Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Order Approving Proposed Rule Change Relating to Standards for Manual Execution of Market and Marketable Limit Orders, 43475-43476 [E5-3980]

Download as PDF Federal Register / Vol. 70, No. 143 / Wednesday, July 27, 2005 / Notices following Linkage order fees: (i) $.24 per contract transaction fee for equity, QQQQ and SPDR options, (ii) $.35 or $.20 per contract, depending on the premium, for OEF options and $.45 or $.25 per contract, depending on the premium, for other index options, (iii) $.04 per contract floor brokerage fee, if any portion of a Linkage order is manually handled, (iv) $.30 per contract RAES access fee, if a linkage order is executed in whole or in part on RAES, and (v) $.10 license fee on transactions in MNX and NDX options.6 Satisfaction Orders are not assessed Exchange fees. The Exchange believes that extension of the Linkage fee pilot program until July 31, 2006 will give the Exchange and the Commission further opportunity to evaluate the appropriateness of Linkage fees. 2. Statutory Basis. The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act 7 in general, and furthers the objectives of Section 6(b)(4) 8 of the Act in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges among CBOE members and other persons using its facilities. B. Self-Regulatory Organization’s Statement on Burden on Competition CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received from Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change. III. 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 rulecomments@sec.gov. Please include File 6 See CBOE Fees Schedule, Footnote 15. U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(4). 7 15 VerDate jul<14>2003 20:48 Jul 26, 2005 Jkt 205001 43475 fees and other charges among its members and other persons using its facilities. The Commission believes that Paper Comments the extension of the Linkage fee pilot • Send paper comments in triplicate until July 31, 2006 will give the to Jonathan G. Katz, Secretary, Commission further opportunity to Securities and Exchange Commission, evaluate whether such fees are 100 F Street, NE., Washington, DC appropriate. 20549–9303. The Commission finds good cause, All submissions should refer to File pursuant to Section 19(b)(2) of the Number SR–CBOE–2005–54. This file Act,12 for approving the proposed rule number should be included on the change prior to the thirtieth day after subject line if e-mail is used. To help the the date of publication of the notice of Commission process and review your the filing thereof in the Federal comments more efficiently, please use Register. The Commission believes that only one method. The Commission will granting accelerating approval will post all comments on the Commission’s preserve the Exchange’s existing pilot Internet Web site (http://www.sec.gov/ program for Linkage fees without rules/sro.shtml). Copies of the interruption as the CBOE and the submission, all subsequent Commission further consider the amendments, all written statements appropriateness of Linkage fees. with respect to the proposed rule V. Conclusion change that are filed with the Commission, and all written It is therefore ordered, pursuant to communications relating to the Section 19(b)(2) of the Act 13 that the proposed rule change between the proposed rule change (SR–CBOE–2005– Commission and any person, other than 54) is hereby approved on an those that may be withheld from the accelerated basis for a pilot period to public in accordance with the expire on July 31, 2006. provisions of 5 U.S.C. 552, will be For the Commission, by the Division of available for inspection and copying in Market Regulation, pursuant to delegated the Commission’s Public Reference authority.14 Section, 100 F Street, NE., Washington, Jonathan G. Katz, DC 20549. Copies of such filing also will Secretary. be available for inspection and copying [FR Doc. E5–3985 Filed 7–26–05; 8:45 am] at the principal office of the CBOE. All BILLING CODE 8010–01–P comments received will be posted without change; the Commission does not edit personal identifying SECURITIES AND EXCHANGE information from submissions. You COMMISSION should submit only information that you wish to make available publicly. All [Release No. 34–52062; File No. SR–CHX– 2004–03] submissions should refer to File Number SR–CBOE–2005–54 and should Self-Regulatory Organizations; be submitted on or before August 17, Chicago Stock Exchange, Inc.; Order 2005. Approving Proposed Rule Change IV. Commission’s Findings and Order Relating to Standards for Manual Granting Accelerated Approval of Execution of Market and Marketable Proposed Rule Change Limit Orders After careful consideration, the July 19, 2005. Commission finds that the proposed On February 11, 2004, the Chicago rule change is consistent with the Stock Exchange, Incorporated (‘‘CHX’’), requirements of the Act and the rules filed with the Securities and Exchange and regulations thereunder, applicable Commission (‘‘Commission’’), pursuant to a national securities exchange,9 and, to Section 19(b)(1) of the Securities in particular, with the requirements of Exchange Act of 1934 (‘‘Act’’),1 and Section 6(b) of the Act 10 and the rules Rule 19b–4 thereunder,2 a proposed rule and regulations thereunder. The change to amend Article XX, Rule 37 to Commission finds that the proposed eliminate a specific requirement that a rule change is consistent with Section specialist execute eligible orders at the 6(b)(4) of the Act,11 which requires that the rules of the Exchange provide for the price and size associated with the national best bid or offer (‘‘NBBO’’) and equitable allocation of reasonable dues, Number SR–CBOE–2005–54 on the subject line. 9 In approving this rule, the Commission notes that it has considered its impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(4). PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 12 15 U.S.C. 78s(b)(2). 