29156 Federal Register / Vol. 61, No. 111 / Friday, June 7, 1996 / Notices

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

2 17 CFR 240.19b–4.

3See Letter from David T. Rusoff, Attorney, Foley

& Lardner, to Ivette Lopez, Assistant Director,

Division of Market Regulation, SEC, dated May 9,

1996 (‘‘Amendment No. 1’’).

4See Letter from David T. Rusoff, Attorney, Foley

& Lardner, to Ivette Lopez, Assistant Director,

Division of Market Regulation, SEC, dated May 29,

1996 (‘‘Amendment No. 2’’) Amendment No. 2

amends Article XX, Rule 2 to clarify that this rule

also applies to the Post Primary Trading Session

and Interpretation and Policy .01 to this rule to

correct an inaccurate cross-reference. In addition,

Amendment No. 2 revises the proposed changes to

Article IX, Rule 10(b) to clarify that if a security’s

primary market is the Pacific Stock Exchange,

Incorporated (‘‘PSE’’), the Primary Trading Session

for that security shall end no later than 3:00 p.m.

(CT). Amendment No. 2 also revises the proposed

changes to Article IX, Rule 10(b) to remove the

extension of the Primary Trading Session for CHX

exclusive issues from 3:00 p.m. to 3:30 p.m. (CT)

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The purpose of the proposed rule

change is to make a clarifying

amendment to Interpretation .04 of Rule

6.73, which requires a floor broker to

continuously represent certain orders in

the trading crowd.

Paragraph (a) of Rule 6.73,

Responsibilities of Floor Brokers, states

that a floor broker must use due

diligence in handling an order to

execute the order at the best price or

prices available to the broker, in

accordance with Exchange rules. In

further clarifying a broker’s

responsibility to use due diligence,

Interpretation .04 of Rule 6.73 states that

a floor broker’s use of due diligence

includes the immediate and continuous

representation of ‘‘market or marketable

orders’’ at the trading station where the

option class represented by the order is

traded. The use of the term

‘‘marketable’’ has lead to some

ambiguity in the interpretation of the

Rule, however, because some members

have assumed that the term refers to

marketable limit orders which are limit

orders where the specified price at

which to sell is below or at the current

bid, or if to buy is at or above the

current offer. In fact, however, the

interpretation should read, and has been

interpreted to mean, that a floor broker

must immediately and continuously

represent market orders or limit orders

where the specified price to sell is at or

below the current offer, or if to buy is

at or above the current bid. Because this

interpretation will require floor brokers

to continuously and immediately

represent some orders that are neither

market orders or marketable limit

orders, i.e. those orders whose limit

price is between the bid and offer, the

Exchange thought it was appropriate to

revise the interpretation to clarify the

intent of the term marketable. The

proposed rule change will ensure that

floor brokers will represent an order in

a trading crowd when that order is

likely to be executed soon, even if it is

not immediately executable.

By clarifying an existing rule of the

Exchange in order to clear up any

possible ambiguity, the CBOE believes

that the proposed rule change is

consistent with and furthers the

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

in that it is designed to perfect the

mechanisms of a free and open market

and 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

any inappropriate burden on

competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

No written comments were solicited

or received with respect to the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Because the foregoing rule change

constitutes a stated policy with respect

to the meaning, administration, or

enforcement of an existing rule, it has

become effective pursuant to Section

19(b)(3)(A) of the Act and Rule 19b–4

thereunder. 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 submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 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, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the CBOE. All submissions

should refer to the File No. SR–CBOE–

96–26 and should be submitted by June

28, 1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 96–14402 Filed 6–6–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37265; File No. SR–CHX–

96–13]

Self-Regulatory Organizations; Order

Granting Accelerated Approval of

Proposed Rule Change and

Amendment No. 1 and Notice of Filing

and Order Granting Accelerated

Approval of Amendment No. 2 by the

Chicago Stock Exchange, Incorporated

Relating to the Modification of the

Hours of the Exchange’s Primary

Trading Session and the

Establishment of a Post Primary

Trading Session

May 31, 1996.

I. Introduction

On April 9, 1996, the Chicago Stock

Exchange, Incorporated (‘‘CHX’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission

(‘‘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

modify the hours of the Exchange’s

Primary Trading Session and to

establish a Post Primary Trading

Session. On May 10, 1996 the Exchange

submitted to the Commission

Amendment No. 1 to the proposed rule

change.3 The proposed rule change, as

amended by Amendment No. 1, was

published for comment in Securities

Exchange Act Release No. 37204 (May

13, 1996), 61 FR 24988 (May 17, 1996).

On May 29, 1996 the Exchange

submitted Amendment No. 2 to the

proposed rule change.4 This order
Federal Register / Vol. 61, No. 111 / Friday, June 7, 1996 / Notices 29157

and to provide that CHX exclusive issues are

eligible for the Post Primary Trading Session.

