Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change To Expand Its Price Manipulation Rule To Address Additional Instances of Improper Behavior, 19998-19999 [E7-7492]

Download as PDF 19998 Federal Register / Vol. 72, No. 76 / Friday, April 20, 2007 / Notices burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither received nor solicited written comments on the proposal. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change will take effect upon filing with the Commission pursuant to Section 19(b)(3)(A)(i) of the Act 9 and Rule 19b– 4(f)(1) thereunder,10 because it constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule. At any time within 60 days of the filing of the proposed rule change, 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. IV. Solicitation of Comments Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room. 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–2007–35 and should be submitted on or before May 11, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.11 Nancy M. Morris, Secretary. [FR Doc. E7–7554 Filed 4–19–07; 8:45 am] 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 Number SR–CBOE–2007–35 on the subject line. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55625; File No. SR–CHX– 2007–08] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change To Expand Its Price Manipulation Rule To Address Additional Instances of Improper Behavior April 12, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 • Send paper comments in triplicate (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 to Nancy M. Morris, Secretary, notice is hereby given that on March 21, Securities and Exchange Commission, 2007, the Chicago Stock Exchange, Inc. 100 F Street, NE., Washington, DC (‘‘CHX’’ or ‘‘Exchange’’) filed with the 20549–1090. Securities and Exchange Commission (‘‘Commission’’) the proposed rule All submissions should refer to File change as described in Items I, II and III Number SR–CBOE–2007–35. This file below, which Items have been number should be included on the subject line if e-mail is used. To help the substantially prepared by the CHX. The Commission is publishing this notice to Commission process and review your solicit comments on the proposed rule comments more efficiently, please use only one method. The Commission will change from interested persons. post all comments on the Commission’s sroberts on PROD1PC70 with NOTICES Paper Comments 11 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 CFR 240.19b–4. U.S.C. 78s(b)(3)(A)(i). CFR 240.19b–4(f)(1). 10 17 VerDate Aug<31>2005 18:52 Apr 19, 2007 Jkt 211001 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 on the proposed rule change. 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. BILLING CODE 8010–01–P 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: 9 15 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rule relating to price manipulation to address two separate instances of improper activity: (1) Manipulative conduct consisting of a single event (in addition to a series of events, as the current rule contemplates) and (2) manipulation based upon the entry of orders as opposed to that based solely upon the entry of trades. The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and http:// www.chx.com/rules/ proposed_rules.htm. PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose Through this proposal, the Exchange seeks to amend its rule relating to price manipulation to address two separate instances of improper activity: (1) Manipulative conduct consisting of a single event (in addition to a series of events, as the current rule contemplates) and (2) manipulation based upon the entry of orders as opposed to that based solely upon the entry of trades.3 As an initial matter, the Exchange believes that these changes to the rule would appropriately establish that improper price manipulation could occur, in certain circumstances, when orders are entered at successively higher or lower prices, not just upon the execution of a series of trades at successively higher or lower prices. Order-based manipulation, sometimes called spoofing, may be intended to take advantage of algorithms or electronic traders who focus on changes to the bid or offer in trading. In such situations, 3 The proposal would also expand the rule to address conduct by persons associated with a participant firm, in addition to the firm’s partners, directors, officers and registered employees. E:\FR\FM\20APN1.SGM 20APN1 Federal Register / Vol. 72, No. 76 / Friday, April 20, 2007 / Notices 19999 the bad actor may enter higher, nonmarketable bids (offers) in one market center in order to induce market participants to lift an offer (hit a bid) which he has posted in the same or different market center.4 Additionally, the Exchange believes that the proposed changes to the rule would appropriately establish that improper price manipulation could occur, in certain circumstances, when a single execution occurs (or a single order is entered) at a price higher than (or lower than) the current market. A single trade that is executed at a significantly higher or lower price at the end of the trading day, for example, could be used to establish a price which does not reflect the true state of the market in that security, to the benefit of a participant firm. 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 change, or B. Institute proceedings to determine whether the proposed rule change should be disapproved. submissions should refer to File Number SR–CHX–2007–08 and should be submitted on or before May 11, 2007. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: SECURITIES AND EXCHANGE COMMISSION 2. Statutory Basis 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 Number SR–CHX–2007–08 on the subject line. The Exchange believes that the proposal is consistent with Section 6(b) of the Act,5 in general, and Section 6(b)(5) of the Act,6 in particular, 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 expanding the price manipulation rule to address additional instances of improper behavior. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange did not solicit or receive any written comments with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action sroberts on PROD1PC70 with NOTICES Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) 4 Other order-based manipulative activity might occur with the upcoming implementation of the new market data revenue allocation formula under Regulation NMS—which, in general, requires that market data revenue be allocated based upon both quoting and trading activity in each market. The entry of orders (which are designed not be executed) could be used to create a false, misleading, or artificial appearance of quoting activity in a particular security within a particular market. 5 15 U.S.C. 78f(b). 6 15 U.S.C. 78f(b)(5). VerDate Aug<31>2005 18:52 Apr 19, 2007 Jkt 211001 For the Commission, by the Division of Market Regulation, pursuant to delegated authority.7 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–7492 Filed 4–19–07; 8:45 am] BILLING CODE 8010–01–P [Release No. 34–55635; File No. SR–ISE– 2007–16] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1, Relating to Options Based on Commodity Pool ETFs April 16, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’)1 and Rule 19b–4 2 thereunder, Paper Comments notice is hereby given that on February • Send paper comments in triplicate 21, 2007, the International Securities to Nancy M. Morris, Secretary, Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’) Securities and Exchange Commission, filed with the Securities and Exchange Station Place, 100 F Street, NE., Commission (‘‘Commission’’) the Washington, DC 20549–1090. proposed rule change as described in All submissions should refer to File Items I and II below, which Items have Number SR–CHX–2007–08. This file been substantially prepared by the number should be included on the Exchange. On March 26, 2007, ISE filed subject line if e-mail is used. To help the Amendment No. 1 to the proposed rule Commission process and review your change.3 This order provides notice of comments more efficiently, please use the proposed rule change as modified by only one method. The Commission will Amendment No. 1 and approves the post all comments on the Commission’s proposed rule change on an accelerated Internet Web site (http://www.sec.gov/ basis. rules/sro.shtml). Copies of the I. Self-Regulatory Organization’s submission, all subsequent Statement of the Terms of Substance of amendments, all written statements the Proposed Rule Change with respect to the proposed rule change that are filed with the The Exchange proposes to amend Commission, and all written certain rules to permit the listing and communications relating to the trading of options on equity interests proposed rule change between the Commission and any person, other than issued by trust issued receipts (‘‘TIRs’’), partnership units (‘‘Partnership those that may be withheld from the Units’’),4 and other entities (referred public in accordance with the collectively herein as ‘‘Commodity Pool provisions of 5 U.S.C. 552, will be available for inspection and copying in 7 17 CFR 200.30–3(a)(12). the Commission’s Public Reference 1 15 U.S.C. 78s(b)(1). Room. Copies of such filing also will be 2 17 CFR 240.19b–4. available for inspection and copying at 3 Amendment No. 1 replaces and supersedes the the principal office of the Exchange. All original filing in its entirety. comments received will be posted 4 As set forth in ISE Rule 2127, a ‘‘Partnership Unit’’ means a security (a) that is issued by a without change; the Commission does partnership that invests in any combination of not edit personal identifying futures contracts, options on futures contracts, information from submissions. You forward contracts, commodities and/or securities; should submit only information that and (b) that is issued and redeemed daily in you wish to make available publicly. All specified aggregate amounts at net asset value. PO 00000 Frm 00124 Fmt 4703 Sfmt 4703 E:\FR\FM\20APN1.SGM 20APN1

