[Federal Register: January 18, 2008 (Volume 73, Number 13)]
[Notices]
[Page 3499-3500]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18ja08-93]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57140; File No. SR-CHX-2007-23]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Order Approving a Proposed Rule Change To Allow the Exchange To Open at
8:30 a.m. (Chicago Time) Without Regard to the Opening on the Primary
Market
January 14, 2008.
I. Introduction
On October 2, 2007, the Chicago Stock Exchange, Inc. (``CHX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to allow the Exchange to open at 8:30 a.m.
(Chicago time) without regard to the opening on the primary market. To
accommodate its implementation schedule for this proposal, the Exchange
extended the time for Commission action to January 14, 2008. The
Federal Register published the proposed rule change for comment on
November 1, 2007.\3\ The Commission received no comments on the
proposal.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 56698 (October 24,
2007), 72 FR 61919.
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II. Description
Under existing rules, the Exchange generally opens for trading in a
security once the primary market has done so.\4\ If the primary market
announces that it will not open, or if the primary market has delayed
its opening for reasons other than a regulatory halt, the rules permit
two senior CHX officials to open the market.\5\ The Exchange has
proposed to amend its rules to permit trading to begin at 8:30 a.m.
(Chicago time), except for trading in specified exchange-traded funds,
which would begin at 7:20 a.m. (Chicago time).\6\
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\4\ See CHX Rules, Article 20, Rule 1(b).
\5\ See CHX Rules, Article 20, Interpretation and Policy .01.
\6\ See Proposed CHX Rules, Article 20, Rule 1(b). The Exchange
represents that Exchange-traded funds that begin trading at 7:20
a.m. would be announced, from time to time, by the Exchange in a
customer service notification or other type of update. The only
exchange-traded fund currently trading at 7:20 a.m. is the
streetTRACKS [reg] Gold Trust. Telephone conversation
between Ellen Neely, President and General Counsel, CHX, Richard
Holley III, Senior Special Counsel, Division of Market Regulation
(``Division''), Commission, and Sonia Trocchio, Special Counsel,
Division, Commission (October 18, 2007).
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In conjunction with this change to the opening time of the
Exchange's market, the Exchange also proposes two other changes to its
rules. First, the Exchange would eliminate the opening cross order
type. According to the Exchange, these cross orders, which are designed
to execute at the primary market opening price, likely could no longer
be effectively executed on the Exchange, once the proposed change is
made to the time of the Exchange's opening.\7\ In addition, the
Exchange would add a new rule that prevents immediate or cancel
(``IOC'') market orders from being accepted until either (i) the
primary market in a security has opened trading in that security or
(ii) two senior officers of the Exchange have determined that it is
appropriate for the Exchange to accept IOC market orders.\8\ The
[[Page 3500]]
Exchange states that this change is designed to prevent market orders
from being executed at prices that are far away from the primary market
opening price, when that market ultimately opens.
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\7\ If the Exchange's systems allow its participants to begin
trading before the primary market opens trading in a particular
security, an opening cross order (which must execute at the primary
market opening price) might violate the protected quotations of
other markets. To avoid this potential result, the Exchange believes
that it is appropriate to eliminate this order type.
\8\ See Proposed CHX Rules, Article 1, Rule 2(n) and Article 20,
Rule 4(b)(13). For purposes of this rule, another exchange would be
considered to have opened for trading in a security when the first
trade in that security occurs in that market on or after 8:30 a.m.
The Exchange has stated that two senior officers of the Exchange
might decide that it is appropriate to allow IOC market orders to be
accepted if, for example, the primary market has announced that it
will open later than expected, but other markets are open to provide
additional liquidity. Telephone conversation between Ellen Neely,
President and General Counsel, CHX, Richard Holley III, Senior
Special Counsel, Division, Commission, and Sonia Trocchio, Special
Counsel, Division, Commission (October 18, 2007).
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III. Discussion
After careful review, 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.\9\
In particular, the Commission finds that the proposal is consistent
with Section 6(b)(5) of the Act,\10\ which requires, among other
things, that a national securities exchange's rules be designed to
promote just and equitable principles of trade, to remove impediments
to 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. Previously, the Exchange opened for trading in a
security once the primary market had opened in that security. The
Exchange now proposes to permit trading to begin at 8:30 a.m. Chicago
time (9:30 a.m. Eastern time), without regard to the whether the
primary market opened in that security. The Commission believes that
this proposed change is consistent with the Act and does not raise any
new regulatory issues. Further, the proposal is consistent with the
definition of ``regular trading hours'' under Rule 600(b)(64) of the
Act.\11\ In addition, the Exchange has proposed a related change to
eliminate the opening cross order type, which executes at the primary
market opening price. As the Exchange will no longer link its opening
to the primary market, the Commission believes that eliminating the
cross order type is consistent with the Act as it eliminates the
potential for those order types to violate the protected quotations of
other markets. Finally, the Exchange's proposal to prevent IOC market
orders from being accepted until the primary market opens in that
security or two senior officers of the Exchange otherwise determine
that it is appropriate to accept such orders is likewise consistent
with the Act and the protection of investors and the public interest
and should allow IOC market orders entered on CHX to be executed at
prices that are closely related to the primary market opening price.
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\9\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\10\ 15 U.S.C. 78f(b)(5).
\11\ 17 CFR 242.600(b)(64).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-CHX-2007-23) is approved.
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\12\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-860 Filed 1-17-08; 8:45 am]
BILLING CODE 8011-01-P