Document ID: SEC-2007-0266-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Stock Exchange, Inc.
Posted Date: 2007-02-23T05:00Z

[Federal Register: February 23, 2007 (Volume 72, Number 36)]
[Notices]               
[Page 8215-8216]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23fe07-98]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55308; File No. SR-CHX-2006-38]

 
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing of a Proposed Rule Change To Extend the Late Trading 
Session and To Permit Only the Execution of Cross Orders During That 
Session

February 15, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on December 22, 2006, the Chicago Stock Exchange, Inc. (the 
``CHX'' or the ``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 CHX. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules (i) To extend its late 
trading session until 4 p.m. and (ii) to provide that only cross orders 
may be executed during that session. The text of this proposed rule 
change is available on the Exchange's Web site at http://www.chx.com/rules/proposed_rules.htm
, at the Exchange's principal office, and in 

the Commission's Public Reference Room.

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 CHX included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received regarding the proposal. The text of 
these statements may be examined at the places specified in Item IV 
below. The CHX 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
    In the Exchange's new trading model, the Exchange conducts two 
trading

[[Page 8216]]

sessions. The first session--called the regular trading session--is 
held from 8:30 a.m. (Central Time) to 3 p.m. (Central Time).\3\ 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.\4\
---------------------------------------------------------------------------

    \3\ The regular trading session for certain ETFs extends to 3:15 
p.m. (Central Time).
    \4\ 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.
---------------------------------------------------------------------------

    Through this proposal, the Exchange seeks to extend its late 
trading session by one-half hour, to 4 p.m. (Central Time), and to 
confirm that only cross orders may be executed during the late trading 
session. The slightly 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 cross-orders-only rule simply confirms 
that CHX participants may only submit cross orders for execution during 
the late trading session.\5\ 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.\6\ The Exchange also believes that 
this proposal is consistent with late trading sessions operated by 
other markets.\7\
---------------------------------------------------------------------------

    \5\ In connection with this change to allow only cross orders to 
be executed during the late trading session, the Exchange is 
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, 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. See Article 20, Rule 4(b)(4)(defining a cross 
order as one that is equal to or better than the NBBO).
    \6\ Under the rules relating to its soon-to-be-retired trading 
model, the Exchange's MAX[reg] system is not available for trading 
in the post-primary trading session, which begins immediately after 
the end of the regular trading session. See Article XX, Rule 37, 
Interpretation and Policy .05. The Exchange's floor brokers can 
receive and execute orders during the post-primary trading session 
and often execute those orders as cross transactions.
    \7\ 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)).
---------------------------------------------------------------------------

2. Statutory Basis
    Approval of the rule changes proposed in this submission is 
consistent with the requirements of the Act and the rules and 
regulations thereunder that are applicable to a national securities 
exchange, and, in particular, with the requirements of Section 6(b) of 
the Act.\8\ In particular, the proposed changes are consistent with 
Section 6(b)(5) of the Act,\9\ because they would promote just and 
equitable principles of trade, remove impediments to, and perfect the 
mechanism of, a free and open market and a national market system, and, 
in general, protect investors and the public interest by permitting the 
Exchange to operate a late trading session during which only cross 
orders are eligible for execution.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule changes would 
impose any 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 either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period: (i) As the Commission 
may designate up to 90 days of such date if it finds such longer period 
to be appropriate and publishes its reasons for so finding or (ii) as 
to which the self-regulatory organization consents, the Commission 
will:
    (A) By order approve the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File No. SR-CHX-2006-38 on the subject line.

Paper Comments:

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File No. SR-CHX-2006-38. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). 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 Room. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the CHX. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File No. SR-CHX-2006-38 and should be submitted on or before March 16, 
2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-3090 Filed 2-22-07; 8:45 am]

BILLING CODE 8010-01-P