[Federal Register Volume 72, Number 70 (Thursday, April 12, 2007)]
[Notices]
[Page 18497]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-6893]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55584; File No. SR-CHX-2006-38]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change to Extend the Late 
Trading Session and to Permit Only the Execution of Cross Orders During 
That Session

April 5, 2007.

I. Introduction

    On December 22, 2006, the Chicago Stock Exchange, Inc. (the ``CHX'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities 
Exchange Act (``Act''), and Rule 19b-4 thereunder,\2\ a proposed rule 
change (i) To extend its late trading session until 4:00 p.m. (Central 
Time) and (ii) to provide that only cross orders may be executed during 
that session. The proposed rule change was published for comment in the 
Federal Register on February 23, 2007.\3\ The Commission received no 
comments on the proposed rule change. This order approves the proposed 
rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1)
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 55308 (Feb. 15, 
2007), 71 FR 8215.
---------------------------------------------------------------------------

II. Description of the Proposal

    The Exchange conducts two trading sessions in its new trading 
model. The first session--called the regular trading session--is held 
from 8:30 a.m. (Central Time) to 3 p.m. (Central Time).\4\ The second 
trading session--called the late trading session--is held from the end 
of the regular session until 3:30 p.m. (Central Time). The Exchange's 
Matching System begins accepting orders for the late trading session 
immediately after the closing of the regular trading session in a 
security.\5\
---------------------------------------------------------------------------

    \4\ The regular trading session for certain ETFs extends to 3:15 
p.m. (Central Time).
    \5\ See CHX Rules, Article 20, Rule 8(c)(3). All orders 
remaining in the Matching System at the end of the regular trading 
session are cancelled back to the firms that submitted them; firms 
must submit new orders if they seek to trade in the late trading 
session.
---------------------------------------------------------------------------

    The proposed rule change would extend the Exchange's late trading 
session by one-half hour, to 4 p.m. (Central Time), and confirm that 
only cross orders may be executed during the late trading session. The 
Exchange states that the longer trading session is designed to allow 
CHX participants to trade for a full hour after the normal close of the 
regular trading session. The Exchange further states that the cross-
orders-only rule simply confirms that CHX participants may only submit 
cross orders for execution during the late trading session. The 
Exchange believes that it is appropriate to limit the late trading 
session to cross orders for a variety of reasons--including the fact 
that doing so is consistent with the types of orders currently 
submitted by CHX participants during its current after-hours trading 
session. The Exchange also believes that this proposal is consistent 
with late trading sessions operated by other markets.\6\
---------------------------------------------------------------------------

    \6\ Other markets have instituted trading sessions that occur 
after the end of regular trading and that involve the execution of 
cross transactions. See, e.g., Boston Stock Exchange Rules, Ch. IIC 
(Extended Hours Crossing Session), Section 4 (noting that ``only 
matched orders are eligible for execution during the ETS''); New 
York Stock Exchange 900 Series Rules ((``Off-Hours Trading Facility 
Rules'') including Rules 902 and 907 (describing different types of 
coupled orders that can be executed during the NYSE off-hours 
sessions)).
---------------------------------------------------------------------------

    As part of the proposed rule change, the Exchange is also proposing 
a change in its definition of ``NBBO'' to confirm that it applies only 
to protected quotes disseminated during regular trading hours. Without 
this change, the Exchange explained that a cross order in the late 
trading session technically would be required to be submitted at a 
price that is at or better than the NBBO during the late trading 
session (if markets are disseminating protected quotes), even though 
the trade-through provisions of Rule 611 of Regulation NMS do not apply 
during that session.\7\
---------------------------------------------------------------------------

    \7\ See Article 20, Rule 4(b)(4)(defining a cross order as one 
that is equal to or better than the NBBO).
---------------------------------------------------------------------------

III. Discussion

    After careful review of the proposal, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\8\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\9\ which 
requires, among other things, that the rules of an exchange be designed 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
the national market system, and, in general, to protect investors and 
the public interest. In making this finding, the Commission notes that 
other markets operate late trading sessions involving the execution of 
cross transactions.\10\
---------------------------------------------------------------------------

    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition and 
capital formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ See, e.g., Boston Stock Exchange Rules, Ch. IIC (Extended 
Hours Crossing Session), Section 4; New York Stock Exchange 900 
Series Rules ((``Off-Hours Trading Facility Rules'') including Rules 
902 and 907 (describing different types of coupled orders that can 
be executed during the NYSE off-hours sessions)).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-CHX-2006-38) be, and hereby 
is, approved.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(2).
    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-6893 Filed 4-11-07; 8:45 am]
BILLING CODE 8010-01-P