Self-Regulatory Organizations; Chicago Stock Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Extension of a Pilot Relating to Transactions in Certain Exchange-Traded Funds, 12026-12027 [E5-1012]
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12026
Federal Register / Vol. 70, No. 46 / Thursday, March 10, 2005 / Notices
[FR Doc. 05–4698 Filed 3–9–05; 8:45 am]
BILLING CODE 3110–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51303; File No. SR–CHX–
2005–05]
Self-Regulatory Organizations;
Chicago Stock Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to the Extension
of a Pilot Relating to Transactions in
Certain Exchange-Traded Funds
March 2, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 2,
2005, the Chicago Stock Exchange,
Incorporated (‘‘CHX’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (the ‘‘Commission’’) a
request for reinstatement and extension
of a pilot rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Exchange filed the proposed rule change
pursuant to Section 19(b)(3)(A) of the
Act,3 and Rule 19b–4(f)(6) 4 thereunder,
which renders the rule change effective
upon filing with the Commission.5 The
Commission is publishing this notice to
solicit comments on the proposal from
interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
In its submission, the Exchange
requested extension of a pilot rule
change to CHX Article XX, Rule 37(a),
which governs manual execution of
eligible market and marketable limit
orders. The pilot rule change, which
will remain in effect for an additional
60-day pilot period, permits a CHX
specialist, acting in its principal
capacity, to manually execute an
incoming market or marketable limit
order in one of three exchange-traded
funds at a price other than the national
best bid or offer.
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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 4 17 CFR 240.19b–4(f)(6).
5 The Commission waived the 5-day prefiling
notice requirement.
2 17
VerDate jul<14>2003
18:28 Mar 09, 2005
Jkt 205001
the purpose of and basis for the
proposed rule change 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
On August 28, 2002, the Commission
issued an order granting a de minimis
exemption (‘‘Exemption’’) for
transactions in certain exchange-traded
funds (‘‘Exempt ETFs’’) 6 from the tradethrough provisions of the Intermarket
Trading System (‘‘ITS’’) Plan.7
As stated by both Commission staff
and Commissioners at an open meeting
on August 27, 2002, rapid-fire
quotations and executions in Exempt
ETFs occur consistently throughout the
trading day within a range around the
NBBO, rendering it extremely difficult,
if not impossible, to access liquidity at
an exact NBBO price point.
Compounding the ‘‘flickering’’ noted by
the Commission, the Exchange has
noted a marked increased in the
incidence of locked and crossed markets
in Exempt ETFs.
CHX Article XX, Rule 37(a),
commonly referred to as the Exchange’s
‘‘Best Rule,’’ requires that with respect
to any market or marketable limit order
not executed automatically, a CHX
specialist must ‘‘ * * * either (a)
manually execute such order at a price
and size equal to the NBBO price and
size the time the order was received; or
(b) act as agent for such order in seeking
to obtain the best available price for
such order on a marketplace other than
the Exchange, using order routing
systems where appropriate.’’
Given the unique environment in
which the ETFs are traded, and the
difficulty that CHX specialists often
encounter in accessing NBBO price
points, the Exchange’s Department of
Market Regulation (‘‘Department’’)
believes that its enforcement of the Best
6 The three affected Exempt ETFs are the
exchange-traded funds tracking the Nasdaq-100
Index (‘‘QQQ’’), the Dow Jones Industrial Average
(‘‘DIAMONDs’’) and the Standard & Poor’s 500
Index (‘‘SPDRs’’).
7 See Securities Exchange Act Release No. 46428
(August 28, 2002). At present, the Exemption
extends to transactions that are ‘‘executed at a price
that is no more than three cents lower than the
highest bid displayed in CQS and no more than
three cents higher than the lowest offer displayed
in CQS.’’
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
Rule must take the ETF trading
environment into account when the
Department evaluates the execution
prices of eligible market and marketable
limit orders for Exempt ETFs. The
Department believes that in certain
instances, execution of an order in an
Exempt ETF at a price other than the
NBBO may nonetheless be consistent
with the specialist’s best execution
obligation, in light of the unique
environment that characterizes trading
in Exempt ETFs. The Exchange believes
that the current version of the BEST
Rule contains sufficient latitude with
respect to an order executed by a CHX
specialist acting as agent for the order,8
but does not contemplate any flexibility
for specialists acting in their principal
capacity.9 Accordingly, the Exchange
obtained pilot approval of the attached
rule change, which permits a CHX
specialist, acting in its principal
capacity, to manually execute an
incoming market or marketable limit
order in an Exempt ETF at a price other
than the NBBO.10 The pilot expired on
February 24, 2005.11 Accordingly, the
Exchange requests reinstatement and a
sixty-day extension of the pilot rule
change; the pilot rule text incorporated
into this submission as Exhibit 5 does
not differ in any respect from the
existing pilot rule provisions.
