Document ID: SEC-2015-1778-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc
Posted Date: 2015-11-02T05:00Z

[Federal Register Volume 80, Number 211 (Monday, November 2, 2015)]
[Notices]
[Pages 67440-67443]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27792]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76262; File No. SR-CHX-2015-05]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Unify Procedures for the Handling of Resting Orders in a Security 
Subject to a Trading Halt, Pause or Suspension on the Exchange

October 26, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on October 19, 2015, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CHX proposes to amend CHX Rules to unify procedures for the 
handling of resting orders in a security subject to a trading halt, 
pause or suspension on the Exchange. CHX has designated this proposed 
rule change as non-controversial pursuant to Section 19(b)(3)(A) \3\ of 
the Act and Rule 19b-4(f)(6) \4\ thereunder and has provided the 
Commission with the notice required by Rule 19b-4(f)(6)(iii).\5\ The 
text of this proposed rule change is available on the Exchange's Web 
site at (www.chx.com) and in the Commission's Public Reference Room.
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    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ 17 CFR 240.19b-4(f)(6)(iii).
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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 changes and 
discussed any comments it received on the

[[Page 67441]]

proposed rule change. 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
    The Exchange proposes to amend CHX Rules to unify procedures for 
the handling of resting orders in a security subject to a trading halt, 
pause or suspension on the Exchange.\6\ Specifically, the Exchange 
proposes to apply the current procedures for the handling of resting 
orders in a security subject to a Limit Up-Limit Down (``LULD'') 
trading pause \7\ to all trading halts on the Exchange (``proposed 
unification'').
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    \6\ The Exchange may initiate a trading halt, pause or 
suspension for various reasons, including, but not limited to, 
technical issues with the Matching System or in response to a 
regulatory halt initiated by the primary listing market.
    \7\ See CHX Article 20, Rule 2A(c).
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    Currently, upon initiation of any trading halt, pause or suspension 
in a security on the Exchange, the Exchange will take the following 
actions:
     Stop all trading in the security;
     Cancel all resting orders marked Cancel On Halt, as 
defined under Article 1, Rule 2(b)(1)(B); and
     Reject all incoming orders; provided valid incoming Sub-
second Non-displayed Auction Process Auction Only Orders (``SNAP 
AOOs''), as defined under Article 1, Rule 2(h)(3),\8\ not marked Cancel 
On Halt received during a trading halt on the Exchange will be placed 
in the SNAP AOO Queue, pursuant to Article 18, Rule 1(c)(4),\9\ and not 
cancelled.\10\
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    \8\ CHX Article 1, Rule 2(h)(3) is effective, but not yet 
operative. See infra note 10.
    \9\ CHX Article 20, Rule 8(b)(2)(A) is effective, but not yet 
operative. See infra note 10.
    \10\ The proposed rule change to adopt SNAP was recently 
approved, but is not yet operative. See Securities Exchange Act 
Release No. 76087 (October 6, 2015), 80 FR 61540 (October 13, 2015).
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    However, the Exchange handles resting orders in a security subject 
to a trading halt, pause or suspension on the Exchange differently 
depending on whether trading is stopped due to a LULD trading pause. In 
the case of a LULD trading pause, the Exchange will cancel all resting 
orders in the subject security, except that SNAP AOOs not marked Cancel 
On Halt will be placed or remain in the SNAP AOO Queue and not 
cancelled.\11\ However, for all other trading halts, pauses or 
suspensions, the Exchange will maintain the resting orders in the 
subject security, except that orders marked Cancel On Halt will be 
cancelled.\12\
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    \11\ See CHX Article 20, Rule 2A(c); see also CHX Article 18, 
Rule 1(c) (which is effective, but not yet operative); see also 
supra note 10.
    \12\ See paragraph .02 of CHX Article 20, Rule 1.
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    Upon the initiation of any trading halt, pause or suspension in a 
security on the Exchange, the Exchange now proposes to cancel all 
resting orders in the security, while maintaining the current exception 
for SNAP AOOs not marked Cancel On Halt. To this end, the Exchange 
proposes various amendments to CHX Rules, as described below.
    Initially, as a global amendment, the Exchange proposes to replace 
certain references throughout CHX Rules to trading halts, suspensions 
and/or pauses, or some combination thereof, with the more uniform 
``trading halts, suspensions or pauses.'' The Exchange believes that 
this consistency will promote clarity of CHX Rules. Specifically, the 
Exchange proposes to make such amendments to Article 1, Rule 
2(b)(1)(B); Article 18, Rule 1(b)(3); Article 20, Rule 1(b) and (d); 
\13\ and paragraph .02 of Article 20, Rule 1.
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    \13\ Incidentally, the Exchange proposes to amend CHX Article 
20, Rule 1(b) to replace reference to ``Rules 1(d) and (2)'' with 
``CHX Rules'' generally, as trading halts, pauses or suspensions may 
be effected on the Exchange pursuant to various CHX Rules, 
including, but not limited to, Article 20, Rules 1(d) and (2). 
Similarly, the Exchange proposes to amend CHX Article 20, Rule 1(d) 
to provide that trading may also be halted, paused or suspended on 
the Exchange, and resumed thereafter, pursuant to other CHX Rules. 
Specifically, trading halts, pauses or suspensions may be declared 
and lifted pursuant to the following CHX Rules: Article 20, Rules 
1(d), 2, 2A and 10; and Article 22, Rule 6.
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Amended paragraph .02 of Article 20, Rule 1
    Current paragraph .02 of Article 20, Rule 1 provides as follows:

    If trading in one or more issues is suspended or halted, which 
requires the Exchange to suspend trading in the issue, other than a 
LULD Trading Pause, all orders in those issues shall remain in the 
Matching System unless they are cancelled by the Participant that 
submitted the order. The Matching System shall not accept any 
orders, or any changes to orders (other than cancellations), in 
those issues during a trading suspension or halt, subject to Article 
18, Rule 1(c). Immediately after the trading halt or suspension has 
ended, the Matching System shall begin accepting orders and shall 
match them as provided in Rule 8(d), below.

