Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change Modifying the Definition of Cross and Cross With Size Order Types, 68298-68300 [E9-30425]
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68298
Federal Register / Vol. 74, No. 245 / Wednesday, December 23, 2009 / Notices
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
OneChicago has prepared statements
concerning the purpose of, and basis for,
the proposed rule change, burdens on
competition, and comments received
from members, participants, and others.
The text of these statements may be
examined at the places specified in Item
IV below. These statements are set forth
in Sections A, B, and C below.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this proposed rule
change is to permit security futures to
maintain comparability with the options
markets and to provide competitive
financial tools that offer a variety of
investing and hedging products for the
public as set forth in the Commissions
JO–2009. This proposed change is
simply to conform to JO–2009.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b)(5) of the
Act 5 in that it is designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to protect investors
and the public interest, and to remove
impediments to and perfect the
mechanism for a free and open market
and a national market system. In
particular, the proposed rule change
will maintain comparability with the
listed options markets. Additionally, the
changes are consistent with those set
forth in JO–2009.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
OneChicago does not believe that the
proposed rule change will have an
impact on competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
srobinson on DSKHWCL6B1PROD with NOTICES
Comments on the OneChicago
proposed rule change have not been
solicited and none has been received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The proposed rule change will
become effective on December 3, 2009.
Within 60 days of the date of
5 15
U.S.C. 78f(b)(5).
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16:41 Dec 22, 2009
effectiveness of the proposed rule
change, the Commission, after
consultation with the CFTC, may
summarily abrogate the proposed rule
change and require that the proposed
rule change be refiled in accordance
with the provisions of Section 19(b)(1)
of the Act.6
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–OC–2009–03 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–OC–2009–03. 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, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of the 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
6 15
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U.S.C. 78s(b)(1).
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you wish to make available publicly. All
submissions should refer to File
Number SR–OC–2009–03 and should be
submitted on or before January 13, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–30422 Filed 12–22–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–61173; File No. SR–CHX–
2009–16]
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Notice
of Filing of Proposed Rule Change
Modifying the Definition of Cross and
Cross With Size Order Types
December 16, 2009.
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 December
15, 2009, Chicago Stock Exchange, Inc.
(‘‘Exchange’’ or ‘‘CHX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. CHX has designated
the proposed rule change as constituting
a rule change under Rule 19b–4(f)(6)
under the Act,3 which renders the
proposal effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CHX proposes to amend its rules to
change the definition of Cross and Cross
With Size order types. The text of this
proposed rule change is available on the
Exchange’s Web site at (https://
www.chx.com) and in 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 changes and discussed
7 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
1 15
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Federal Register / Vol. 74, No. 245 / Wednesday, December 23, 2009 / Notices
any comments it received regarding the
proposal. The text of these statements
may be examined at the places specified
in Item IV below. The CHX has prepared
summaries, set forth in sections A, B
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
srobinson on DSKHWCL6B1PROD with NOTICES
The Exchange is proposing to amend
its definitions of the ‘‘cross’’ and ‘‘cross
with size’’ order types to eliminate a
latent ambiguity about the processing of
such orders in the Exchange’s Matching
System.4 A cross order is an order to
buy and sell the same security at a
specific price which is better than the
best bid and offer displayed in the
Matching System. A cross with size
order type is a cross order which also
has a limited exception to the priority
rules of the exchange. Generally, where
there are multiple orders to be executed
at the same price, the first order
received by the Matching System is the
first to be executed.5 Certain large cross
orders submitted to the Matching
System may be executed
notwithstanding the fact that a bid or
offer at the same price as the proposed
cross transaction and with time priority
may reside in our trading facility.6
The current definitions of the cross
and cross with size order types also
require that the price of the proposed
trade be ‘‘equal to or better than the
NBBO [National Best Bid or Offer].’’ 7
We propose to delete this reference for
both order types and substitute the
requirement that the price of the cross
transaction ‘‘which would not constitute
a trade-through under Reg NMS
(including all applicable exceptions and
exemptions).’’ This proposed
formulation better comports with the
history of the cross and cross with size
provisions and removes any possible
confusion over the proper application of
our rules.
The cross and cross with size order
provisions have existed in our rules in
4 The Matching System is our core trading
facility.
5 See Article 20, Rule 8(b)(1), (d)(1).
6 Such cross orders must be for at least 5,000
shares and $100,000 in total value to qualify for
‘‘cross with size’’ treatment. Article 1, Rule 2(g);
Article 20, Rule 4(b)(6).