Agencies

[Federal Register Volume 72, Number 76 (Friday, April 20, 2007)]
[Notices]
[Pages 19998-19999]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-7492]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55625; File No. SR-CHX-2007-08]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change To Expand Its Price 
Manipulation Rule To Address Additional Instances of Improper Behavior

April 12, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 21, 2007, 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 substantially prepared by the CHX. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ CFR 240.19b-4.
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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 its rule relating to price 
manipulation to address two separate instances of improper activity: 
(1) Manipulative conduct consisting of a single event (in addition to a 
series of events, as the current rule contemplates) and (2) 
manipulation based upon the entry of orders as opposed to that based 
solely upon the entry of trades. The text of the proposed rule change 
is available at the Exchange, the Commission's Public Reference Room, 
and http://www.chx.com/rules/proposed_rules.htm.

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 on the proposed rule change. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Through this proposal, the Exchange seeks to amend its rule 
relating to price manipulation to address two separate instances of 
improper activity: (1) Manipulative conduct consisting of a single 
event (in addition to a series of events, as the current rule 
contemplates) and (2) manipulation based upon the entry of orders as 
opposed to that based solely upon the entry of trades.\3\
---------------------------------------------------------------------------

    \3\ The proposal would also expand the rule to address conduct 
by persons associated with a participant firm, in addition to the 
firm's partners, directors, officers and registered employees.
---------------------------------------------------------------------------

    As an initial matter, the Exchange believes that these changes to 
the rule would appropriately establish that improper price manipulation 
could occur, in certain circumstances, when orders are entered at 
successively higher or lower prices, not just upon the execution of a 
series of trades at successively higher or lower prices. Order-based 
manipulation, sometimes called spoofing, may be intended to take 
advantage of algorithms or electronic traders who focus on changes to 
the bid or offer in trading. In such situations,

[[Page 19999]]

the bad actor may enter higher, non-marketable bids (offers) in one 
market center in order to induce market participants to lift an offer 
(hit a bid) which he has posted in the same or different market 
center.\4\
---------------------------------------------------------------------------

    \4\ Other order-based manipulative activity might occur with the 
upcoming implementation of the new market data revenue allocation 
formula under Regulation NMS--which, in general, requires that 
market data revenue be allocated based upon both quoting and trading 
activity in each market. The entry of orders (which are designed not 
be executed) could be used to create a false, misleading, or 
artificial appearance of quoting activity in a particular security 
within a particular market.
---------------------------------------------------------------------------

    Additionally, the Exchange believes that the proposed changes to 
the rule would appropriately establish that improper price manipulation 
could occur, in certain circumstances, when a single execution occurs 
(or a single order is entered) at a price higher than (or lower than) 
the current market. A single trade that is executed at a significantly 
higher or lower price at the end of the trading day, for example, could 
be used to establish a price which does not reflect the true state of 
the market in that security, to the benefit of a participant firm.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act,\5\ in general, and Section 6(b)(5) of the Act,\6\ in 
particular, 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 expanding the 
price manipulation rule to address additional instances of improper 
behavior.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition.

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

    The Exchange did not solicit or receive any written comments with 
respect to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer 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 change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-CHX-2007-08 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

    All submissions should refer to File Number SR-CHX-2007-08. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. 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 
File Number SR-CHX-2007-08 and should be submitted on or before May 11, 
2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-7492 Filed 4-19-07; 8:45 am]
BILLING CODE 8010-01-P