Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Relating to a Prohibition on Using a Layoff Service Unless the Service Provides Required Information to the Exchange, 40086-40088 [E5-3665]

Download as PDF 40086 Federal Register / Vol. 70, No. 132 / Tuesday, July 12, 2005 / Notices All submissions should refer to File Number SR–CBOE–2005–44. 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 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 Section. Copies of such filing also will be available for inspection and copying at the principal office of the CBOE. 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–CBOE–2005–44 and should be submitted on or before August 2, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.15 Jill M. Peterson, Assistant Secretary. [FR Doc. E5–3666 Filed 7–11–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51967; File No. SR–CHX– 2004–25] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Relating to a Prohibition on Using a Layoff Service Unless the Service Provides Required Information to the Exchange July 1, 2005. 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 August 31, 2004, the Chicago Stock Exchange, 15 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate jul<14>2003 16:15 Jul 11, 2005 Jkt 205001 Inc. (‘‘CHX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the CHX. On June 7, 2005 and June 27, 2005, the Exchange filed Amendment Nos. 1 3 and 2 4 to the proposed rule change, respectively. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend CHX Article V, Rule 4 to prohibit Exchange participants, beginning August 1, 2005, from using any communications means to send orders to another market for execution (‘‘layoff service’’), unless that layoff service has established a process for providing the Exchange with specific information about the orders and the executions that participants receive. The text of the proposed rule change, as amended, is available on CHX’s Web site (https:// www.chx.com/marketreg/proposed rules.htm), at CHX’s principal office, 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 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 Changes 1. Purpose The Exchange’s participants execute trades on the Exchange and on other 3 See Amendment No. 1 dated June 7, 2005. In Amendment No. 1, the Exchange modified the text of the proposed rule change in response to comments by the Commission staff. See infra notes 12–16 and accompanying text for a description of items included in Amendment No. 1. 4 See Amendment No. 2 dated June 27, 2005, replacing the original filing and Amendment No. 1 in their entirety. In Amendment No. 2, the Exchange eliminated the requirement to provide information about the contra party to the execution and made other technical changes to the proposal. PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 markets. Most interaction with other markets occurs through electronic systems that are provided either by other markets themselves or by members of those markets. Although the Exchange currently receives execution information about its participants’ trading in other markets, the Exchange believes that it could conduct more efficient surveillance of its participants’ order-handling activities if it received additional types of information. This proposal, which would amend the Exchange’s rule relating to communications from the trading floor, is designed to provide the Exchange with the layoff service information that it needs to enhance its surveillance programs. Specifically, the proposal would prohibit Exchange participants, beginning August 1, 2005, from using a layoff service to send orders to another market for execution, unless that service (or the participant using the service) has established a process for providing the Exchange with the following specific information: (1) The symbol of the security to be traded; (2) the clearing organization; (3) an order identifier that uniquely identifies the order; (4) the participant recording the order details; (5) the number of shares; (6) the side of the market on which the order is placed; (7) a designation of the order type (e.g., market, limit, stop, stop limit); (8) whether the order is for the account of a customer or for the account of the participant sending the order; (9) whether the order is short or short exempt; (10) any limit price and/or stop price; (11) the date and time of order transmission; (12) the market to which the order was transmitted; (13) the time in force; (14) a designation of the order as held or not held; (15) any special conditions or instructions associated with the order (including any customer do-not-display instructions or all-ornone conditions); (16) any modifications to the details set out in (1) through (15), for all or part of an order or any cancellation of all or part of the order; (17) the date and time of the transmission of any modifications to the order or any cancellation of the order; (18) the date and time of any order expiration; (19) the identification of the party canceling or modifying the order; (20) the transaction price; (21) the number of shares executed; (22) the date and time of execution; (23) settlement instructions; (24) a system-generated time(s) of recording the required information; and (25) any other information that the Exchange may require from time to time.5 For purposes 5 See Proposed CHX Article V, Rule 4, Interpretation and Policy .01. E:\FR\FM\12JYN1.SGM 12JYN1 Federal Register / Vol. 70, No. 132 / Tuesday, July 12, 2005 / Notices of this proposal, an ‘‘order’’ would be defined as any written, oral or electronic instruction to effect a transaction.6 Other provisions of the proposal would set out additional requirements that are designed to ensure that the Exchange receives