Significantly, the pilot rule change
does not excuse a CHX specialist from
their best execution obligations with
respect to manually-executed orders.
Moreover, the pilot rule change only
relates to orders that are executed
manually, when a CHX specialist’s
ability to obtain liquidity at an exact
NBBO price point is extremely limited.
Orders that are executed automatically
will continue to be executed by the
Exchange’s MAX automated execution
system at the NBBO in effect at the time
the order is received.
8 The Best Rule provision governing manual
agency executions obligates the CHX specialist to
seek ‘‘* * * the best available price.’’ CHX Article
XX, Rule 37(a)(2).
9 The Best Rule provision governing manual
principal executions obligates the CHX specialist to
execute the order at the ‘‘ * * * NBBO price and
size at the time the order was received.’’ CHX
Article XX, Rule 37(a)(2).
10 This rule change is closely analogous to the
Exchange’s previously submitted interpretation
regarding execution of resting limit orders in
Exempt ETFs. Under the limit order interpretation,
CHX specialists need not provide execution
guarantees for Exempt ETFs, based on tradethroughs by other markets, that CHX specialists
typically provide to all other listed issues. See
Securities Exchange Act Release No. 46557
(September 26, 2002), 67 FR 61941 (October 2,
2002).
11 See Securities Exchange Act Release No. 50935
(December 27, 2004), 70 FR 414 (January 4, 2005).
E:\FR\FM\10MRN1.SGM
10MRN1
Federal Register / Vol. 70, No. 46 / Thursday, March 10, 2005 / Notices
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).12 The CHX believes the
proposal is consistent with Section
6(b)(5) of the Act 13 in that it is designed
to promote just and equitable principles
of trade, to remove impediments, 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.
B. Self-Regulatory Organization’s
Statement of Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any inappropriate burden on
competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed pilot
rule change does not:
(i) Significantly affect the protection
of investors or the public interest;
(ii) Impose any significant burden on
competition; and
(iii) Become operative for 30 days
from the date on which it was filed, or
such shorter time as the Commission
may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 14 and Rule 19b–4(f)(6)
thereunder.15 At any time during the 60day pilot period, the Commission may
summarily abrogate such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
The Exchange has requested that the
Commission waive the 30-day operative
delay in Rule 19b–4(f)(6)(iii). The
Commission believes such waiver is
consistent with the protection of
investors and the public interest
because it will allow the pilot to operate
without delay. For this reason, the
Commission designates the proposal to
12 15
U.S.C. 78(f)(b).
U.S.C. 78f(b)(5).
14 15 U.S.C. 78s(b)(3)(A).
15 17 CFR 240.19b–4(f)(6).
18:28 Mar 09, 2005
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposal is
consistent with the Act. Comments may
be submitted by any of the following
methods:
Jkt 205001
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.17
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–1012 Filed 3–9–05; 8:45 am]
BILLING CODE 8010–01–P
DEPARTMENT OF STATE
[Public Notice 5013]
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec. gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
No. SR–CHX–2005–05 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
450 Fifth Street, NW., Washington, DC
20549–0609.
All submissions should refer to File
No. SR–CHX–2005–05. 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 (https://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 changes 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. Copies of the filing will also 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 No.
SR–CHX–2005–05 and should be
submitted on or before March 31, 2005.
16 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
13 15
VerDate jul<14>2003
be effective and operative upon filing
with the Commission.16
12027
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
30-Day Notice of Proposed Information
Collection: Form DS–2019, Certificate
of Eligibility for Exchange Visitor (J–1)
Status, OMB Number 1405–0119
Notice of request for public
comment and submission to OMB of
proposed collection of information.
ACTION:
SUMMARY: The Department of State has
submitted the following information
collection request to the Office of
Management and Budget (OMB) for
approval in accordance with the
Paperwork Reduction Act of 1995.
