Document ID: SEC-2008-0221-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2008-02-08T05:00Z

[Federal Register: February 8, 2008 (Volume 73, Number 27)]
[Notices]               
[Page 7621-7622]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08fe08-107]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57264; File No. SR-CHX-2007-27]

 
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Order Approving a Proposed Rule Change To Eliminate a Requirement That 
a Participant Have a Formal Written Agreement To Use Another 
Participant's Give-Up

February 4, 2008.
    On December 12, 2007, the Chicago Stock Exchange, Inc (``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 to amend CHX Article 9, Rule 25 to eliminate the 
requirement that a participant have a formal written agreement to use 
another participant's give-up.\3\ The proposed rule change was 
published for comment in the Federal

[[Page 7622]]

Register on December 31, 2007.\4\ The Commission received no comments 
on the proposal. This order approves the proposed rule change, as 
amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 57036 (December 21, 
2007), 72 FR 74381 (December 31, 2007) (``Notice'') at footnote 3 
(defining a ``give-up'' as a multi-character symbol that identifies 
a CHX participant firm. In the context of this rule, if a 
participant executes a trade using another participant's give-up, 
the firm is identifying the other firm as a party to the trade and 
allocating the trade to the other firm's account for clearing).
    \4\ See id.
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    When the CHX adopted rules for its new trading model, it included a 
provision that requires a participant that executes a trade using 
another participant's give-up to have a written agreement authorizing 
the use of the give-up.\5\ Soon after implementing its new trading 
model, the Exchange contemplated limiting the way in which the rule 
would apply to its institutional brokers by allowing institutional 
brokers to use other participants' give-ups in accordance with 
reasonable written order-handling procedures, without specifically 
requiring that a written agreement be in place.\6\ The Exchange 
believed that the rule provided an appropriate general standard, but 
did not intend to require a potentially substantial change in the long-
standing business practices of the Exchange's institutional brokers, 
who often execute a trade using another participant's give-up, pursuant 
to instructions from such participant or its customer.\7\
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    \5\ See Securities Exchange Act Release No. 54550 (September 29, 
2006), 71 FR 59563 (October 10, 2006) (approval order for the new 
trading model).
    \6\ See File No. SR-CHX-2006-32. The Exchange withdrew that 
proposal on December 12, 2007.
    \7\ See Notice, supra note 3, at 74381.
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    The Exchange now proposes to eliminate the ``give-up agreement'' 
rule altogether. The Exchange believes the rule sets a good business 
standard, but does not believe that it is appropriate to put a hard-
and-fast rule to that effect in place because of its potential impact 
on the day-to-day business practices of some of its institutional 
brokers.\8\
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    \8\ See id.
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    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\9\ In 
particular, the Commission finds that the proposal is consistent with 
section 6(b)(5) of the Act,\10\ which requires, among other things, 
that the rules of an exchange be designed to 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. Repealing this rule will 
permit the Exchange's members to execute trades using another CHX 
participant's give-up pursuant to instructions from either that 
participant or its customer without requiring that a written agreement 
first be in place between those participants, thereby providing greater 
flexibility for members to execute trades on the Exchange. The 
Commission notes, however, that participants may choose to continue 
entering into formal written give-up agreements as they consider 
appropriate.
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    \9\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
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    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-CHX-2007-27) is approved.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-2331 Filed 2-7-08; 8:45 am]

BILLING CODE 8011-01-P