uniformly-presented, useful data.7 For example, the Exchange proposes that all information be provided on a real-time basis and in an electronic format acceptable to the Exchange.8 Moreover, each layoff service would be required to synchronize its business clocks with reference to a time source designated by the Exchange and maintain that synchronization following procedures prescribed by the Exchange.9 The Exchange confirms in another provision that all time references be expressed in terms of hours, minutes, and seconds.10 Furthermore, the Exchange confirms that a violation of these new requirements would be considered conduct inconsistent with just and equitable principles of trade, in violation of CHX Article VIII, Rule 7.11 Therefore, these violations would not be eligible for handling under the Exchange’s Minor Rule Violation Plan. The Exchange submitted Amendment No. 1 to require that participants provide additional information about their layoff activity; 12 to replace references to the Exchange’s ‘‘members’’ with references to its ‘‘participants,’’ reflecting changes in terminology associated with the Exchange’s February 2005 demutualization; 13 to require that participants notify the Exchange before using an alternative or additional layoff vendor; 14 and to confirm that these rules would not replace any record 6 See Proposed CHX Article V, Rule 4, Interpretation and Policy .03. 7 As an administrative matter, the proposal also would delete CHX Article V, Rule 5, which applied to wires from the Exchange’s floor to its branch offices. The Exchange represents that it no longer maintains branch offices and has no purpose for keeping this rule in place. 8 See Proposed CHX Article V, Rule 4, Interpretation and Policy .01. 9 See Proposed CHX Article V, Rule 4, Interpretation and Policy .02. 10 See Proposed CHX Article V, Rule 4, Interpretation and Policy .03. 11 See Proposed CHX Article V, Rule 4, Interpretation and Policy .04. 12 See Amendment No. 1, supra note 3. Among other things, the Exchange added requirements that participants confirm whether an order was for the account of a customer or for the account of the participant sending the order to the other market; whether an order was short or short exempt; the market to which the order was transmitted; the identification of any party canceling or modifying the order; the date and time of any order expiration; and the contra party to the execution (if applicable). 13 See Securities Exchange Act Release No. 51149 (February 8, 2005), 70 FR 7531 (February 14, 2005). 14 See Proposed CHX Article V, Rule 4, Interpretation and Policy .05. VerDate jul<14>2003 16:15 Jul 11, 2005 Jkt 205001 retention obligations to which the Exchange’s participants would be subject under the Act and the rules thereunder.15 Other changes proposed in Amendment No. 1 clarify the application of the rule text and make other minor corrections to the text.16 Amendment No. 2 eliminated one proposed field of data relating to the contra party to an execution and corrected a few typographical errors.17 As noted above, the Exchange believes that this proposal would enhance the Exchange’s ability to review its members’ order-handling activities and to determine their compliance with applicable trading rules. Moreover, the Exchange believes that this proposal is consistent with recommendations made by the independent consultant retained by the Exchange under its recent settlement agreement with the Commission.18 2. Statutory Basis The Exchange believes that the proposal, as amended, 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) of the Act.19 Specifically, the CHX believes that the proposal, as amended, is consistent with Section 6(b)(5) of the Act,20 in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest by permitting the Exchange to require its participants (or their layoff service providers) to provide the Exchange with data necessary to conduct appropriate surveillance of its participants’ trading activities. B. Self-Regulatory Organization’s Statement of Burden on Competition The Exchange does not believe that the proposed rule change, as amended, will impose any burden on competition. 15 See Proposed CHX Article V, Rule 4, Interpretation and Policy .06. 16 For example, the Exchange had mistakenly identified the proposed rule change as occurring in CHX Article VI, not in CHX Article V. 17 See Amendment No. 2, supra note 4. 18 See Securities Exchange Act Release No. 48566 (September 30, 2003) (Administrative Proceeding File No. 3–11282), available at https://www.sec.gov/ litigation/admin/34-48566.htm. 19 15 U.S.C. 78f(b). 20 15 U.S.C. 78f(b)(5). PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 40087 C. Self-Regulatory Organization’s Statement on Comments Regarding the Proposed Rule Changes Received From Members, Participants or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Changes 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 self-regulatory organization 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, as amended, 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 rulecomments@sec.gov. Please include File Number SR–CHX–2004–25 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–9303. All submissions should refer to File No. SR–CHX–2004–25. 