7 ‘‘NBBO’’ is defined as ‘‘the size and price
associated with the best protected bid and best
protected offer that are calculated and disseminated
in an NMS security during regular trading hours.’’
Article 1, Rule 1(o).
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16:41 Dec 22, 2009
Jkt 220001
number of different forms.8 The current
cross and cross with size order types
were defined as part of our transition to
the New Trading Model (‘‘NTM’’) in
2006 and 2007.9 As originally written,
the NBBO limitation as to cross and
cross with size orders only applied to
transactions in securities listed on the
NYSE, Amex or any other exchange
except Nasdaq. The NBBO limitation
applied to Nasdaq-listed securities only
upon the implementation of Reg NMS.
The apparent purpose of this
formulation was to ensure that the thenexisting trade-though provisions of the
Intermarket Trading System (‘‘ITS’’)
applied to the cross transactions.10
While the Exchange believes that
most transactions can and should be
executed at or within the NBBO, we
note that the Commission has
authorized a number of exemptions to
the trade-through provisions of Reg
NMS. For example, trade through
exemptions are provided within Rule
611 of Reg NMS for, inter alia, nonregular way settlements, certain singlepriced opening, reopening and closing
transactions, when the NBBO is crossed,
for Intermarket Sweep Orders (‘‘ISOs’’),
and where the better-priced market was
satisfied.11 Moreover, the Commission
has issued exemptive orders to the
trade-through prohibition for certain
transactions in non-convertible
preferred securities,12 qualified
contingent trades,13 certain error
correction transactions 14 and certain
print protection transactions.15 To the
8 See former Article XX, Rule 23 (cross orders)
and Interpretation and Policy .02 thereto (cross with
size).
9 The New Trading Model was designed to be a
fully electronic exchange in order to qualify as an
automated trading center under Reg NMS and
thereby, inter alia, qualify for trade through
protection.
10 See SR–CHX–2006–05 (Sept. 26, 2006)
(approving the NTM-related rule changes), at notes
27–30 and accompanying text. The ITS tradethrough provisions applied only to securities listed
on a national securities exchange and not to stocks
listed on the Nasdaq Stock Market. Once Reg NMS
Rule 611 became effective (supplanting the ITS
rules), the trade through restriction applied equally
to exchange-listed and Nasdaq securities.
11 Reg NMS Rule 611(b).
12 Order Exempting Non-Convertible Preferred
Securities from Rule 611(a) of Regulation NMS
under the Securities Exchange Act of 1934 (Rel. No.
34–57621, April 4, 2008).
13 Order Granting an Exemption for Qualified
Contingent Trades from Rule 611(a) of Regulation
NMS under the Securities Exchange Act of 1934
(Rel. No. 34–54389, Aug. 31, 2006), modified, (Rel.
No. 34–57620, April 4, 2008).
14 Order Exempting Certain Error Correction
Transactions from Rule 611 of Regulation NMS
under the Securities Exchange Act of 1934 (Rel. No.
34–55884, June 8, 2007).
15 Order Exempting Certain Print Protection
Transactions from Rule 611 of Regulation NMS
under the Securities Exchange Act of 1934 (Rel. No.
34–55883, June 8, 2007).
PO 00000
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Fmt 4703
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68299
extent that a Participant can submit a
cross or cross with size order which is
also exempt from Reg NMS tradethrough prohibition, the Exchange
believes that such orders should be
eligible for execution notwithstanding
the fact that they are priced outside the
NBBO, assuming all other requirements
are satisfied. In evaluating whether any
applicable exemption applied to a cross
or cross with size order, the CHX would
require Participants to indicate in its
order submission the nature of the
exemption relied upon.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act in general,16 and
furthers the objectives of Section 6(b)(5)
in particular,17 in that it is designed to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transaction in securities, to
remove impediments and perfect the
mechanisms of a free and open market,
and, in general, to protect investors and
the public interest. In this case, the
proposed change in the definition of the
cross and cross with size order types
will remove any potential confusion
among Participants over the proper
handling and treatment of such orders.
The changes should also provide
Participants with additional options in
seeking trade executions on our trading
facilities by allowing them to more fully
utilize existing exemptions to the Reg
NMS trade through restrictions.
