Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Order Granting Approval to a Proposed Rule Change and Amendment Nos. 1, 2 and 3 Thereto Relating to the Transfer of Securities Among Co.-Specialists Within a Specialist Firm, 43254-43255 [E6-12151]
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43254
Federal Register / Vol. 71, No. 146 / Monday, July 31, 2006 / Notices
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,12 that the
proposed rule change (SR–CBOE–2006–
27), as amended, is approved on an
accelerated basis.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.13
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6–12155 Filed 7–28–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54191; File No. SR–CHX–
2006–04]
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Order
Granting Approval to a Proposed Rule
Change and Amendment Nos. 1, 2 and
3 Thereto Relating to the Transfer of
Securities Among Co.-Specialists
Within a Specialist Firm
July 21, 2006.
On March 8, 2006, the Chicago Stock
Exchange, Inc. (‘‘CHX’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend its rules to permit the
transfer of securities to different cospecialists within a specialist firm. On
May 3, 2006, CHX filed Amendment No.
1 to the proposed rule change.3 On May
22, 2006, CHX filed Amendment No. 2
to the proposed rule change.4 The
proposed rule change, as amended, was
published for comment in the Federal
Register on June 15, 2006.5 On July 3,
2006, CHX filed Amendment No. 3 to
12 Id.
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 In Amendment No. 1, the Exchange revised the
rule text of the proposed rule change to clarify the
application of the proposal to intrafirm transfers
and revised the purpose section to discuss the
proposed provision requiring the specialist unit to
accurately represent its plans in the specialist
application regarding designating a particular cospecialist to trade a security.
4 In Amendment No. 2, the Exchange revised the
rule text of the proposed rule change to clarify the
impact of an intrafirm transfer on the deregistration
and registration of individual co-specialists within
a specialist firm and made non-substantive changes
to the proposed rule text. The proposed rule text
set forth in Amendment No. 2 superceded and
replaced the rule text set forth in the initial filing
and Amendment No. 1 in its entirety.
5 See Securities Exchange Act Release No. 53949
(June 6, 2006), 71 FR 34648.
sroberts on PROD1PC70 with NOTICES
1 15
VerDate Aug<31>2005
17:34 Jul 28, 2006
Jkt 208001
the proposed rule change.6 The
Commission received no comments
regarding the proposal, as amended.
This order approves the proposed rule
change, as amended.
Under the Exchange’s current rules
relating to the assignment of securities
to specialist firms, the Committee on
Specialist Assignment and Evaluation
(‘‘CSAE’’) assigns each security to a
specialist firm and this firm is
responsible both financially and as a
regulatory matter for the trading of the
security.7 At the same time, however,
when a specialist firm applies to trade
a security, it must identify the cospecialist that will trade the security
and the CSAE will review the cospecialist’s trading performance in
making its assignment decision.8 As an
overall matter, the specialist firm and
the individual co-specialist are jointly
responsible for each assigned security
and the decision by either the firm or
the individual trader to deregister in a
security could result in the posting of
the security for re-assignment.9
The current Exchange rules generally
require that a co-specialist to whom a
security was assigned in competition to
keep the assigned security for a period
of two years.10 Alternatively, if the
specialist unit agrees to have the
security posted, a period of at least one
year must have elapsed from the date of
the original assignment.11 Further,
securities assigned without competition
may be transferred without a waiting
period. However, in all situations, the
transfers must be approved by the
CSAE.12
The Exchange proposes to delete the
waiting period requirement prior to
approving a request for deregistration
and to permit the transfer of securities
among co-specialists within a firm,
without seeking prior CSAE approval, as
long as: (1) The specialist unit
immediately notifies the Exchange of
such transfer; and (2) when such a
transfer is made within six months of an
initial assignment of the security to the
specialist unit, the specialist unit
provides written notification to the
6 In Amendment No. 3, the Exchange makes
minor, non-substantive changes to the rule text of
the proposed rule change. This is a technical
amendment and is not subject to notice and
comment.
7 See Article XXX, Rule 1, Interpretation and
Policy .01, Section II, Introductory paragraphs; and
Section I.4.
8 See Article XXX, Rule 1, Interpretation and
Policy .01, Sections II and III.
9 See Article XXX, Rule 1, Interpretation and
Policy .01, Section I.4.