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 E:\FR\FM\12JYN1.SGM 12JYN1 40088 Federal Register / Vol. 70, No. 132 / Tuesday, July 12, 2005 / Notices 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 such 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–2004–25 and should be submitted on or before August 2, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.21 Jill M. Peterson, Assistant Secretary. [FR Doc. E5–3665 Filed 7–11–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51962; File No. SR–ISE– 2005–29] Self-Regulatory Organizations; International Securities Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to Fee Changes July 1, 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 June 6, 2005, the International Securities Exchange, Inc. (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the ISE. On June 20, 2005, ISE filed Amendment No. 1 to the proposed rule change.3 The ISE has designated this proposal as one establishing or changing a due, fee, or other charge imposed by the ISE under Section 19(b)(3)(A)(ii) of the Act,4 and 21 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Amendment No. 1 made a technical change to the text of Exhibit 5 (ISE’s Schedule of Fees) and added footnote 6 to this rule filing. The correction to Exhibit 5 does not affect the fees for transactions in options on the five narrow-based indexes that are the subject of this filing, but only corrects Exhibit 5 to remove asterisks between the Payment for Order Flow section under Execution Fees and the Comparison Fee section, since no rule text has been omitted between those two sections. 4 15 U.S.C. 78s(b)(3)(A)(ii). VerDate jul<14>2003 16:15 Jul 11, 2005 Jkt 205001 Rule 19b–4(f)(2) thereunder,5 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The ISE is proposing to amend its Schedule of Fees to establish fees for transactions in options on five narrowbased indexes: the ISE–CCM Homeland Security Index, the ISE Oil & Gas Services Index, the ISE Semiconductors Index, the ISE Gold Index and the ISE Homebuilders Index.6 The text of the proposed rule change is available on the ISE’s Web site (https:// www.iseoptions.com/legal/ proposedlrulelchanges.asp), at the principal office of the ISE, 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 ISE included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The ISE 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 The Exchange is proposing to amend its Schedule of Fees to establish fees for transactions in options on five narrowbased indexes: the ISE–CCM Homeland Security Index (‘‘HSX’’), the ISE Oil & Gas Services Index (‘‘OOG’’), the ISE Semiconductors Index (‘‘BYT’’), the ISE Gold Index (‘‘HVY’’), and the ISE Homebuilders Index (‘‘RUF’’). Specifically, the Exchange is proposing to adopt an execution fee and a CFR 240.19b–4(f)(2). Exchange represents that the following five narrow-based indexes, ISE–CCM Homeland Security Index, the ISE Oil & Gas Services Index, the ISE Semiconductors Index, the ISE Gold Index and the ISE Homebuilders Index, meet the standards of ISE Rule 2002(b), which allows the ISE to begin trading these products by filing Form 19b– 4(e) at least five business days after commencement of trading these new products pursuant to Rule 19b–4(e) of the Act. Accordingly, ISE filed Form 19b–4(e) with the Commission on June 13, 2005. PO 00000 5 17 6 The Frm 00102 Fmt 4703 Sfmt 4703 comparison fee for all transactions in options on HSX, OOG, BYT, HVY, and RUF.7 The amount of the execution fee and comparison fee shall be the same for all order types on the Exchange— that is, orders for Public Customers, Market Makers, and Firm Proprietary— and shall be equal to the execution fee and comparison fee currently charged by the Exchange for Market Maker and Firm Proprietary transactions in equity options.8 The Exchange believes the proposed rule change will further the Exchange’s goal of introducing new products to the marketplace that are competitively priced. Additionally, the Exchange has entered into a license agreement with Cronus Capital Markets in connection with the listing and trading of options on HSX. As with certain other licensed options, the Exchange is adopting a surcharge per contract for trading in these options to defray the licensing costs.9 The Exchange believes that charging the participants that trade this instrument is the most equitable means of recovering the costs of the license. However, because of competitive pressures in the industry, the Exchange proposes to exclude Public Customer Orders 10 from this surcharge fee. Accordingly, this surcharge fee will only be charged to Exchange members with respect to non-Public Customer Orders (e.g., Market Maker and Firm Proprietary orders) and shall apply to Linkage Orders 11 under a pilot program that is set to expire on July 31, 2005. Further, since options on HSX, OOG, BYT, HVY, and RUF are not multiplylisted, the Payment for Order Flow fee shall not apply. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b)(4) of the Act,12 which requires that an exchange have an equitable allocation of reasonable dues, fees, and other charges among its members and other persons using its facilities. 7 The Exchange represents that these fees will be charged only to Exchange members. 8 The execution fee is currently between $.21 and $.12 per contract side, depending on the Exchange Average Daily Volume, and the comparison fee is currently $.03 per contract side. 9 The Commission notes the proposed fee is five (5) cents per contract/side. 10 Public Customer Order is defined in ISE Rule 100(a)(33) as an order for the account of a Public Customer. Public Customer is defined in ISE Rule 100(a)(32) as a person that is not a broker or dealer in securities. 11 See ISE Rule 1900(10). 12 15 U.S.C. 78f(b)(4). E:\FR\FM\12JYN1.SGM 12JYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 70, Number 132 (Tuesday, July 12, 2005)]
[Notices]
[Pages 40086-40088]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-3665]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51967; File No. SR-CHX-2004-25]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 
Thereto Relating to a Prohibition on Using a Layoff Service Unless the 
Service Provides Required Information to the Exchange

