

[Federal Register: November 1, 2007 (Volume 72, Number 211)]
[Notices]               
[Page 61919-61921]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01no07-89]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56698; File No. SR-CHX-2007-23]

 
 Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change to Allow the Exchange to Open 
at 8:30 a.m.

October 24, 2007.
    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 October 2, 2007, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with

[[Page 61920]]

the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I, II and III below, which Items have 
been substantially 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).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CHX proposes to amend its rules allow the CHX to open at 8:30 
a.m., without regard to whether the primary market in a particular 
security is open and to make other associated changes to its rules. The 
text of this proposed rule change is available on the Exchange's Web 
site at http://www.chx.com/content/Participant_Information/Rules_Filings.html
, at the CHX's Office of the Secretary, and at the 

Commission's Public Reference Room.

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 changes and 
discussed any comments it received regarding the proposal. 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
    Under existing rules, the Exchange generally opens for trading in a 
security once the primary market has done so.\3\ 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.\4\
---------------------------------------------------------------------------

    \3\ See CHX Rules, Article 20, Rule 1(b).
    \4\ See CHX Rules, Article 20, Interpretation and Policy .01.
---------------------------------------------------------------------------

    While these rules provided a reasonable way to handle the opening 
as the Exchange transitioned from its specialist trading model to its 
new fully-automated trading model, the Exchange believes that it is no 
longer appropriate to base its opening time on the actions taken by 
other markets. Through this filing, the Exchange would amend its rules 
to permit trading to begin at 8:30 a.m., except for trading in 
specified exchange-traded funds, which would begin at 7:20 a.m.\5\
---------------------------------------------------------------------------

    \5\ 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).
---------------------------------------------------------------------------

    In conjunction with this change to the opening time of the 
Exchange's market, the Exchange would make two other changes to its 
rules. First, the Exchange would eliminate the opening cross order 
type. 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.\6\ 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.\7\ 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.
---------------------------------------------------------------------------

    \6\ 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.
    \7\ 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).
---------------------------------------------------------------------------

2. Statutory Basis
    The CHX believes the proposal is consistent with the requirements 
of the Act and the rules and regulations thereunder that are applicable 
to a national securities exchange, and, in particular, with the 
requirements of Section 6(b).\8\ The proposed rule change is consistent 
with Section 6(b)(5) of the Act \9\ because it would promote just and 
equitable principles of trade, remove impediments to, and perfect the 
mechanism of, a free and open market and a national market system, and, 
in general, protect investors and the public interest by permitting the 
Exchange to begin trading at 8:30 a.m., without regard to whether the 
primary market in a particular security is open.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78(f)(b).
    \9\ 15 U.S.C. 78(f)(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    CHX does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposal.

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 other 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 CHX consents, the Commission will:
    (A) By order approve the proposed rule changes, or
    (B) Institute proceedings to determine whether the proposed rule 
changes 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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-CHX-2007-23 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary,

[[Page 61921]]

Securities and Exchange Commission, 100 F Street, NE., Washington, DC 
20549-1090.

    All submissions should refer to File Number SR-CHX-2007-23. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). 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 in the Commission's Public Reference Room, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of the CHX. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CHX-2007-23 and should be 
submitted on or before November 23, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
 [FR Doc. E7-21455 Filed 10-31-07; 8:45 am]

BILLING CODE 8011-01-P