13 Id. 14 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\27JYN1.SGM 27JYN1 43476 Federal Register / Vol. 70, No. 143 / Wednesday, July 27, 2005 / Notices replace it with a requirement that specialists use reasonable diligence to ascertain the best available price for the security so that the resultant execution price is as favorable to the order sender as possible under prevailing market conditions. The new rule sets out factors that will be considered by the CHX in determining whether the specialist used reasonable diligence. On December 14, 2004, the CHX filed Amendment No. 1 to its original submission. The proposed rule change, as amended, was published for comment in the Federal Register on December 22, 2004.3 The Commission received no comment letters with respect to the proposal. After careful review, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.4 In particular, the Commission believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,5 which requires, among other things, that an exchange’s rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. Specialists who execute market and marketable limit orders must, among other things, satisfy their duty of best execution by executing customer trades at the most favorable terms reasonably available under the circumstances. As amended, Article XX, Rule 37 will require specialists to use reasonable diligence to find the best available price for the security so that the resultant execution price is as favorable to the order sender as possible under prevailing market conditions. Furthermore, although CHX specialists no longer would be explicitly required to execute eligible orders at the NBBO, if the amended standard results in specialists effecting orders at a prices worse than the NBBO, this information would be reflected in the statistics that the CHX must produce pursuant to Rule 11Ac1–5.6 Broker-dealers that route orders to the CHX would have to consider this information in connection with their duty to obtain best execution on behalf of their customers. In addition, the Commission notes that the Exchange has committed to continue surveillance over order 3 See Securities Exchange Act Release No. 50865 (December 16, 2004), 69 FR 76804. 4 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 5 15 U.S.C. 78f(b)(5). 6 17 CFR 240.11Ac1–5. VerDate jul<14>2003 19:40 Jul 26, 2005 Jkt 205001 executions to ensure that specialists are using reasonable diligence to find the best available price for their customers. The Commission expects that such surveillance will be proactive and that meaningful disciplinary action will be taken against specialists found to have violated the rule. For the foregoing reasons, the Commission finds that the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange, and, in particular, Section 6(b)(5) of the Act.7 It is therefore ordered, pursuant to Section 19(b)(2) of the Act,8 that the proposed rule change (SR–CHX–2004– 03) be, and hereby is, approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.9 Jonathan G. Katz, Secretary. [FR Doc. E5–3980 Filed 7–26–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52085; File No. SR–FICC– 2005–13] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Procedure for Fine Waivers and To Make Other Technical and Administrative Amendments July 20, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 notice is hereby given that on July 15, 2005, the Fixed Income Clearing Corporation (‘‘FICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change described in Items I, II, and III below, which items have been prepared primarily by FICC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested parties. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The purpose of the proposed rule change is to amend the: (1) Government Securities Division (‘‘GSD’’) and Mortgage-Backed Securities Division (‘‘MBSD’’) rules to allow the PO 00000 7 15 U.S.C. 78f(b)(5). U.S.C. 78s(b)(2). 9 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). Membership and Risk Management Committee (‘‘Committee’’) to delegate fine waiver decisions to management while retaining the ability to override management’s decision; (2) GSD and MBSD rules to eliminate the automatic placement on the Watch List of FICC members who fail to notify FICC within two business days of first learning of their non-compliance with FICC’s membership standards; (3) MBSD rules to broaden the reference to ‘‘net worth;’’ (4) MBSD rules by adding a confidentiality clause; and (5) GSD rules to make a technical change by moving an incorrectly placed ‘‘and.’’ II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FICC 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. FICC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements.2 (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Management Waiver of Fines Currently, pursuant to GSD Rule 37 (‘‘Hearing Procedures’’), Section 1 (‘‘General’’) and MBSD Article V (‘‘Miscellaneous’’), Rule 3 (‘‘Fines and Other Sanctions’’), each time a member requests that an assessed fine be waived, FICC management makes a determination to accept or reject the waiver request based on a review of the circumstances leading to the disputed fine. FICC management then presents its determination to the Committee for ratification at its next regularly scheduled meeting. Final determinations by the Committee may be appealed according to the GSD and MBSD rules. The need for Committee approval of management decisions with respect to fine assessments delays final decisions for members because the Committee only meets approximately every two months. The Committee has routinely agreed with management’s decisions regarding fine waivers. For these reasons, the Committee at this time feels comfortable delegating decisions on fine waiver requests to management. 8 15 Frm 00087 Fmt 4703 Sfmt 4703 2 The Commission has modified the text of the summaries prepared by FICC. E:\FR\FM\27JYN1.SGM 27JYN1