Finally, Amendment No. 2 deletes a provision of

proposed Article XX, Rule 37, Interpretation and

Policy .05 that would have allowed a specialist to

decline to accept, under certain circumstances,

orders entered during the Post Primary Trading

Session.

5The proposed rule change provides that for a

security whose primary market is the PSE, the

Primary Trading Session for that security shall end

no later than 3:00 p.m. (CT). See Amendment No.

2, supra note 4.

6See Amendment No. 2, supra note 4. The

proposal, as originally filed, would have changed

the trading hours for securities whose primary

market is the CHX to 8:30 a.m.–3:30 p.m. (CT). See

Securities Exchange Act Release No. 37204 (May

13, 1996), 61 FR 24988 (May 17, 1996).

However, trading in the Chicago Basket, currently

conducted on the Floor of the Exchange from 8:30

a.m. to 3:15 p.m. (CT), will be unaffected by the

proposed rule change.

7The CHX represents that ITS will be available

for both inbound and outbound trades during the

PPS to the extent that other market centers (i.e., the

PSE and the Philadelphia Stock Exchange, Inc.

(‘‘Phlx’’) are open for trading. The CHX also

represents that the PPS will be surveilled in the

same manner and using the same techniques as

those used to surveil the Primary Trading Session.

To facilitate the surveillance of the PPS, CHX’s

surveillance staff will remain on-site during the PPS

and for any necessary additional time period after

the close of the PPS. See Letter from David T.

Rusoff, Attorney, Foley & Lardner, to Ivette Lopez,

Assistant Director, Division of Market Regulation,

SEC, dated May 9, 1996 (‘‘ITS/Surveillance Letter’’).

8For purposes of the PPS, the Exchange considers

the close of regular trading to occur at 3:00 p.m.

(CT) with respect to securities whose primary

market is the PSE. Telephone conversation between

David T. Rusoff, Attorney, Foley & Lardner, and Jon

Kroeper, Attorney, SEC, dated May 31, 1996.

9The Exchange will require order tickets of PPSeligible orders to include an ‘‘E’’ designator, which

will indicate that the order is eligible for execution

during the PPS. See ITS/Surveillance Letter, supra

note 7.

10The CHX has represented that it has held a

number of meetings with its members in which it

has explained the necessary steps members must

take in order to make orders eligible for execution

during the PPS. The CHX has represented further

that it will distribute a Notice to Members that will

state, among other things, that PPS orders may not

be entered with a specialist prior to 3:00 p.m. (CT)

and orders entered during the Primary Trading

Session must be replaced after 3:00 p.m. (CT) with

order tickets bearing the ‘‘E’’ designator in order to

be eligible for the PPS. Telephone conversation

between David T. Rusoff, Attorney, Foley &

Lardner, and Jon Kroeper, Attorney, SEC, dated

May 31, 1996.

11As part of the proposed rule change, the

Exchange has moved existing Interpretation and

Policies .01–.03 of Rule 37(a), Article XX, currently

found at the end of subparagraph (a) of Rule 37, to

the end of Rule 37, and renumbered existing

Interpretation and Policy .01 of Rule 37 as

Interpretation and Policy .04.

12See Amendment Nos. 1 and 2, supra notes 3

and 4.

Article XX of the CHX Rules contains the

Exchange’s trading rules. Article XX, Rule 1

currently states that the rules contained in Article

XX have general applicability to Exchange

Contracts made on the Exchange during the Primary

Trading Session, and, to the extent determined by

the Exchange, to Exchange Contracts not made on

the Exchange. Article XX, Rule 2 currently states

that no member or member organization shall make

any bid, offer or transaction upon the Floor of the

Exchange, issue an ITS commitment from the Floor,

or send an order in a Nasdaq National Market

Security for execution via telephone to a Nasdaq

System market maker other than during the Primary

Trading Session, unless pursuant to the ITS Plan.

Article XXI, Rule 1 currently requires each

Exchange member to promptly advise the Exchange

of each of his or her transactions that are executed

on the Floor of the Exchange during the Primary

Trading Session or through the Portfolio Trading

System.

13Therefore, under the proposed rule change, as

amended, and the rules of the other national

securities exchanges, as of May 31, 1996: the

Primary Trading Session will run from 8:30 a.m. to

3:00 p.m. (CT); the PPS will run from 3:00 p.m. to

3:30 p.m. (CT); and the Secondary Trading Session

will run from 3:30 p.m. to 5:00 p.m. (CT).

For a description of operation of the Exchange’s

Secondary Trading Session, see Securities Exchange

Act Release No. 33991 (May 2, 1994), 59 FR 23904

(May 9, 1994) (File No. SR–CHX–93–23).

14See Amendment No. 1, supra note 3.