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 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
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
16 15
17 15
E:\FR\FM\23DEN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
23DEN1
68300
Federal Register / Vol. 74, No. 245 / Wednesday, December 23, 2009 / Notices
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 18 and Rule 19b–
4(f)(6) thereunder.19
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 20 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6) 21
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange requests
that the Commission waive the 30-day
operative delay so that it may
immediately provide participants the
benefits of the clarified order types. The
Commission believes that waiving the
30-day operative delay 22 is consistent
with the protection of investors and the
public interest because it will allow the
Exchange to immediately modify the
rules relating to the cross and crosswith-size order types to account for the
exceptions and exemptions with respect
to Rule 611 of Regulation NMS.23 For
this reason, the Commission designates
that the proposed rule change become
operative upon filing.
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
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 (https://www.sec.gov/
rules/sro.shtml); or
18 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
20 17 CFR 240.19b–4(f)(6).
21 17 CFR 240.19b–4(f)(6).
22 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposal’s impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
23 Rule 611 of Regulation NMS includes various
exceptions. See 17 CFR 242.611(b). In addition, the
Commission has issued exemptive orders relating to
Rule 611 of Regulation NMS. See supra notes 12–
15.
srobinson on DSKHWCL6B1PROD with NOTICES
19 17
VerDate Nov<24>2008
16:41 Dec 22, 2009
Jkt 220001
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–CHX–2009–16 on the
subject line.
DEPARTMENT OF TRANSPORTATION
Paper Comments
The Indiana Rail Road Company—
Abandonment Exemption—in Martin
and Lawrence Counties, IN
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
Surface Transportation Board
[STB Docket No. AB–295 (Sub-No. 7X)]
On December 7, 2009, the Indiana
Rail Road Company (INRD), filed with
the Surface Transportation Board
(Board) a petition under 49 U.S.C. 10502
All submissions should refer to File
for exemption from the provisions of 49
Number SR–CHX–2009–16. This file
U.S.C. 10903 to abandon 22.80 miles of
number should be included on the
rail line in Martin and Lawrence
subject line if e-mail is used. To help the Counties, IN, comprised of the CraneCommission process and review your
Bedford Line extending from milepost
comments more efficiently, please use
241.35 near Crane, IN, to milepost
only one method. The Commission will 262.50 in Bedford, IN, and the Bedford
post all comments on the Commission’s Industrial Track extending from Bedford
Internet Web site (https://www.sec.gov/
Industrial Track railroad milepost 0.00
rules/sro.shtml). Copies of the
at Crane-Bedford milepost 262.40, to
Bedford Industrial Track railroad
submission, all subsequent
milepost 1.65. The line traverses U.S.
amendments, all written statements
Postal Service Zip Codes 47581, 47470,
with respect to the proposed rule
and 47421, and includes the stations of
change that are filed with the
Williams at milepost 251.40 and
Commission, and all written
Bedford at milepost 262.50.
communications relating to the
INDR states that the line does not
proposed rule change between the
contain Federally granted rights-of-way.
Commission and any person, other than
Any documentation in INRD’s
those that may be withheld from the
possession will be made available
public in accordance with the
promptly to those requesting it.
provisions of 5 U.S.C. 552, will be
The interest of railroad employees
available for inspection and copying in
will be protected by the conditions set
the Commission’s Public Reference
forth in Oregon Short Line R. Co.—
Room, 100 F Street, NE., Washington,
Abandonment—Goshen, 360 I.C.C. 91
DC 20549, on official business days
(1979).
between the hours of 10 a.m. and 3 p.m.
By issuance of this notice, the Board
is instituting an exemption proceeding
Copies of such filing also will be
pursuant to 49 U.S.C. 10502(b). A final
available for inspection and copying at
the principal office of the Exchange. All decision will be issued by March 26,
2010.1
comments received will be posted
Any offer of financial assistance
without change; the Commission does
(OFA) under 49 CFR 1152.27(b)(2) will
not edit personal identifying
be due no later than 10 days after
information from submissions. You
service of a decision granting the
should submit only information that
you wish to make publicly available. All petition for exemption. Each OFA must
be accompanied by a $1,500 filing fee.
submissions should refer to File
See 49 CFR 1002.2(f)(25).
Number SR–CHX–2009–16 and should
All interested persons should be
be submitted on or before January 13,
aware that, following abandonment of
2010.
rail service and salvage of the line, the
line may be suitable for other public
For the Commission, by the Division of
use, including interim trail use.2 Any
Trading and Markets, pursuant to delegated
authority.24
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–30425 Filed 12–22–09; 8:45 am]
BILLING CODE 8011–01–P
24 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00077
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1 In its petition, INRD requests that the Board
render its decision on the petition immediately
effective if it is issued after February 28, 2010. This
request will be addressed in the decision on the
merits of the petition.