Agencies

[Federal Register Volume 70, Number 143 (Wednesday, July 27, 2005)]
[Notices]
[Pages 43475-43476]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-3980]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52062; File No. SR-CHX-2004-03]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Order Approving Proposed Rule Change Relating to Standards for Manual 
Execution of Market and Marketable Limit Orders

July 19, 2005.
    On February 11, 2004, the Chicago Stock Exchange, Incorporated 
(``CHX''), 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 amend Article XX, Rule 37 to eliminate a 
specific requirement that a specialist execute eligible orders at the 
price and size associated with the national best bid or offer 
(``NBBO'') and

[[Page 43476]]

replace it with a requirement that specialists use reasonable diligence 
to ascertain the best available price for the security so that the 
resultant execution price is as favorable to the order sender as 
possible under prevailing market conditions. The new rule sets out 
factors that will be considered by the CHX in determining whether the 
specialist used reasonable diligence. On December 14, 2004, the CHX 
filed Amendment No. 1 to its original submission. The proposed rule 
change, as amended, was published for comment in the Federal Register 
on December 22, 2004.\3\ The Commission received no comment letters 
with respect to the proposal.
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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. 50865 (December 16, 
2004), 69 FR 76804.
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    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\4\ In particular, the Commission believes that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\5\ 
which requires, among other things, that an exchange's rules be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, and, in general, to 
protect investors and the public interest. Specialists who execute 
market and marketable limit orders must, among other things, satisfy 
their duty of best execution by executing customer trades at the most 
favorable terms reasonably available under the circumstances. As 
amended, Article XX, Rule 37 will require specialists to use reasonable 
diligence to find the best available price for the security so that the 
resultant execution price is as favorable to the order sender as 
possible under prevailing market conditions. Furthermore, although CHX 
specialists no longer would be explicitly required to execute eligible 
orders at the NBBO, if the amended standard results in specialists 
effecting orders at a prices worse than the NBBO, this information 
would be reflected in the statistics that the CHX must produce pursuant 
to Rule 11Ac1-5.\6\ Broker-dealers that route orders to the CHX would 
have to consider this information in connection with their duty to 
obtain best execution on behalf of their customers.
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    \4\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 17 CFR 240.11Ac1-5.
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    In addition, the Commission notes that the Exchange has committed 
to continue surveillance over order executions to ensure that 
specialists are using reasonable diligence to find the best available 
price for their customers. The Commission expects that such 
surveillance will be proactive and that meaningful disciplinary action 
will be taken against specialists found to have violated the rule.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange, and, in 
particular, Section 6(b)(5) of the Act.\7\
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    \7\ 15 U.S.C. 78f(b)(5).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-CHX-2004-03) be, and hereby 
is, approved.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E5-3980 Filed 7-26-05; 8:45 am]
BILLING CODE 8010-01-P