62384 Federal Register / Vol. 62, No. 225 / Friday, November 21, 1997 / Notices

8 17 CFR 200.30(a)(12).

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

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 39320

(October 10, 1997) 62 FR 54496.

4See Letter from Charles R. Haywood, Foley &

Lardner, to Debbie Flynn, Division of Market

Regulation, SEC, dated October 30, 1997

(‘‘Amendment No. 1’’). In Amendment No. 1, the

CHX requested that the rule filing by approved on

an accelerated basis due to the recent volatility in

the financial markets and the Exchange’s belief that

such volatility may continue.

5Standard and Poor’s 500 Stock Index is a service

mark of Standard and Poor’s Corporation.

6See Ch. II, Sec. 35(b) of the BSE’s rules.

7See Securities Exchange Act Release Nos. 26218

(October 26, 1988) 53 FR 44137 (November 1, 1988)

(order approving File No. SR–MSE–88–9); 27370

(October 23, 1989) 54 FR 43881 (October 27, 1989)

(order approving File No. SR–MSE–89–9); 28580

(October 25, 1990) 55 FR 45895 (October 31, 1990)

(order approving File No. SR–MSE–90–16); 29868

(October 28, 1991) 56 FR 56535 (November 5, 1991)

(order approving File No. SR–MSE–91–14); 33120

(October 29, 1993) 58 FR 59503 (November 9, 1993)

(order approving File No SR–CHX–93–22); 36414

(October 25, 1995) 60 FR 55630 (November 1, 1995)

(order approving File No. SR–CHX–95–23); 37459

(July 19, 1996) 61 FR 39172 (July 26, 1996) (order

approving File No. SR–CHX–96–20); and 38221

(January 31, 1997) 62 FR 5871 (February 7, 1997)

(order approving File No. SR–CHX–96–33).

8See CHX Art. IX, Rule 10A.

9 15 U.S.C. 78f.

10 In approving this rule, the Commission notes

that it has considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

11 15 U.S.C. 78f(b)(5).

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 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 in

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 Exchange. All submissions

should refer to the File No. SR–CBOE–

97–53 and should be submitted by

December 12, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–30625 Filed 11–20–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39323; File No. SR–CHX–

97–24]

Self-Regulatory Organizations;

Chicago Stock Exchange, Inc; Order

Granting Accelerated Approval to

Proposed Rule Change and Notice of

Filing and Order Granting Accelerated

Approval of Amendment No. 1 Thereto

Relating to a Ban on the Entry of

Certain Stop Orders and Stop Limit

Orders

November 13, 1997.

I. Introduction

On September 22, 1997, the Chicago

Stock Exchange, Inc. (‘‘CHX’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’),1 and Rule 19b–4

thereunder,2 a proposed rule change to

adopt a new rule to prohibit the entry

of certain stop orders and stop limit

orders if the New York Stock Exchange

(‘‘NYSE’’) implements a stop order ban

pursuant to NYSE Rule 80A.

The proposed rule change was

published for comment in the Federal

Register on October 20, 1997.3 No

comments were received on the

proposal. On October 31, 1997, the CHX

submitted Amendment No. 1 to the

proposed rule change.4 This order

approves the proposed rule change and

approves Amendment No. 1 on an

accelerated basis.

II. Description of the Proposal

The Exchange proposes to add Article

IX, Rule 10B (Stop Order Ban Due to

Extraordinary Market Volatility) to

prohibit the entry of certain stop orders

and stop limit orders if the NYSE

implements a stop order ban pursuant to

NYSE Rule 80A. The NYSE’s Rule 80A

prohibits the entry of stop orders and

stop limit orders if the price of the

primary Standard and Poor’s 500 Stock

Price Index 5 futures contract traded on

the Chicago Mercantile Exchange

reaches a value 12 points below the

contract’s closing value on the previous

trading day. Likewise, the Boston Stock

Exchange (‘‘BSE’’) prohibits the entry of

stop and stop limit orders on the BSE

when the NYSE has a ban in place.6 The

Exchange’s new rule would exempt

from the ban stop orders and stop limit

orders of 2,099 shares or less for the

account of an individual investor

pursuant to instructions received

directly from the individual investor.

