# Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Chicago Stock Exchange, Inc. Relating to Utilization of Exempt Credit by Market Makers > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A94-15932 ## Record - **Collection:** Federal Register - **Document type:** Uncategorized Document - **Published:** June 30, 1994 ## Text SECURITIES AND EXCHANGE COMMISSION [Release No. 34-34256; File No. SR-CHX-94-07] June 24, 1994. Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Chicago Stock Exchange, Inc. Relating to Utilization of Exempt Credit by Market Makers Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ notice is hereby given that on March 15, 1994, the Chicago Stock Exchange, Inc. (``CHX'' or ``Exchange'') filed with the Securities and Exchange Commission (``Commission'' or ``SEC'') the proposed rule change as described in Items I, II and III below, which items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\15 U.S.C. Sec. 78s(b)(1). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The CHX proposes to amend Interpretation and Policy .01 of Rule 17 of Article XXXIV of the Exchange's Rules. The text of the proposed rule is as follows: Additions italicized. Article XXXIV Rule 17 Interpretations and Policies .01 Utilization of Exempt Credit. Exchange Members registered as equity market makers are members registered as specialists for purposes of the Securities Exchange Act of 1934 and as such are entitled to obtain exempt credit for financing their market maker transactions. Members and/or prospective members who are anticipating becoming registered as equity market makers as well as those clearing firms who are or will be carrying the accounts of market makers should be aware of the following interpretation relative to the use of such credit: 1. Only those transactions initiated on the Exchange Floor qualify as market transactions. This restriction prohibits the use of exempt credit where market maker orders are routed to the Floor from locations off the Floor. 2. Fifty per cent (50%) of the quarterly share volume which creates or increases a position in a market maker account must result from transactions which are either consummated on the Exchange or sent from the Exchange Floor for execution in another market via ITS. 3. Only those positions which have been established as a direct result of bona fide equity market maker activity qualify for exempt credit treatment. This restriction precludes exempt credit financing based on an equity market maker registration for positions resulting from options exercises and assignments. 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 self-regulatory organization 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 self-regulatory organization 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 proposed rule change relates to the utilization of exempt credit by market makers. Under current rules, in order for a market maker to obtain exempt credit for the financing of its market maker transactions, fifty percent (50%) of the quarterly share volume in its market maker account must result from transactions consummated on the Exchange. The proposed rule change would amend this interpretation and policy under the Exchange's rules so that the fifty percent (50%) volume test also would include orders that, although initiated on the Exchange Floor, are sent to another market for execution via the Intermarket Trading System (``ITS''). The Exchange believes that when a market maker initiates an order on the Exchange Floor and clears the post, the market maker should not be penalized when there is no order against which it can be executed or when the specialist does not accept the order for placement in his book. As a result, if a market maker clears the post, sends the order to another market via ITS and the order is executed, under the proposed rules, that transaction would count towards the fifty percent (50%) quarterly share volume requirement. 2. Statutory Basis The proposed rule change is consistent with Section 6(b)(5) of the Act in that it is designed to promote just and equitable principles of trade, to remove impediments to and to perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose a burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No comments where solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the publication of this notice in the Federal Register or within such other period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consent, 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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 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. Sec. 552, will be available for inspection and copying at the Commission's Public Reference Section, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing will also be available for inspection and copying at the principal office of the CHX. All submissions should refer to File No. SR-CHX-94-07 and should be submitted by July 21, 1994. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. Margaret H. McFarland, Deputy Secretary. [FR Doc. 94-15932 Filed 6-29-94; 8:45 am] BILLING CODE 8010-01-M --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A94-15932. Public record. Not legal advice.