July 1, 2005.
    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 August 31, 2004, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the CHX. On June 7, 
2005 and June 27, 2005, the Exchange filed Amendment Nos. 1 \3\ and 2 
\4\ to the proposed rule change, respectively. The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Amendment No. 1 dated June 7, 2005. In Amendment No. 1, 
the Exchange modified the text of the proposed rule change in 
response to comments by the Commission staff. See infra notes 12-16 
and accompanying text for a description of items included in 
Amendment No. 1.
    \4\ See Amendment No. 2 dated June 27, 2005, replacing the 
original filing and Amendment No. 1 in their entirety. In Amendment 
No. 2, the Exchange eliminated the requirement to provide 
information about the contra party to the execution and made other 
technical changes to the proposal.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend CHX Article V, Rule 4 to prohibit 
Exchange participants, beginning August 1, 2005, from using any 
communications means to send orders to another market for execution 
(``layoff service''), unless that layoff service has established a 
process for providing the Exchange with specific information about the 
orders and the executions that participants receive. The text of the 
proposed rule change, as amended, is available on CHX's Web site 
(https://www.chx.com/marketreg/proposed rules.htm), at CHX's principal 
office, 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 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 Changes

1. Purpose
    The Exchange's participants execute trades on the Exchange and on 
other markets. Most interaction with other markets occurs through 
electronic systems that are provided either by other markets themselves 
or by members of those markets. Although the Exchange currently 
receives execution information about its participants' trading in other 
markets, the Exchange believes that it could conduct more efficient 
surveillance of its participants' order-handling activities if it 
received additional types of information.
    This proposal, which would amend the Exchange's rule relating to 
communications from the trading floor, is designed to provide the 
Exchange with the layoff service information that it needs to enhance 
its surveillance programs. Specifically, the proposal would prohibit 
Exchange participants, beginning August 1, 2005, from using a layoff 
service to send orders to another market for execution, unless that 
service (or the participant using the service) has established a 
process for providing the Exchange with the following specific 
information: (1) The symbol of the security to be traded; (2) the 
clearing organization; (3) an order identifier that uniquely identifies 
the order; (4) the participant recording the order details; (5) the 
number of shares; (6) the side of the market on which the order is 
placed; (7) a designation of the order type (e.g., market, limit, stop, 
stop limit); (8) whether the order is for the account of a customer or 
for the account of the participant sending the order; (9) whether the 
order is short or short exempt; (10) any limit price and/or stop price; 
(11) the date and time of order transmission; (12) the market to which 
the order was transmitted; (13) the time in force; (14) a designation 
of the order as held or not held; (15) any special conditions or 
instructions associated with the order (including any customer do-not-
display instructions or all-or-none conditions); (16) any modifications 
to the details set out in (1) through (15), for all or part of an order 
or any cancellation of all or part of the order; (17) the date and time 
of the transmission of any modifications to the order or any 
cancellation of the order; (18) the date and time of any order 
expiration; (19) the identification of the party canceling or modifying 
the order; (20) the transaction price; (21) the number of shares 
executed; (22) the date and time of execution; (23) settlement 
instructions; (24) a system-generated time(s) of recording the required 
information; and (25) any other information that the Exchange may 
require from time to time.\5\ For purposes

[[Page 40087]]

of this proposal, an ``order'' would be defined as any written, oral or 
electronic instruction to effect a transaction.\6\
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    \5\ See Proposed CHX Article V, Rule 4, Interpretation and 
Policy .01.
    \6\ See Proposed CHX Article V, Rule 4, Interpretation and 
Policy .03.
---------------------------------------------------------------------------