15Currently, Interpretation and Policy .01 refers

to the Exchange’s ITS rules as being located in

Article XX, Rule 36, whereas they are actually

located in Article XX, Rule 39.

16 15 U.S.C. 78f(b).

approves the proposed rule change, as

amended by Amendment Nos. 1 and 2,

on an accelerated basis.

II. Description

Currently, the Exchange’s Primary

Trading Session runs from 8:30 a.m. to

3:00 p.m. (CT), Monday through Friday.

One purpose of the proposed rule

change is to amend Article XX, Rule

10(b) to conform the Exchange’s Primary

Trading Session hours for each traded

security to the trading hours during

which the security is traded on its

primary market.5 If a security’s primary

market is the CHX, the Primary Trading

Session for such security will continue

to run from 8:30 a.m. to 3:00 p.m. (CT).6

The proposed rule change would also

add a Post Primary Trading Session

(‘‘PPS’’) on the trading floor.7 The PPS

for orders and securities designated as

eligible for the PPS would be for onehalf hour after the close of the regular

trading session on the security’s primary

market.8 Securities in which the CHX is

the primary market will be eligible for

the PPS.

Only orders designated as eligible for

the PPS would be eligible for execution

during the PPS.9 Market, limit and

contingent order types currently

acceptable would be accepted for PPS if

so designated. In this regard, GTX

orders would only be accepted if

specifically designated as PPS-eligible.

The Exchange’s MAX System will not

be available as an automated execution

system or as an automated routing

system during the PPS. As a result,

order sending firms must contact a floor

broker in order to send an order to the

CHX for execution during the PPS.10

Because the PPS will be an extension of

the Exchange’s daily auction market, all

the Exchange’s rules applicable to floor

trading during the Exchange’s Primary

Trading Session, as modified by

proposed Interpretation and Policy .05

of Rule 37, Article XX, will continue to

be applicable.11 For example, specialists

will be required to quote markets and

trading will occur based on real-time

price and quote changes.

To accomplish the foregoing, the

Exchange is amending Article XX, Rules

1 and 2 and Article XXI, Rule 1 to make

it clear that these rules also apply to the

PPS.12 The Exchange is also amending

Interpretation and Policy .02 of Rule 37,

Article XX to make it clear that although

GTX orders are executable after the

close the PPS (i.e., in the Exchange’s

Secondary Trading Session), they are

executed based on trading that occurs in

a security in a primary market’s afterhours closing price trading session, at

that closing price, and are not

executable based on trading in, or the

closing price established in, the PPS.13

In addition, the Exchange is amending

Article IX, Rule 10(b) to provide that if

trading on the Exchange is halted during

the Primary Trading Session pursuant to

Article XX, Rule 10A, and such trading

halt is still in effect at the close of the

Primary Trading Session, the PPS

scheduled for that day will be

canceled.14 Finally, Article XX, Rule 2,

Interpretation and Policy .01 is being

amended in order to correct an

inaccurate internal cross-reference.15

The Exchange requests the

Commission to find good cause,

pursuant to Section 19(b)(2) of the Act,

for approving the proposed rule change

prior to the thirtieth day after

publication in the Federal Register.

III. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

The Commission finds that the CHX’s

proposal to modify the definition of its

Primary Trading Session and to

establish a post-primary auction market

trading session extending to 3:30 p.m.

(CT) is consistent with the requirements

of the Act and the rules and regulations

thereunder applicable to a national

securities exchange, and, in particular,

with the requirements of Section 6(b).16

Specifically, the Commission finds that

the proposed rule change is consistent

with the Section 6(b)(5) requirements

that the rules of an exchange be

designed to promote just and equitable

principles of trade, and, in general, to

protect investors and the public interest.

The Commission believes that the

CHX’s modification of the definition of

its Primary Trading Session to track the

hours that each security is traded on its

primary market is a more flexible
29158 Federal Register / Vol. 61, No. 111 / Friday, June 7, 1996 / Notices

17See Securities Exchange Act Release No. 35188

(January 3, 1995), 60 FR 2422 (January 9, 1995) (SR–

Phlx–94–46) (order approving establishment of Phlx

PPS from 4:00 to 4:15 (ET)); Securities Exchange

Act Release No. 29631 (August 30, 1991), 56 FR

46025 (September 9, 1991) (SR–PSE–91–21) (order

approving extension of PSE post-1 p.m. session

from 1:30 to 1:50 p.m. (PT)).

18The Commission notes that the CHX has

represented that trading during the PPS will be

surveilled in the same manner and using the same

techniques as those used to surveil the Primary

Trading Session. See ITS/Surveillance Letter, supra

note 7.

19The Commission notes the CHX’s

representation that it will distribute a Notice to

Members setting forth the procedures to be followed

to make orders eligible for the PPS. See supra note

10.

20See ITS/Surveillance Letter, supra note 7.

