Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by The Chicago Stock Exchange, Inc., Relating to the Execution of Stopped Orders Under the Enhanced SuperMAX Program

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39162; File No. SR-CHX-97-23]

Self-Regulatory Organizations; Notice of Filing and Immediate

Effectiveness of Proposed Rule Change by The Chicago Stock Exchange,

Inc., Relating to the Execution of Stopped Orders Under the Enhanced

SuperMAX Program

September 30, 1997.

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 September 16, 1997, the Chicago Stock Exchange, Incorporated

(``CHX'' or ``Exchange'') filed with the Securities and Exchange

Commission (``SEC'' or ``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.

---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).

\2\ 17 CFR 240.19b-4.

---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of

Substance of the Proposed Rule Change

The Exchange proposes to amend its Rule 37(e) of Article XX

relating to the execution of stopped orders under the CHX's Enhanced

SuperMAX program. The text of the proposed rule change is available at

the Office of the Secretary, the CHX, and at the Commission.

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

On May 22, 1995, the Commission approved a proposed rule change

that allows specialists on the Exchange, through the Exchange's MAX

system, to provide order execution guarantees that are more favorable

than those required under CHX Rule 37(a), Article XX.\3\ That approval

order contemplated that the CHX would file with the Commission specific

modifications to the parameters of MAX that are required to implement

various options available under the rule.\4\ The CHX now proposes to

amend the Enhanced SuperMAX program, a program first adopted under CHX

Rule 37 of Article XX in July 1995.\5\

---------------------------------------------------------------------------

\3\ See Securities Exchange Act Release No. 35753 (May 22,

1995), 60 FR 28007 (May 26, 1995) (order approving File No. SR-CHX-

95-08).

\4\ Id.

\5\ See Securities Exchange Act Release No. 36027 (July 27,

1995), 60 FR 39465 (August 2, 1995) (order approving File No. SR-

CHX-95-15).

---------------------------------------------------------------------------

Currently under the Enhanced SuperMAX program, certain orders are

``stopped'' at the ITS BBO \6\ and are executed with reference to the

next primary market sale. The Enhanced SuperMAX program also includes a

time-out feature whereby if there are no executions in the primary

market after the order has been stopped for a designated time period,

the order is executed at the stopped price at the end of such period.

Such period, known as a time out period, is pre-selected by a

specialist on a stock-by-stock basis based on the size of the order,

may be changed by a specialist no more frequently than once a month and

may be no less than 30 seconds.

---------------------------------------------------------------------------

\6\ CHX defines ``ITS BBO'' as the best offer or best bid

available among the following exchanges: American, Boston,

Cincinnati, Chicago, New York, Pacific, Philadelphia or the

Intermarket Trading System/Computer Assisted Execution System

(``ITS/CAES''). See CHX Rule 37(a), Article XX.

---------------------------------------------------------------------------

The Exchange believes the proposed rule change will simplify the

pricing algorithm used by Enhanced SuperMAX. Under the new algorithm,

an agency market order eligible for Enhanced SuperMAX will continue to

be ``stopped'' if executing the order at the ITS BBO would create a

double up-tick (for a buy order) or a double down-tick (for a sell

order) and the spread between the ITS Bid and ITS Offer is \1/4\ point

or more. Under the proposal, once stopped, a buy order will be executed

as follows:

If the next primary market sale is equal to or greater than the

primary market offer, the order will be executed at the stopped price.

If there is no primary market sale within the time out period or

the next primary market sale is less than the primary market offer, the

order will be executed at one minimum variation better than the stopped

price.

Sell orders will receive price improvement in a similar manner.

Specifically, sell orders will be executed at the stopped price if the

next primary market sale is equal to or less than the primary market

bid. Sell orders will be executed at one minimum variation better than

the stopped price if the next primary market sale is greater than the

primary market bid or if there is no primary market sale before the

expiration of the time-out period.

2. Statutory Basis

The Exchange believes the proposed rule change is consistent with

Section 6(b)(5) of the Act \7\ in that it is designed to promote just

and equitable principles of trade, to remove impediments 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.

---------------------------------------------------------------------------

\7\ 15 U.S.C. 78(b)(5).

---------------------------------------------------------------------------

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.

[[Page 52368]]

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

Rule Change Received From Members, Participants or Others

No comments were solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing

for Commission Action

Because the foregoing proposed rule change: (1) does not

significantly affect the protection of investors or the public

interest; (2) does not impose any significant burden on competition;

and (3) does not become operative for 30 days from September 16, 1997,

the date on which it was filed, and the Exchange provided the

Commission with written notice of its intent to file the proposed rule

change at least five days prior to the filing date, it has become

effective pursuant to Section 19(b)(3)(A) of the Act \8\ and rule 19b-

4(e)(6) \9\ thereunder.

---------------------------------------------------------------------------

\8\ 15 U.S.C. 78s(b)(3)(A).

\9\ 17 CFR 19b-4(e)(6).

---------------------------------------------------------------------------

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. Persons making written submission

should file six copies thereof with the Secretary, Securities and

Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.

Copies of the submissions, 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, 450 Fifth Street, NW., Washington,

DC 20549. Copies of such filing also will be available for inspection

and copying at the principal office of the CHX. All submissions should

refer to file number SR-CHX-97-23 and should be submitted by October

28, 1997.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\10\

---------------------------------------------------------------------------

\10\ 17 CFR 200.30-3(a)(12).

---------------------------------------------------------------------------

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97-26521 Filed 10-6-97; 8:45 am]

BILLING CODE 8010-01-M