its late trading session until 4:00 p.m. (Central
Time) and (ii) to provide that only cross orders may be executed during
that session. The proposed rule change was published for comment in the
Federal Register on February 23, 2007.\3\ The Commission received no
comments on the proposed rule change. This order approves the proposed
rule change.
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\1\ 15 U.S.C. 78s(b)(1)
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 55308 (Feb. 15,
2007), 71 FR 8215.
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II. Description of the Proposal
The Exchange conducts two trading sessions in its new trading
model. The first session--called the regular trading session--is held
from 8:30 a.m. (Central Time) to 3 p.m. (Central Time).\4\ The second
trading session--called the late trading session--is held from the end
of the regular session until 3:30 p.m. (Central Time). The Exchange's
Matching System begins accepting orders for the late trading session
immediately after the closing of the regular trading session in a
security.\5\
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\4\ The regular trading session for certain ETFs extends to 3:15
p.m. (Central Time).
\5\ See CHX Rules, Article 20, Rule 8(c)(3). All orders
remaining in the Matching System at the end of the regular trading
session are cancelled back to the firms that submitted them; firms
must submit new orders if they seek to trade in the late trading
session.
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The proposed rule change would extend the Exchange's late trading
session by one-half hour, to 4 p.m. (Central Time), and confirm that
only cross orders may be executed during the late trading session. The
Exchange states that the longer trading session is designed to allow
CHX participants to trade for a full hour after the normal close of the
regular trading session. The Exchange further states that the cross-
orders-only rule simply confirms that CHX participants may only submit
cross orders for execution during the late trading session. The
Exchange believes that it is appropriate to limit the late trading
session to cross orders for a variety of reasons--including the fact
that doing so is consistent with the types of orders currently
submitted by CHX participants during its current after-hours trading
session. The Exchange also believes that this proposal is consistent
with late trading sessions operated by other markets.\6\
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\6\ Other markets have instituted trading sessions that occur
after the end of regular trading and that involve the execution of
cross transactions. See, e.g., Boston Stock Exchange Rules, Ch. IIC
(Extended Hours Crossing Session), Section 4 (noting that ``only
matched orders are eligible for execution during the ETS''); New
York Stock Exchange 900 Series Rules ((``Off-Hours Trading Facility
Rules'') including Rules 902 and 907 (describing different types of
coupled orders that can be executed during the NYSE off-hours
sessions)).
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As part of the proposed rule change, the Exchange is also proposing
a change in its definition of ``NBBO'' to confirm that it applies only
to protected quotes disseminated during regular trading hours. Without
this change, the Exchange explained that a cross order in the late
trading session technically would be required to be submitted at a
price that is at or better than the NBBO during the late trading
session (if markets are disseminating protected quotes), even though
the trade-through provisions of Rule 611 of Regulation NMS do not apply
during that session.\7\
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\7\ See Article 20, Rule 4(b)(4)(defining a cross order as one
that is equal to or better than the NBBO).
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III. Discussion
After careful review of the proposal, 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.\8\ In particular, the Commission finds that the
proposal is consistent with Section 6(b)(5) of the Act,\9\ which
requires, among other things, that the rules of an exchange be designed
to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
the national market system, and, in general, to protect investors and
the public interest. In making this finding, the Commission notes that
other markets operate late trading sessions involving the execution of
cross transactions.\10\
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\8\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition and
capital formation. See 15 U.S.C. 78c(f).
\9\ 15 U.S.C. 78f(b)(5).
\10\ See, e.g., Boston Stock Exchange Rules, Ch. IIC (Extended
Hours Crossing Session), Section 4; New York Stock Exchange 900
Series Rules ((``Off-Hours Trading Facility Rules'') including Rules
902 and 907 (describing different types of coupled orders that can
be executed during the NYSE off-hours sessions)).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\11\ that the proposed rule change (SR-CHX-2006-38) be, and hereby
is, approved.
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\11\ 15 U.S.C. 78s(b)(2).
\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-6893 Filed 4-11-07; 8:45 am]
BILLING CODE 8010-01-P