Self-Regulatory Organizations; Filing of Proposed Rule Change by the Chicago Stock Exchange, Inc. (``CHX'') Relating to Price Protection of Limit Orders

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-33798; File No. SR-CHX-93-23]

Self-Regulatory Organizations; Filing of Proposed Rule Change by

the Chicago Stock Exchange, Inc. (``CHX'') Relating to Price Protection

of Limit Orders

March 22, 1994.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on

September 30, 1993, 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 prepared by the self-regulatory

organization. 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

The CHX requests permanent approval of its proposed rule change

relating to price protection of limit orders.\1\ The rule change

provides primary market protection to certain limit orders trading at

the limit price in a primary market's after-hours trading session.\2\

On February 1, 1994, the CHX's pilot program was extended until April

30, 1994.\3\

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\1\Concurrently with this notice, the Commissions also

publishing for comment proposals submitted by the New York Stock

Exchange, Inc., the American Stock Exchange, Inc., the Boston Stock

Exchange, Inc., the Philadelphia Stock Exchange, Inc. and the

Pacific Stock Exchange, Inc., to request permanent approval for

their respective programs which provide for executions of securities

after regular trading hours. See File Nos. SR-NYSE-93-50; BSE-93-24;

SR-Amex-93-15; SR-Phlx-94-8; and SR-PSE-94-2.

\2\On June 13, 1991, the Commission approved, on a pilot basis,

File No. SR-MSE-91-11, which amended CHX Rule 37 (in 1991, the CHX

was named the Midwest Stock Exchange or MSE). See Securities

Exchange Act Release No. 29297 (June 13, 1991), 56 FR 28191 (June

19, 1991) (order approving File No. SR-56 FR 28191 (June 19, 1991)

(order approving File No. SR-MSE-91-11) (MSE Approval Order). The

CHX procedures provide primary market protection for customer GTX

orders (good until canceled, executable in the afternoon session) in

securities listed on the NYSE and on the Amex and traded during the

after-hours sessions of those Exchanges. The New York Stock Exchange

(``NYSE'') initiated its Off-Hours trading (``OHT'') Crossing

Sessions in June 1991. See Securities Exchange Act Release No. 29237

(May 24, 1991), 56 FR 24853 (May 31, 1991) (approving File Nos. SR-

NYSE-90-52 and NYSE-90-53). The American Stock Exchange, Inc.

(``Amex'') established an after-hours trading facility in August

1991. See Securities Exchange Act Release No. 29515 (August 2,

1991), 56 FR 37736 (August 8, 1991) (approving File No. SR-Amex-91-

15). The Commission approved extensions of the NYSE, Amex and CHX

pilots, as well as pilots by the other regional exchanges until

January 31, 1994 and further extended the pilots until April 30,

1994. See Securities Exchange Act Release Nos. 32365 (May 25, 1993),

58 FR 31560 (June 3, 1993), and 33562 (February 8, 1994), 59 FR 5792

(February 8, 1994).

\3\See Securities Exchange Act Release No. 33562, supra note 2.

File No. SR-CHX-93-23 requested both an extension and permanent

approval of the proposal relating to the price protection of limit

orders. This notice concerns the CHX's permanent approval request.

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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 purpose of the proposed rule change is to request permanent

approval of the Exchange's price protection of limit orders based on

after-hours prints in a primary market. The proposed change requires

that Exchange specialists provide primary market protection for those

limit orders entered during the Exchange's primary trading session

which are designated as executable after the close of the regular

Exchange auction market trading session, known as ``GTX'' orders

(``good until cancelled, executable in the afternoon session'').\4\

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\4\The Exchange is open for business for two trading sessions

during each business day. The first trading session (the Primary

Trading Session) is conducted on the Floor of the Exchange from 8:30

a.m. to 3 p.m., Central time, Monday through Friday. The second

session (the Secondary Trading Session) is conducted through the

Portfolio Trading System, pursuant to the provisions of Article XX

from 3:30 p.m. to 5 p.m., Central time, Monday through Friday. The

Floor of the Exchange is closed during the Secondary Trading

Session. See CHX Article IX, rule 10.

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The Exchange provided the Commission with an updated report

describing the Exchange's experience with the new rule during the

period of January 1, 1993, through September 1, 1993, with a summary

review covering the entire pilot program from June 13, 1991, through

September 1, 1993.\5\ The Exchange has already provided much of the

information requested in monthly reports and has provided all requested

information in a single report to the Commission dated April 30, 1993,

covering data collected through January 1, 1993.\6\ The Commission

requested in its order extending the pilot until April 30, 1994, that

the Exchange submit to the Commission by March 15, 1994, an updated

report concerning the pilot activity through February 28, 1994. This

updated report will assist the Commission in considering the Exchange's

request for permanent approval prior to the April 30, 1994 expiration

of the pilot program.

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\5\See letter from David T. Rusoff, Attorney, Foley & Lardner,

to Diana Luka-Hopson, Branch Chief, Commission, dated September 30,

1993.

\6\See letter from Daniel J. Liberti, Associate Counsel, MSE, to

Diana Luka-Hopson, Branch Chief, Commission, dated April 30, 1993.

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2. Statutory Basis

The proposed rule change is consistent with Sections 6(b)(5) and

11A of the Act in that it is designed to promote just and equitable

principles of trade, perfect the mechanism of a free and open national

market system, and, in general, further investor protection and the

public interest in fair and orderly markets on national securities

exchanges.

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

The Exchange believes that no burdens will be placed on competition

as a result of the proposed rule change.

C. Self-Regulatory Organization's Statement on Comments on the Proposed

Rule Change Received from Members, Participants or Others

No comments were received on 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. 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. 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-93-23 and should be

submitted by April 19, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-7281 Filed 3-28-94; 8:45 am]

BILLING CODE 8010-01-M