21The Commission notes that the proposal to

establish the Phlx’s PPS was noticed previously in

the Federal Register for the full statutory period

and the Commission did not receive any comments

on it. See supra note 17.

22 15 U.S.C. 78s(b)(2).

23 17 CFR 200.30–3(a)(12).

definition that the existing one in that

it can readily accommodate future

changes in the trading hours of the other

national securities exchanges, without,

at present, affecting a substantive

change to the existing hours of trading

in these securities on the Exchange.

The Commission also believes that the

initiation of the PPS does not raise any

new regulatory concerns. Currently,

auction market trading after 4:00 p.m.

(ET) occurs on the Phlx until 4:15 p.m.

(ET) and the PSE until 4:50 p.m. (ET).17

The CHX’s PPS will operate in a

substantially similar manner and enable

the CHX to compete with both the Phlx

and PSE for after-hours volume.

Specifically, the CHX PPS will continue

to provide full transparency by

disseminating quotes through the

Consolidated Quotation System and

reporting trades to the consolidated

tape. In addition, although the

Exchange’s MAX System will be

unavailable for automated order routing

or executions during the PPS, there will

continue to be complete access to the

CHX and the usual auction market

trading rules of the Exchange will

continue to apply.18 Moreover, in order

to preserve the execution quality of

market, limit, contingent (including

GTX) orders placed on the CHX

specialists’ books during the Primary

Trading Session, such orders will not

automatically migrate to the PPS, but

rather will do so only if the order is so

designated (i.e., with an ‘‘E’’ indicator

on the ticket) and entered with the

specialist after 3:00 p.m. (CT).19

Furthermore, the Commission

believes that the CHX’s proposal to

cancel the PPS for a particular day as a

result of any trading halt during the

Primary Trading Session pursuant to

Article XX, Rule 10A that is still in

effect at the close of the Primary Trading

Session removes from its consideration

any regulatory concerns that may have

existed if this provision was not present.

The Commission notes, however, that

the only other national securities

exchanges that will be operating an

auction market after 4:00 p.m. (ET) will

be the Phlx and PSE. In this regard, the

CHX has represented to the Commission

that the ITS will be available between

the three exchanges during their post4:00 p.m. (ET) auction market

sessions.20 Thus, ITS commitments will

be able to be routed back and forth, just

as during the regular hours of auction

trading on the primary markets.

Although the NYSE is operating its

Off-Hours Trading facility and the Amex

is operating its After-Hours Trading

facility during this time period, these

sessions are limited to accepting single

stock orders priced at either the NYSE

or Amex closing price, respectively, or

effecting portfolio trades. Because the

PPS trading session will not overlap the

5:00 p.m. (ET) executions in Crossing

Session I of the NYSE’s Off-Hours

Trading facility or the Amex’s AfterHours Trading Facility, the proposal

being approved today does not raise

market structure issues regarding the

interaction between the PPS and these

two after-hours trading facilities.

Accordingly, the Commission does

not believe that an extension of auction

market trading on the CHX until 4:30

p.m. (ET) will have an adverse effect on

the maintenance of fair and orderly

markets or disadvantage public

customers.

The Commission finds good cause for

approving the proposed rule change

prior the thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. The Commission

believes that accelerated approval of the

proposal to modify the definition of the

Exchange’s Primary Trading Session is

appropriate because the CHX’s proposal

does not alter, at present, the existing

hours of the Primary Trading Session.

Moreover, the Commission will retain

the ability to consider the effects of any

future change in the hours of the CHX’s

Primary Trading Session brought about

by the modification of another

exchange’s trading hours through its

review under Section 19(b) of the Act of

any proposed rule that would

precipitate such a change.

The Commission believes that

accelerated approval of the proposal to

establish a PPS is appropriate because

the CHX’s proposal is substantively the

same as the PPS currently operated by

the Phlx, with the exception that the

CHX’s PPS remains open for an

additional fifteen minutes.21 In this

regard, the Commission does not believe

that this difference is a significant one,

as the same market situation that

currently exists between 4:00 to 4:15

(ET) when only the Phlx and PSE are

conducting auction market trading will

prevail between 4:15 to 4:30 p.m. (ET)

when only the CHX and PSE will be

conducting such trading.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

2. Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of the

submission, Amendment Nos. 1 and 2,

and 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, D.C. 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 File No. SR–CHX–96–13

and should be submitted by June 28,

1996.

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act 22 that the

proposed rule change is hereby

approved on an accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.23

Jonathan G. Katz,

Secretary.

[FR Doc. 96–14400 Filed 6–6–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37256; File No. SR–DTC–

96–08]

Self-Regulatory Organizations; The

Depository Trust Company; Notice of

Filing of a Proposed Rule Change To

Establish a Custody Service For

Certain Non-depository Eligible

Securities

May 30, 1996.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934