10 See Article XXX, Rule 1, Interpretation and
Policy .01, Section I.2.
11 Id.
12 Id.
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Frm 00161
Fmt 4703
Sfmt 4703
Exchange of the transfer decision and of
its reasons for making the change.
Accordingly, each intrafirm transfer by
the specialist unit effectively would
deregister a co-specialist in the
securities that the co-specialist no
longer trades and register another cospecialist in any newly-assigned
securities.
In addition, under the Exchange’s
existing rules, when the CSAE makes a
decision to assign a particular security,
the CSAE considers the qualifications of
the specialist unit and the co-specialist’s
demonstrated ability and experience.
Because the CSAE bases its decision, in
part, on a co-specialist’s qualifications,
the Exchange proposes to make explicit
in its rules that it is important that a
specialist firm accurately represent
plans for having a particular cospecialist trade a security. Under the
proposal, a specialist unit must not
designate a co-specialist with relatively
strong demonstrated ability and
experience when applying for a security
and then immediately transfer the
security to a co-specialist with less
demonstrated ability and experience
without good cause for making the
change.
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.13 In particular, the
Commission believes that the proposal,
as amended, is consistent with Section
6(b)(5) of the Act, which requires that
the rules of an exchange be designed to
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. The
Commission believes that the proposed
rule change, as amended, is designed to
provide specialist firms with greater
flexibility to respond to various market
conditions that may require prompt
transfer of securities among cospecialists within the same firm. With
respect to the Exchange’s proposal to
require that a specialist unit not
designate a co-specialist with relatively
strong demonstrated ability and
experience when applying for a security
and then immediately transfer the
security to a co-specialist with less
demonstrated ability and experience
without good cause for making the
change, the Commission believes that
13 In approving this proposed rule change, as
amended, the Commission notes that it has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
E:\FR\FM\31JYN1.SGM
31JYN1
Federal Register / Vol. 71, No. 146 / Monday, July 31, 2006 / Notices
this requirement is designed to provide
the CSAE with accurate and complete
information at the time it makes
specialist assignment decisions and to
protect the integrity of the specialist
assignment process.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,14 that the
proposed rule change (SR–CHX–2006–
04), as amended, is hereby approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.15
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6–12151 Filed 7–28–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54198; File No. SR–CHX–
2005–01]
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Order
Granting Approval of Proposed Rule
Change and Amendment Nos. 1 and 2
Thereto and Notice of Filing and Order
Granting Accelerated Approval to
Amendment No. 3 Relating to the
Exchange’s Order Priority Rule and the
Mandatory Use of Order Match
Functionalities
July 24, 2006.
I. Introduction
sroberts on PROD1PC70 with NOTICES
On February 3, 2005, the Chicago
Stock Exchange, Inc. (‘‘CHX’’ or
‘‘Exchange’’), filed with the Securities
and Exchange Commission
(‘‘Commission’’) a proposed rule change
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 to
amend Exchange Article XXX, Rule 2 to
clarify the requirements of the
Exchange’s priority rule and to require
specialists to make use of Exchangeprovided order match functionalities
except in limited circumstances. On
September 16, 2005 and October 6,
2005, the Exchange filed Amendment
Nos. 1 and 2, respectively, to the
proposed rule change. The proposed
rule change, as amended, was published
for comment in the Federal Register on
October 28, 2005.3 The Commission
received no comments on the proposal.
On July 13, 2006, the Exchange filed
14 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 52647
(October 21, 2005), 70 FR 62152 (‘‘Notice’’).
15 17
VerDate Aug<31>2005
17:34 Jul 28, 2006
Jkt 208001
Amendment No. 3.4 This order approves
the proposed rule change, as amended
by Amendment Nos. 1, 2, and 3, grants
accelerated approval to Amendment No.
3, and solicits comments on
Amendment No. 3.
II. Description
The Exchange proposes to amend
Exchange Article XXX, Rule 2, to clarify
the requirements of the Exchange’s
priority rule and to require specialists to
make use of Exchange-provided order
match functionalities except in limited
circumstances. The Exchange’s priority
rule generally requires Exchange
specialists to give precedence to orders
in their books for the purchase or sale
of securities over their own dealer
(proprietary) orders.5
The Exchange’s systems incorporate
order match functionalities that are
designed to replace proposed specialist
proprietary orders with eligible
customer orders in the specialist’s book.
