[Federal Register Volume 61, Number 19 (Monday, January 29, 1996)]
[Notices]
[Pages 2850-2851]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1566]



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

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36751; File No. SR-CHX-96-03]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Stock Exchange, 
Incorporated Relating to a Program To Display Price Improvement on the 
Execution Report Sent to the Entering Firm

January 22, 1996.
    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 January 
18, 1996, the Chicago Stock Exchange, Incorporated (``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 proposes to implement a program that will calculate and 
display, on the execution reports sent to member firms, the dollar 
amounts realized as savings to their customers as a result of price 
improvement in the execution of their orders on the Exchange.

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 implement a program 
for calculating and displaying, on an execution report sent to member 
firms entering orders, the dollar value saved by their customers as a 
result of price improvement of orders executed on the Exchange. This 
program does not in any way affect the actual execution of orders. The 
Exchange is proposing to refer to this calculated dollar savings as the 
``NATIONAL BEST <SUP>SM.''

    \SM\ NATIONAL BEST is a service mark of the Chicago Stock 
Exchange, Inc.
---------------------------------------------------------------------------

    The NATIONAL BEST is proposed to be made available for intraday 
market orders entered via the Exchange's MAX system that are not tick 
sensitive and are entered from off the Floor.\1\ The NATIONAL BEST 
(amount of price improvement) is calculated in comparison to the best 
bid and offer displayed in the national market system at the time the 
order is received.\2\ Only orders executed at a price better than the 
inside market will receive a NATIONAL BEST indicator.

    \1\ Also excluded from the NATIONAL BEST feature are orders 
received when the spread between the national best bid and offer is 
one minimum variation, and MAX floor broker orders.
    \2\ For stocks that are not ITS-eligible, the CHX quote is used.
---------------------------------------------------------------------------

    The following examples illustrate how NATIONAL BEST is proposed to 
work.
    Assume the national market quote is 50-50\1/4\.
    Example 1--A market order to sell 1000 shares, entered on the CHX, 
is stopped at 50, meaning it is guaranteed a price at 50 or a better 
price. The quote is narrowed to 50-50\1/8\ and the order is 
subsequently executed at 50\1/8\. This is an \1/8\ point savings over 
the national bid price of 50, which translates into $125 savings over 
the guaranteed price. Thus, the execution report would display NATIONAL 
BEST $125.\3\

    \3\ The algorithm that calculates the savings per share can 
calculate price improvement from a minimum of \1/32\ or $0.03125 per 
share to a maximum of 96/32 or $3.00 per share. If price improvement 
exceeds $3.00 per share, the NATIONAL BEST will be preceded by a 
``>'' sign and will equal $3.00  x  the number of shares traded.
---------------------------------------------------------------------------

    Assume the national market quote is 50-50\1/4\.
    Example 2--A market order to buy 800 shares, entered on the CHX, is 
executed at 50\1/8\. This is an \1/8\ point savings over taking the 
prevailing offer of 50\1/4\. The execution report would display 
NATIONAL BEST $100.
    If there is no price improvement because either there was no 
execution between the national best bid or offer or the order was not 
eligible for the program, then no price improvement information would 
be displayed on the execution report to the entering firm.
    The Exchange believes that the NATIONAL BEST can be expected to 
enhance the information made available to investors and improve their 
understanding of the auction market.

[[Page 2851]]

2. Statutory Basis
    The proposed rule change is consistent with Section 6(b)(5) of the 
Act 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. This rule change is designed to 
perfect the mechanism of a free and open market in that it enhances the 
information provided to investors by displaying to them the dollar 
value of the price improvement their orders may have received when 
executed on the CHX.

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

    The Exchange believes that no burden will be placed on competition 
as a result of the proposed rule change. In fact, the Exchange believes 
that the NATIONAL BEST program can reasonably be expected to enhance 
competition by disclosing to investors the amount of savings they may 
realize as a result of the price improvement their orders may receive 
when executed on the CHX.

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.

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 have the effect of limiting access to or availability 
of any Exchange order entry or trading system, the NATIONAL BEST 
program has become effective pursuant to Section 19(b)(3)(A)(iii) of 
the Act and Rule 19b-4(e)(5) thereunder.\4\ At any time within 60 days 
of the filing of such 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 purpose of 
the Act.

    \4\ 17 CFR 240.19b-4(e)(5).
---------------------------------------------------------------------------

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-96-03 and should be 
submitted by February 20, 1996.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-1566 Filed 1-26-96: 8:45 am]
BILLING CODE 8010-01-M