2 INRD notes that it acquired its interest in the
line by quit claim. INRD states that it is
investigating the nature of its title to the right-ofway, and that the outcome of this investigation may
affect how it chooses to proceed with regard to trail
use negotiations. INRD also states that part of the
Crane-Bedford Line runs through the Naval Surface
Warfare Center at Crane, and that security
requirements may limit the availability of the rightof-way at that location.
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]]>Agencies
[Federal Register Volume 74, Number 245 (Wednesday, December 23, 2009)]
[Notices]
[Pages 68298-68300]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-30425]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61173; File No. SR-CHX-2009-16]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing of Proposed Rule Change Modifying the Definition of
Cross and Cross With Size Order Types
December 16, 2009.
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 December 15, 2009, Chicago Stock Exchange, Inc. (``Exchange'' or
``CHX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. CHX has
designated the proposed rule change as constituting a rule change under
Rule 19b-4(f)(6) under the Act,\3\ which renders the proposal effective
upon filing with the Commission. 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\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CHX proposes to amend its rules to change the definition of Cross
and Cross With Size order types. The text of this proposed rule change
is available on the Exchange's Web site at (https://www.chx.com) and in
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 changes and
discussed
[[Page 68299]]
any comments it received regarding the proposal. The text of these
statements may be examined at the places specified in Item IV below.
The CHX has prepared summaries, set forth in sections A, B and C below,
of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to amend its definitions of the ``cross''
and ``cross with size'' order types to eliminate a latent ambiguity
about the processing of such orders in the Exchange's Matching
System.\4\ A cross order is an order to buy and sell the same security
at a specific price which is better than the best bid and offer
displayed in the Matching System. A cross with size order type is a
cross order which also has a limited exception to the priority rules of
the exchange. Generally, where there are multiple orders to be executed
at the same price, the first order received by the Matching System is
the first to be executed.\5\ Certain large cross orders submitted to
the Matching System may be executed notwithstanding the fact that a bid
or offer at the same price as the proposed cross transaction and with
time priority may reside in our trading facility.\6\
---------------------------------------------------------------------------
\4\ The Matching System is our core trading facility.
\5\ See Article 20, Rule 8(b)(1), (d)(1).
\6\ Such cross orders must be for at least 5,000 shares and
$100,000 in total value to qualify for ``cross with size''
treatment. Article 1, Rule 2(g); Article 20, Rule 4(b)(6).
---------------------------------------------------------------------------
The current definitions of the cross and cross with size order
types also require that the price of the proposed trade be ``equal to
or better than the NBBO [National Best Bid or Offer].'' \7\ We propose
to delete this reference for both order types and substitute the
requirement that the price of the cross transaction ``which would not
constitute a trade-through under Reg NMS (including all applicable
exceptions and exemptions).'' This proposed formulation better comports
with the history of the cross and cross with size provisions and
removes any possible confusion over the proper application of our
rules.
---------------------------------------------------------------------------
\7\ ``NBBO'' is defined as ``the size and price associated with
the best protected bid and best protected offer that are calculated
and disseminated in an NMS security during regular trading hours.''
Article 1, Rule 1(o).
---------------------------------------------------------------------------
The cross and cross with size order provisions have existed in our
rules in number of different forms.\8\ The current cross and cross with
size order types were defined as part of our transition to the New
Trading Model (``NTM'') in 2006 and 2007.\9\ As originally written, the
NBBO limitation as to cross and cross with size orders only applied to
transactions in securities listed on the NYSE, Amex or any other
exchange except Nasdaq. The NBBO limitation applied to Nasdaq-listed
securities only upon the implementation of Reg NMS. The apparent
purpose of this formulation was to ensure that the then-existing trade-
though provisions of the Intermarket Trading System (``ITS'') applied
to the cross transactions.\10\
---------------------------------------------------------------------------
\8\ See former Article XX, Rule 23 (cross orders) and
Interpretation and Policy .02 thereto (cross with size).
\9\ The New Trading Model was designed to be a fully electronic
exchange in order to qualify as an automated trading center under
Reg NMS and thereby, inter alia, qualify for trade through
protection.