These order match functionalities,
among other things, prevent a specialist
from manually executing a proprietary
order when there is a customer order on
the same side on the book that is eligible
for execution. The proposed rule change
would require specialists to use the
order match functionalities except when
there are system problems with the
order match functionalities,6 and in
certain circumstances related to the
execution of preopening orders
pursuant to the Exchange’s rules,7 or
related to satisfaction through ITS of a
trade through of a customer order.8
4 See Partial Amendment dated July 13, 2006
(‘‘Amendment No. 3’’). The text of Amendment No.
3 is available on the Exchange’s Web site (https://
www.chx.com/rules/ proposed_rules.htm), at the
Exchange’s Office of the Secretary, and at the
Commission’s Public Reference Room.
5 See Exchange Article XXX, Rule 2, Precedence
to Orders in Book. Specialists, however, are not
required to give precedence to certain professional
orders.
6 The Exchange stated that it does not anticipate
that systems problems will occur frequently, but
has included this exception to the rule to address
those relatively rare circumstances when the order
match functionality is not operating properly due
to unexpected consequences of unrelated systems
changes or a software failure. The Exchange stated
that it did not intend the exception to allow
participants to avoid the use of order match
functionalities, but to recognize that there could be
limited circumstances when the order match
functionalities are malfunctioning.
7 See Exchange Article XXX, Rule 37(a)(4). In
Amendment No. 3, the Exchange clarified that this
proposed exception only applies to listed securities.
8 In addition, in Amendment No. 3, the Exchange
eliminated the proposed exception that when a
specialist received an inbound ITS execution in
satisfaction of a complaint lodged by an Exchange
specialist against another market center, the
specialist would not be required fill any other
customer order(s) in his or its book as a result of
having received the ‘‘satisfying’’ ITS execution. In
Amendment No. 3, the Exchange revised the rule
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Fmt 4703
Sfmt 4703
43255
III. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning Amendment No.
3, including whether Amendment No. 3
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–2005–01 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–CHX–2005–01. 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
Room. Copies of such filing also will be
available for inspection and copying at
the principal office of the Exchange. 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 Amendment
No. 3 of File Number SR–CHX–2005–01
and should be submitted on or before
August 21, 2006.
text to clarify that when a specialist receives an
inbound ITS execution in satisfaction of another
market center’s trade-through of a customer order
that the specialist has already filled, the specialist,
under current Exchange rules, is required to give
the customer order that was traded through by the
other ITS market center any better price that the
specialists receives in satisfaction of the tradethrough.
E:\FR\FM\31JYN1.SGM
31JYN1
]]>Agencies
[Federal Register Volume 71, Number 146 (Monday, July 31, 2006)]
[Notices]
[Pages 43254-43255]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-12151]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54191; File No. SR-CHX-2006-04]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Order Granting Approval to a Proposed Rule Change and Amendment Nos. 1,
2 and 3 Thereto Relating to the Transfer of Securities Among Co.-
Specialists Within a Specialist Firm
July 21, 2006.
On March 8, 2006, the Chicago Stock Exchange, Inc. (``CHX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend its rules to permit the transfer of
securities to different co-specialists within a specialist firm. On May
3, 2006, CHX filed Amendment No. 1 to the proposed rule change.\3\ On
May 22, 2006, CHX filed Amendment No. 2 to the proposed rule change.\4\
The proposed rule change, as amended, was published for comment in the
Federal Register on June 15, 2006.\5\ On July 3, 2006, CHX filed
Amendment No. 3 to the proposed rule change.\6\ The Commission received
no comments regarding the proposal, as amended. This order approves the
proposed rule change, as amended.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange revised the rule text of
the proposed rule change to clarify the application of the proposal
to intrafirm transfers and revised the purpose section to discuss
the proposed provision requiring the specialist unit to accurately
represent its plans in the specialist application regarding
designating a particular co-specialist to trade a security.
\4\ In Amendment No. 2, the Exchange revised the rule text of
the proposed rule change to clarify the impact of an intrafirm
transfer on the deregistration and registration of individual co-
specialists within a specialist firm and made non-substantive
changes to the proposed rule text. The proposed rule text set forth
in Amendment No. 2 superceded and replaced the rule text set forth
in the initial filing and Amendment No. 1 in its entirety.