• Title of Information Collection:
Certificate of Eligibility for Exchange
Visitor (J–1) Status.
• OMB Control Number: 1405–0119.
• Type of Request: Extension of a
currently approved collection.
• Originating Office: Bureau of
Educational and Cultural Affairs, DOS/
ECA/EC.
• Form Number: DS–2019.
• Respondents: Department of State
designated Exchange Visitor Program
sponsors and exchange visitors.
• Estimated Number of Respondents:
300,000.
• Estimated Number of Responses:
300,000.
• Average Hours per Response: 45
minutes.
• Total Estimated Burden: 225,000.
• Frequency: On occasion.
• Obligation To Respond: Required to
obtain or retain a benefit.
DATES: The Department will accept
comments from the public for up to 30
days from March 10, 2005.
ADDRESSES: Comments and questions
should be directed to Alex Hunt, the
State Department Desk Officer in Office
of Information and Regulatory Affairs at
the Office of Management and Budget
(OMB), who may be reached on (202)
395–7860. You may submit comments
by any of the following methods:
• E-mail: ahunt@omb.eop.gov. You
must include the DS form number (if
applicable), information collection title,
and OMB control number in the subject
line of your message.
17 CFR
E:\FR\FM\10MRN1.SGM
200.30–3(a)(12).
10MRN1
]]>Agencies
[Federal Register Volume 70, Number 46 (Thursday, March 10, 2005)]
[Notices]
[Pages 12026-12027]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-1012]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51303; File No. SR-CHX-2005-05]
Self-Regulatory Organizations; Chicago Stock Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to the Extension of a Pilot Relating to
Transactions in Certain Exchange-Traded Funds
March 2, 2005.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on March 2, 2005, the Chicago Stock Exchange, Incorporated
(``CHX'' or ``Exchange'') filed with the Securities and Exchange
Commission (the ``Commission'') a request for reinstatement and
extension of a pilot rule change as described in Items I and II below,
which Items have been prepared by the Exchange. The Exchange filed the
proposed rule change pursuant to Section 19(b)(3)(A) of the Act,\3\ and
Rule 19b-4(f)(6) \4\ thereunder, which renders the rule change
effective upon filing with the Commission.\5\ The Commission is
publishing this notice to solicit comments on the proposal from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 4 17 CFR 240.19b-4(f)(6).
\5\ The Commission waived the 5-day prefiling notice
requirement.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
In its submission, the Exchange requested extension of a pilot rule
change to CHX Article XX, Rule 37(a), which governs manual execution of
eligible market and marketable limit orders. The pilot rule change,
which will remain in effect for an additional 60-day pilot period,
permits a CHX specialist, acting in its principal capacity, to manually
execute an incoming market or marketable limit order in one of three
exchange-traded funds at a price other than the national best bid or
offer.
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 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
On August 28, 2002, the Commission issued an order granting a de
minimis exemption (``Exemption'') for transactions in certain exchange-
traded funds (``Exempt ETFs'') \6\ from the trade-through provisions of
the Intermarket Trading System (``ITS'') Plan.\7\
---------------------------------------------------------------------------
\6\ The three affected Exempt ETFs are the exchange-traded funds
tracking the Nasdaq-100 Index (``QQQ''), the Dow Jones Industrial
Average (``DIAMONDs'') and the Standard & Poor's 500 Index
(``SPDRs'').
\7\ See Securities Exchange Act Release No. 46428 (August 28,
2002). At present, the Exemption extends to transactions that are
``executed at a price that is no more than three cents lower than
the highest bid displayed in CQS and no more than three cents higher
than the lowest offer displayed in CQS.''
---------------------------------------------------------------------------
As stated by both Commission staff and Commissioners at an open
meeting on August 27, 2002, rapid-fire quotations and executions in
Exempt ETFs occur consistently throughout the trading day within a
range around the NBBO, rendering it extremely difficult, if not
impossible, to access liquidity at an exact NBBO price point.
Compounding the ``flickering'' noted by the Commission, the Exchange
has noted a marked increased in the incidence of locked and crossed
markets in Exempt ETFs.
CHX Article XX, Rule 37(a), commonly referred to as the Exchange's
``Best Rule,'' requires that with respect to any market or marketable
limit order not executed automatically, a CHX specialist must `` * * *
either (a) manually execute such order at a price and size equal to the
NBBO price and size the time the order was received; or (b) act as
agent for such order in seeking to obtain the best available price for
such order on a marketplace other than the Exchange, using order
routing systems where appropriate.''