\10\ See SR-CHX-2006-05 (Sept. 26, 2006) (approving the NTM-
related rule changes), at notes 27-30 and accompanying text. The ITS
trade-through provisions applied only to securities listed on a
national securities exchange and not to stocks listed on the Nasdaq
Stock Market. Once Reg NMS Rule 611 became effective (supplanting
the ITS rules), the trade through restriction applied equally to
exchange-listed and Nasdaq securities.
---------------------------------------------------------------------------
While the Exchange believes that most transactions can and should
be executed at or within the NBBO, we note that the Commission has
authorized a number of exemptions to the trade-through provisions of
Reg NMS. For example, trade through exemptions are provided within Rule
611 of Reg NMS for, inter alia, non-regular way settlements, certain
single-priced opening, reopening and closing transactions, when the
NBBO is crossed, for Intermarket Sweep Orders (``ISOs''), and where the
better-priced market was satisfied.\11\ Moreover, the Commission has
issued exemptive orders to the trade-through prohibition for certain
transactions in non-convertible preferred securities,\12\ qualified
contingent trades,\13\ certain error correction transactions \14\ and
certain print protection transactions.\15\ To the extent that a
Participant can submit a cross or cross with size order which is also
exempt from Reg NMS trade-through prohibition, the Exchange believes
that such orders should be eligible for execution notwithstanding the
fact that they are priced outside the NBBO, assuming all other
requirements are satisfied. In evaluating whether any applicable
exemption applied to a cross or cross with size order, the CHX would
require Participants to indicate in its order submission the nature of
the exemption relied upon.
---------------------------------------------------------------------------
\11\ Reg NMS Rule 611(b).
\12\ Order Exempting Non-Convertible Preferred Securities from
Rule 611(a) of Regulation NMS under the Securities Exchange Act of
1934 (Rel. No. 34-57621, April 4, 2008).
\13\ Order Granting an Exemption for Qualified Contingent Trades
from Rule 611(a) of Regulation NMS under the Securities Exchange Act
of 1934 (Rel. No. 34-54389, Aug. 31, 2006), modified, (Rel. No. 34-
57620, April 4, 2008).
\14\ Order Exempting Certain Error Correction Transactions from
Rule 611 of Regulation NMS under the Securities Exchange Act of 1934
(Rel. No. 34-55884, June 8, 2007).
\15\ Order Exempting Certain Print Protection Transactions from
Rule 611 of Regulation NMS under the Securities Exchange Act of 1934
(Rel. No. 34-55883, June 8, 2007).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act in general,\16\ and furthers the
objectives of Section 6(b)(5) in particular,\17\ in that it is designed
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transaction in securities, to remove impediments and perfect the
mechanisms of a free and open market, and, in general, to protect
investors and the public interest. In this case, the proposed change in
the definition of the cross and cross with size order types will remove
any potential confusion among Participants over the proper handling and
treatment of such orders. The changes should also provide Participants
with additional options in seeking trade executions on our trading
facilities by allowing them to more fully utilize existing exemptions
to the Reg NMS trade through restrictions.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
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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 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
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time
[[Page 68300]]
as the Commission may designate, it has become effective pursuant to
Section 19(b)(3)(A) of the Act \18\ and Rule 19b-4(f)(6)
thereunder.\19\
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \20\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6) \21\ permits the Commission to
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange requests
that the Commission waive the 30-day operative delay so that it may
immediately provide participants the benefits of the clarified order
types. The Commission believes that waiving the 30-day operative delay
\22\ is consistent with the protection of investors and the public
interest because it will allow the Exchange to immediately modify the
rules relating to the cross and cross-with-size order types to account
for the exceptions and exemptions with respect to Rule 611 of
Regulation NMS.\23\ For this reason, the Commission designates that the
proposed rule change become operative upon filing.
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\20\ 17 CFR 240.19b-4(f)(6).
\21\ 17 CFR 240.19b-4(f)(6).
\22\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposal's impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
\23\ Rule 611 of Regulation NMS includes various exceptions. See
17 CFR 242.611(b). In addition, the Commission has issued exemptive
orders relating to Rule 611 of Regulation NMS. See supra notes 12-
15.
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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
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 (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-CHX-2009-16 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-CHX-2009-16. 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, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. 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 publicly available. All
submissions should refer to File Number SR-CHX-2009-16 and should be
submitted on or before January 13, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-30425 Filed 12-22-09; 8:45 am]
BILLING CODE 8011-01-P