The Exchange has previously adopted

circuit breaker rules on a pilot basis 7

which parallel the circuit breaker rules

of the NYSE.8 Such rules are designed

to dampen market volatility by

providing a ‘‘time-out’’ to permit

investors and market professionals to

evaluate the state of the market.

However, unlike the NYSE, the

Exchange has not previously prohibited

the entry of stop and stop limit orders

during times of market stress.

III. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirement of Section 6 of the Act 9

and the rules and regulations

thereunder applicable to a national

securities exchange.10 The Commission

believes that the proposed rule change

is consistent with and furthers the

objectives of Section 6(b)(5) of the Act 11

in that it is designed to perfect the

mechanism of a free and open market

and to protect investors and the public

interest. Specifically, the Commission

believes that the prohibition against

accepting stop orders and stop limit

orders, except for individual investor

orders of up to 2,099 shares, during

periods of market stress will facilitate

the maintenance of an orderly market

and reduce market volatility.

The Commission recognizes that

banning the entry of stop orders and

stop limit orders in a significant market

decline may help to reduce market

volatility related to increased selling

pressure in the security. The

Commission believes that banning the

entry of stop orders and stop limit

orders in dually-traded issues when

NYSE Rule 80A is in effect should

prevent the transfer of market volatility

from the NYSE to the CHX. The

Commission believes that the CHX

proposal represents a reasonable effort

to arrive at a coordinated means to

address potential strain on the market

that may develop should the CHX

become inundated with orders that have

been banned pursuant to NYSE Rule

80A.

The Commission notes that stop

orders and stop limit orders on the

specialist’s book at the time the ban is
Federal Register / Vol. 62, No. 225 / Friday, November 21, 1997 / Notices 62385

12The Commission notes that this exception to

the proposed rule is consistent with the rules

adopted by the NYSE and BSE. See NYSE Rule

80A(b) and Ch. II, Sec. 35(b) of the BSE’s rules.

13See Securities Exchange Act Release No. 32697

(July 29, 1993) 58 FR 41538 (August 4, 1993) (order

approving File No. SR–BSE–92–05).

14 15 U.S.C. 78f(b)(5).

15 15 U.S.C. 78s(b)(2).

16 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3 In this Order, NASD Regulation and Nasdaq are

referred to as the ‘‘Subsidiaries.’’ The three entities,

NASD, NASD Regulation, and Nasdaq are referred

to collectively as the ‘‘Association.’’

4The corporate documents proposed for

amendment are: (1) The By-Laws of the NASD; (2)

the By–Laws of NASD Regulation; (3) the By-Laws

of Nasdaq; (4) the Restated Certificate of

Incorporation of the NASD; (5) the Restated

Certificate of Incorporation of NASD Regulation;

and (6) the Restated Certificate of Incorporation of

Nasdaq. The by-laws and restated certificates of

incorporation of the NASD and its Subsidiaries are

collectively referred to in this Order as the

‘‘corporate governance documents.’’

5Securities Exchange Act Release No. 39175

(September 30, 1997), 62 FR 53062 (October 10,

1997). On September 29, 1997, the NASD filed a

technical amendment to the proposed rule change,

the substance of which was included in the Notice.

See letter from T. Grant Callery, General Counsel,

NASD, to Katherine A. England, Assistant Director,

Division of Market Regulation, Commission, dated

September 29, 1997. On September 30, 1997, the

filing was further amended by the NASD to correct

non-substantive typographical errors, all of which

were incorporated in the original filing as well.

Conversation between Mary Dunbar, Office of

General Counsel, NASD Regulation, and Mandy S.

Cohen, Division of Market Regulation, Commission.

Subsequent to notice of the rule filing, the NASD

filed Amendment No. 2, which adjusted the period

during which a member may add an agenda item

to the annual meeting, to allow the NASD sufficient

time to prepare for the new agenda item. See letter

from T. Grant Callery, General Counsel, NASD, to

Katherine A. England, Assistant Director, Division

of Market Regulation, Commission, dated October 7,

1997. Collectively, the original filing and its

subsequent amendments are referred to herein as

the ‘‘NASD’’ Proposal.’’