\5\ See Securities Exchange Act Release No. 53949 (June 6,
2006), 71 FR 34648.
\6\ In Amendment No. 3, the Exchange makes minor, non-
substantive changes to the rule text of the proposed rule change.
This is a technical amendment and is not subject to notice and
comment.
---------------------------------------------------------------------------
Under the Exchange's current rules relating to the assignment of
securities to specialist firms, the Committee on Specialist Assignment
and Evaluation (``CSAE'') assigns each security to a specialist firm
and this firm is responsible both financially and as a regulatory
matter for the trading of the security.\7\ At the same time, however,
when a specialist firm applies to trade a security, it must identify
the co-specialist that will trade the security and the CSAE will review
the co-specialist's trading performance in making its assignment
decision.\8\ As an overall matter, the specialist firm and the
individual co-specialist are jointly responsible for each assigned
security and the decision by either the firm or the individual trader
to deregister in a security could result in the posting of the security
for re-assignment.\9\
---------------------------------------------------------------------------
\7\ See Article XXX, Rule 1, Interpretation and Policy .01,
Section II, Introductory paragraphs; and Section I.4.
\8\ See Article XXX, Rule 1, Interpretation and Policy .01,
Sections II and III.
\9\ See Article XXX, Rule 1, Interpretation and Policy .01,
Section I.4.
---------------------------------------------------------------------------
The current Exchange rules generally require that a co-specialist
to whom a security was assigned in competition to keep the assigned
security for a period of two years.\10\ Alternatively, if the
specialist unit agrees to have the security posted, a period of at
least one year must have elapsed from the date of the original
assignment.\11\ Further, securities assigned without competition may be
transferred without a waiting period. However, in all situations, the
transfers must be approved by the CSAE.\12\
---------------------------------------------------------------------------
\10\ See Article XXX, Rule 1, Interpretation and Policy .01,
Section I.2.
\11\ Id.
\12\ Id.
---------------------------------------------------------------------------
The Exchange proposes to delete the waiting period requirement
prior to approving a request for deregistration and to permit the
transfer of securities among co-specialists within a firm, without
seeking prior CSAE approval, as long as: (1) The specialist unit
immediately notifies the Exchange of such transfer; and (2) when such a
transfer is made within six months of an initial assignment of the
security to the specialist unit, the specialist unit provides written
notification to the Exchange of the transfer decision and of its
reasons for making the change. Accordingly, each intrafirm transfer by
the specialist unit effectively would deregister a co-specialist in the
securities that the co-specialist no longer trades and register another
co-specialist in any newly-assigned securities.
In addition, under the Exchange's existing rules, when the CSAE
makes a decision to assign a particular security, the CSAE considers
the qualifications of the specialist unit and the co-specialist's
demonstrated ability and experience. Because the CSAE bases its
decision, in part, on a co-specialist's qualifications, the Exchange
proposes to make explicit in its rules that it is important that a
specialist firm accurately represent plans for having a particular co-
specialist trade a security. Under the proposal, a specialist unit must
not designate a co-specialist with relatively strong demonstrated
ability and experience when applying for a security and then
immediately transfer the security to a co-specialist with less
demonstrated ability and experience without good cause for making the
change.
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.\13\ In particular, the Commission believes that the proposal,
as amended, is consistent with Section 6(b)(5) of the Act, which
requires that the rules of an exchange be designed to 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. The Commission
believes that the proposed rule change, as amended, is designed to
provide specialist firms with greater flexibility to respond to various
market conditions that may require prompt transfer of securities among
co-specialists within the same firm. With respect to the Exchange's
proposal to require that a specialist unit not designate a co-
specialist with relatively strong demonstrated ability and experience
when applying for a security and then immediately transfer the security
to a co-specialist with less demonstrated ability and experience
without good cause for making the change, the Commission believes that
[[Page 43255]]
this requirement is designed to provide the CSAE with accurate and
complete information at the time it makes specialist assignment
decisions and to protect the integrity of the specialist assignment
process.
---------------------------------------------------------------------------
\13\ In approving this proposed rule change, as amended, the
Commission notes that it has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\14\ that the proposed rule change (SR-CHX-2006-04), as amended, is
hereby approved.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\15\
---------------------------------------------------------------------------
\15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-12151 Filed 7-28-06; 8:45 am]
BILLING CODE 8010-01-P