Given the unique environment in which the ETFs are traded, and the
difficulty that CHX specialists often encounter in accessing NBBO price
points, the Exchange's Department of Market Regulation (``Department'')
believes that its enforcement of the Best Rule must take the ETF
trading environment into account when the Department evaluates the
execution prices of eligible market and marketable limit orders for
Exempt ETFs. The Department believes that in certain instances,
execution of an order in an Exempt ETF at a price other than the NBBO
may nonetheless be consistent with the specialist's best execution
obligation, in light of the unique environment that characterizes
trading in Exempt ETFs. The Exchange believes that the current version
of the BEST Rule contains sufficient latitude with respect to an order
executed by a CHX specialist acting as agent for the order,\8\ but does
not contemplate any flexibility for specialists acting in their
principal capacity.\9\ Accordingly, the Exchange obtained pilot
approval of the attached rule change, which permits a CHX specialist,
acting in its principal capacity, to manually execute an incoming
market or marketable limit order in an Exempt ETF at a price other than
the NBBO.\10\ The pilot expired on February 24, 2005.\11\ Accordingly,
the Exchange requests reinstatement and a sixty-day extension of the
pilot rule change; the pilot rule text incorporated into this
submission as Exhibit 5 does not differ in any respect from the
existing pilot rule provisions.
---------------------------------------------------------------------------
\8\ The Best Rule provision governing manual agency executions
obligates the CHX specialist to seek ``* * * the best available
price.'' CHX Article XX, Rule 37(a)(2).
\9\ The Best Rule provision governing manual principal
executions obligates the CHX specialist to execute the order at the
`` * * * NBBO price and size at the time the order was received.''
CHX Article XX, Rule 37(a)(2).
\10\ This rule change is closely analogous to the Exchange's
previously submitted interpretation regarding execution of resting
limit orders in Exempt ETFs. Under the limit order interpretation,
CHX specialists need not provide execution guarantees for Exempt
ETFs, based on trade-throughs by other markets, that CHX specialists
typically provide to all other listed issues. See Securities
Exchange Act Release No. 46557 (September 26, 2002), 67 FR 61941
(October 2, 2002).
\11\ See Securities Exchange Act Release No. 50935 (December 27,
2004), 70 FR 414 (January 4, 2005).
---------------------------------------------------------------------------
Significantly, the pilot rule change does not excuse a CHX
specialist from their best execution obligations with respect to
manually-executed orders. Moreover, the pilot rule change only relates
to orders that are executed manually, when a CHX specialist's ability
to obtain liquidity at an exact NBBO price point is extremely limited.
Orders that are executed automatically will continue to be executed by
the Exchange's MAX[supreg] automated execution system at the NBBO in
effect at the time the order is received.
[[Page 12027]]
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).\12\ The CHX believes the proposal is
consistent with Section 6(b)(5) of the Act \13\ in that it is designed
to promote just and equitable principles of trade, to remove
impediments, 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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78(f)(b).
\13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement of Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed pilot rule change does not:
(i) Significantly affect the protection of investors or the public
interest;
(ii) Impose any significant burden on competition; and
(iii) Become operative for 30 days from the date on which it was
filed, or such shorter time as the Commission may designate, it has
become effective pursuant to Section 19(b)(3)(A) of the Act \14\ and
Rule 19b-4(f)(6) thereunder.\15\ At any time during the 60-day pilot
period, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
The Exchange has requested that the Commission waive the 30-day
operative delay in Rule 19b-4(f)(6)(iii). The Commission believes such
waiver is consistent with the protection of investors and the public
interest because it will allow the pilot to operate without delay. For
this reason, the Commission designates the proposal to be effective and
operative upon filing with the Commission.\16\
---------------------------------------------------------------------------
\16\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposal is
consistent with the Act. Comments may be submitted by any of the
following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File No. SR-CHX-2005-05 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File No. SR-CHX-2005-05. 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 (https://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 changes 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. Copies of the filing
will also 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 No. SR-CHX-
2005-05 and should be submitted on or before March 31, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\17\
---------------------------------------------------------------------------
\17\ CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-1012 Filed 3-9-05; 8:45 am]
BILLING CODE 8010-01-P