    Other provisions of the proposal would set out additional 
requirements that are designed to ensure that the Exchange receives 
uniformly-presented, useful data.\7\ For example, the Exchange proposes 
that all information be provided on a real-time basis and in an 
electronic format acceptable to the Exchange.\8\ Moreover, each layoff 
service would be required to synchronize its business clocks with 
reference to a time source designated by the Exchange and maintain that 
synchronization following procedures prescribed by the Exchange.\9\ The 
Exchange confirms in another provision that all time references be 
expressed in terms of hours, minutes, and seconds.\10\
---------------------------------------------------------------------------

    \7\ As an administrative matter, the proposal also would delete 
CHX Article V, Rule 5, which applied to wires from the Exchange's 
floor to its branch offices. The Exchange represents that it no 
longer maintains branch offices and has no purpose for keeping this 
rule in place.
    \8\ See Proposed CHX Article V, Rule 4, Interpretation and 
Policy .01.
    \9\ See Proposed CHX Article V, Rule 4, Interpretation and 
Policy .02.
    \10\ See Proposed CHX Article V, Rule 4, Interpretation and 
Policy .03.
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    Furthermore, the Exchange confirms that a violation of these new 
requirements would be considered conduct inconsistent with just and 
equitable principles of trade, in violation of CHX Article VIII, Rule 
7.\11\ Therefore, these violations would not be eligible for handling 
under the Exchange's Minor Rule Violation Plan.
---------------------------------------------------------------------------

    \11\ See Proposed CHX Article V, Rule 4, Interpretation and 
Policy .04.
---------------------------------------------------------------------------

    The Exchange submitted Amendment No. 1 to require that participants 
provide additional information about their layoff activity; \12\ to 
replace references to the Exchange's ``members'' with references to its 
``participants,'' reflecting changes in terminology associated with the 
Exchange's February 2005 demutualization; \13\ to require that 
participants notify the Exchange before using an alternative or 
additional layoff vendor; \14\ and to confirm that these rules would 
not replace any record retention obligations to which the Exchange's 
participants would be subject under the Act and the rules 
thereunder.\15\ Other changes proposed in Amendment No. 1 clarify the 
application of the rule text and make other minor corrections to the 
text.\16\ Amendment No. 2 eliminated one proposed field of data 
relating to the contra party to an execution and corrected a few 
typographical errors.\17\
---------------------------------------------------------------------------

    \12\ See Amendment No. 1, supra note 3. Among other things, the 
Exchange added requirements that participants confirm whether an 
order was for the account of a customer or for the account of the 
participant sending the order to the other market; whether an order 
was short or short exempt; the market to which the order was 
transmitted; the identification of any party canceling or modifying 
the order; the date and time of any order expiration; and the contra 
party to the execution (if applicable).
    \13\ See Securities Exchange Act Release No. 51149 (February 8, 
2005), 70 FR 7531 (February 14, 2005).
    \14\ See Proposed CHX Article V, Rule 4, Interpretation and 
Policy .05.
    \15\ See Proposed CHX Article V, Rule 4, Interpretation and 
Policy .06.
    \16\ For example, the Exchange had mistakenly identified the 
proposed rule change as occurring in CHX Article VI, not in CHX 
Article V.
    \17\ See Amendment No. 2, supra note 4.
---------------------------------------------------------------------------

    As noted above, the Exchange believes that this proposal would 
enhance the Exchange's ability to review its members' order-handling 
activities and to determine their compliance with applicable trading 
rules. Moreover, the Exchange believes that this proposal is consistent 
with recommendations made by the independent consultant retained by the 
Exchange under its recent settlement agreement with the Commission.\18\
---------------------------------------------------------------------------

    \18\ See Securities Exchange Act Release No. 48566 (September 
30, 2003) (Administrative Proceeding File No. 3-11282), available at 
https://www.sec.gov/litigation/admin/34-48566.htm.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposal, as amended, 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) of the Act.\19\ 
Specifically, the CHX believes that the proposal, as amended, is 
consistent with Section 6(b)(5) of the Act,\20\ in that it is designed 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest by permitting the Exchange to require its participants 
(or their layoff service providers) to provide the Exchange with data 
necessary to conduct appropriate surveillance of its participants' 
trading activities.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b).
    \20\ 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, as 
amended, will impose any burden on competition.

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

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Changes 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 self-regulatory organization 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, as amended, 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 Number SR-CHX-2004-25 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File No. SR-CHX-2004-25. 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

[[Page 40088]]

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 such 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-2004-25 and should be 
submitted on or before August 2, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3665 Filed 7-11-05; 8:45 am]
BILLING CODE 8010-01-P

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