Federal Register / Vol. 66, No. 43 / Monday, March 5, 2001 / Notices 13361

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

2 17 CFR 240.19b–4.

3See Letter dated January 16, 2001, from

Kathleen M. Boege, Associate General Counsel,

CHX, to Alton S. Harvey, Office Head, Division of

Market Regulation, Commission (‘‘Amendment No.

1’’). Amendment No. 1 requests pilot approval of

the proposed rule change through July 9, 2001.

4Securities Exchange Act Release No. 43882

(January 24, 2001), 66 FR 8819.

5 Dual Trading System issues are issues that are

listed on either the New York Stock Exchange or the

American Stock Exchange. See Securities Exchange

Act Release No. 43203 (August 24, 2000), 65 FR

53067 (August 31, 2000) (approving SR–CHX–00–

13 on a pilot basis through February 28, 2001). The

proposed rule change deletes the provisions of

Article XX, Rule 23 that govern cross transactions

in NNM issues, and, thus, has the effect of also

extending the pilot program in Dual Trading System

issues until July 9, 2001.

6These updated quotes will not be directed solely

to the floor broker. Anyone at the post may respond

to the updated quotes.

7 15 U.S.C. 78f(b).

8 15 U.S.C. 78f(b)(5).

9 In approving this rule change, the Commission

has considered its impact on efficiency,

competition, and capital formation. 15 U.S.C. 78c(f). 10 17 CFR 200.30–3(a)(12).

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44000; File No. SR–CHX–

00–27]

Self-Regulatory Organization; Order

Granting Accelerated Approval of a

Proposed Rule Change by the Chicago

Stock Exchange, Incorporated Relating

to Participation in Crossing

Transactions Effected on the

Exchange Floor

February 23, 2001.

I. Introduction

On September 14, 2000, the Chicago

Stock Exchange, Incorporated (‘‘CHX’’

or ‘‘Exchange’’) filed with 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

relating to participation in crossing

transactions effected on the exchange

floor. The CHX amended the proposal

on January 18, 2001.3 The Federal

Register published the proposed rule

change, as amended, for comment on

February 2, 2001.4 The Commission

received no comments on the proposal.

This order approves the proposal on an

accelerated basis.

II. Description of Proposal

The Exchange proposes to amend

Article XX, Rule 23 of the Exchange’s

rules relating to participation in

crossing transactions in Nasdaq/

National Market (‘‘NNM’’) securities

effected on the floor of the Exchange.

This proposal is currently operating, on

a pilot basis through February 28, 2001,

for Dual Trading System issues traded

on the Exchange.5 This pilot was

approved in connection with the

securities industry’s move to a decimal

pricing environment. The proposed rule

change would extend the pilot to cover

crossing transactions in NNM securities.

Under current CHX Rule 23, if a floor

broker presents a crossing transaction

involving NNM issues, another member

may participate, or ‘‘break up,’’ the

transaction, by offering (after

presentation of the proposed crossing

transaction) to better one side of the

transaction by the minimum price

variation. The floor broker is then

effectively prevented from

consummating the transaction as a

‘‘clean cross.’’ In instances where the

minimum price variation is relatively

small, it is very inexpensive for a

member to break up crossing

transactions in this matter.

Under the proposed pilot program, a

floor broker will be permitted to

consummate cross transactions in NNM

issues, as well as Dual Trading System

issues, involving 5,000 shares or more,

without interference by any specialist or

market maker if, prior to presenting the

cross transaction, the floor broker first

requests a quote for the subject

security.6 These requests will place the

specialist and other market makers on

notice that the floor broker is intending

to ‘‘cross’’ within the bid-offer spread.

The proposed rule change will operate

on a pilot basis through July 9, 2001.

III. Discussion

The Commission finds that the

proposed rule change, as amended, is

consistent with the Act and the rules

and regulations under the Act

applicable to a national securities

exchange and, in particular, the

requirements of section 6(b) of the Act.7

Specifically, the Commission finds that

the proposed rule change is consistent

with the section 6(b)(5) 8 requirements

that the rules of an exchange be

designed to promote just and equitable

principles of trade, to prevent

fraudulent and manipulative acts and,

in general, to protect investors and the

public interest.9

The Commission believes that the

proposed rule change strikes a

reasonable balance between the ability

of floor brokers on the Exchange to

execute crossing transactions and the

ability of specialists and market makers

to provide price improvement. In

addition, the Commission believes that

requiring floor brokers to request a

quote in a particular security before

presenting the transaction to be crossed

will provide specialists and market

makers both sufficient notice that the

cross is about to occur between the bid

and offer spread and an opportunity to

improve their quote. The Commission

notes that floor brokers would still

retain the ability to present both sides

of the order at the post if the customers

so desire.

The Commission believes that it is

consistent with the protection of

investors and the public interest and

therefore finds good cause for approving

the proposed rule change prior to the

thirtieth day after the date of

publication of notice thereof in the

Federal Register. The proposed rule

change is designed to minimize possible

negative effects on crossing transactions

of decimal pricing, which is scheduled

to begin in NNM securities on March 12,

2001. In addition, the Commission notes

that the proposed rule change is being

approved on a pilot basis only, through

July 9, 2001. In light of these factors, the

Commission finds good cause to

approve the proposed rule change on an

accelerated basis.

IV. Conclusion

It Is Therefore Ordered, pursuant to

section 19(b)(2) of the Act, that the

proposed rule change (SR–CHX–00–27),

as amended, is approved through July 9,

2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–5248 Filed 3–2–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44003; File No. SR–NASD–

01–10]

Self-Regulatory Organizations; Order

Granting Accelerated Approval of

Proposed Rule Change by the National

Association of Securities Dealers, Inc.

Requiring Conversion to Decimals of

Open Fractional Orders in Nasdaq

Securities

February 26, 2001.

I. Introduction

On January 29, 2001, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’), through its subsidiary, the

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

filed with the Securities and Exchange

Commission (‘‘Commission’’), pursuant