6Securities Exchange Act Release No. 37106

(April 11, 1996), 61 FR 16944 (April 18, 1996) (File

No. SR–NASD–96–02); Securities Exchange Act

Release No. 37107 (April 11, 1996), 61 FR 16948

(April 18, 1996) (File No. SR–NASD–96–16);

Securities Exchange Act Release No. 37282 (June 6,

1996), 61 FR 29777 (June 12, 1996), (File No. SR–

Continued

instituted will remain eligible for

execution. Consequently, the

Commission believes that investors who

have submitted orders will be unduly

disadvantaged or effected by any

subsequent ban on such orders. The

Commission further believes that

allowing individual investors to enter

stop orders or stop limit orders for 2,099

shares or less, while restricting the

professional use of such orders when

the NYSE institutes a ban pursuant to

Rule 80A represents a reasonable

response to the problem presented by

smaller, individual investors who may

be able to monitor market conditions on

a continuous basis and who desire a

measure of downside protection in a

rapidly moving market. In contrast,

market professionals are able to monitor

the market on a continuous basis and

have less of a need to enter such orders.

The Commission believes that this

exception to the proposed rule should

protect investors and the public interest

by ensuring that individual investors’

stop orders and stop limit orders will be

handled even during periods of market

volatility.12

The Commission finds good cause for

approving the proposed rule change,

including Amendment No. 1, prior to

the thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. The Commission

notes that Amendment No. 1 merely

accelerates the effectiveness of the

proposed rule. The Commission further

notes that no comments were received

on this proposal.Finally, the

Commission notes that it has previously

approved an identical proposal

submitted by the BSE.13 Therefore, the

Commission believes that this filing

raises no new regulatory issues.

Accordingly, the Commission believes

that it is consistent with Section 6(b)(5)

of the Act 14 to approve the proposed

rule change and Amendment No. 1 on

an accelerated basis.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

1. Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

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, N.W.,

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–97–24

and should be submitted by December

12, 1997.

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)2() of the Act,15 that the

proposed rule change (SR–CHX–97–24),

including Amendment No. 1, is

approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.16

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–30626 Filed 11–20–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39326; File Nos. SR–

NASD–97–71, SR–NASD–96–20, and

SR–NASD–96–29]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc.; Order Approving

Proposed Rule Change and

Amendment No. 1 to the Proposed

Rule Change, Notice of Filing and

Order Granting Accelerated Approval

of Amendment No. 2 to the Proposed

Rule Change, and Order Extending

Temporary Approval of SR–NASD–96–

20 and SR–NASD–96–29, Regarding

Proposed Changes in the By-Laws and

Restated Certificates of Incorporation

of the NASD, NASD Regulation, Inc.,

The Nasdaq Stock Market, Inc., and the

Plan of Allocation and Delegation of

Functions by the NASD to Subsidiaries

November 14, 1997.

On September 19, 1997, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

a proposed rule change pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’),1 and

Rule 19b–4 thereunder.2 In this filing,

the NASD proposed amendments to the

corporate documents of the NASD, its

regulatory subsidiary, NASD Regulation,

Inc. (‘‘NASD Regulation’’), and its stock

market operating subsidiary, The

Nasdaq Stock Market, Inc. (‘‘Nasdaq’’),3

as well as to the Plan of Allocation and

Delegation of Functions by NASD to

Subsidiaries (‘‘Delegation Plan’’), in

order to finalize the corporate

restructuring of the Association.4 Notice

of this proposed rule filing was

published in the Federal Register on

October 10, 1997 (‘‘Notice’’).5 The

Commission did not receive any

comment letters on the filing.

Portions of the NASD Proposal were

previously submitted and noticed in the

Federal Register in SR–NASD–96–02,

SR–NASD–96–16, SR–NASD–96–20,

SR–NASD–96–29, and SR–NASD–97–

28.6 The versions of the by-laws and