    The Exchange now proposes to amend paragraph. 02 to contemplate the 
proposed unification. The Exchange also proposes to clarify that 
``resting'' orders shall be cancelled and that the amended rule applies 
to trading halts, pauses and suspensions ``on the Exchange,'' which 
obviates current language providing that the rule applies to trading 
halts that require the Exchange to suspend trading in the issue. As 
such, amended paragraph .02 provides as follows:

    If trading in one or more issues is halted, paused or suspended 
on the Exchange, all resting orders in those issues shall be 
cancelled from the Matching System, subject to Article 18, Rule 
1(c). The Matching System shall not accept any orders in those 
issues during a trading halt, pause or suspension, subject to 
Article 18, Rule 1(c). Immediately after the trading halt, pause or 
suspension has ended, the Matching System shall begin accepting 
orders and shall match them as provided in Rule 8(d), below.
Amended Article 1, Rule 2(b)(1)(B) (Cancel On Halt)
    Current Article 1, Rule 2(b)(1)(B) defines ``Cancel On Halt'' as 
follows:

    A limit order modifier that requires an order to be 
automatically cancelled by the Matching System if a trading halt or 
suspension is declared in that security.

    The Exchange now proposes to amend the definition to clarify that 
orders marked Cancel On Halt will be cancelled if a trading halt, pause 
or suspension is declared in the security ``on the Exchange,'' as 
certain operational halts declared by away markets may not require the 
Exchange to suspend trading in the security. Moreover, since the 
Exchange proposes to cancel all resting orders, except for SNAP AOOs, 
during a trading halt, pause or suspension, the Exchange proposes to 
adopt additional language that provides that all limit orders, except 
for SNAP AOOs, as defined under Article 1, Rule 2(h)(3), shall be 
deemed to have been received Cancel On Halt, which cannot be overridden 
by an order sender. The Exchange submits that this is appropriate 
because the current rules require SNAP AOOs to be placed in, or remain 
on, the SNAP AOO Queue during a trading halt, pause or suspension and, 
thus, such queued SNAP AOOs would already be inactive and removed from 
the SNAP CHX book, without the need for cancellations.\14\ As such, 
amended Rule 2(b)(1)(B) provides as follows:
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    \14\ See CHX Article 18, Rule 1(c)(2) (which is effective, but 
not yet operative); see also supra note 10.

    ``Cancel On Halt'': a limit order modifier that requires an 
order to be automatically cancelled by the Matching System if a 
trading halt, pause or suspension is declared in that security by 
the Exchange.

[[Page 67442]]

    All limit orders, except for SNAP AOOs, as defined under 
paragraph (h)(3), shall be deemed to have been received Cancel On 
Halt, which cannot be overridden by an order sender.
Amended Article 18, Rule 1(c) (Halt or Pause During the SNAP Cycle)
    Current Article 18, Rule 1(c)(1) details the actions that would be 
taken if a trading halt is initiated on the Exchange during a SNAP 
Cycle.\15\ With respect to the handling of orders resting on the SNAP 
CHX book, current Rule 1(c)(1) substantively tracks current paragraphs 
.02 of Article 20, Rule 1 for trading halts, pauses and suspensions 
that are not LULD trading pauses and Article 20, Rule 2A(c) for LULD 
trading pauses.\16\ The Exchange now proposes to amend Rule 1(c)(1) to 
eliminate that distinction. As such, amended Rule 1(c)(1) provides as 
follows:
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    \15\ See CHX Article 18, Rule 1(b) (which is effective, but not 
yet operative); see also supra note 10.
    \16\ See supra note 10.

    SNAP CHX book
    (A) During stages one or two. If the market snapshot taken 
pursuant to paragraph (b)(2)(E) or (F) indicates that a material 
halt, pause or suspension is in effect, the SNAP Cycle shall be 
aborted and not proceed to stage three or stage five, as applicable. 
The Exchange shall then cancel all orders resting on the SNAP CHX 
book, subject to paragraph (c)(2) below.
    (B) During stages three or four. If the market snapshot taken 
pursuant to paragraph (b)(3)(B) or (b)(4)(B) indicates that a 
material halt, pause or suspension is in effect for the subject 
security, the SNAP Cycle shall be aborted and not proceed to stage 
five. The Exchange shall then cancel the unexecuted remainders of 
all orders resting on the SNAP CHX book, subject to paragraph (c)(2) 
below.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \17\ in that it would further enable the 
Exchange to be so organized as to have the capacity to be able to carry 
out the purposes of the Act and to comply, and to enforce compliance by 
its Participants and persons associated with its Participants, with the 
provisions of the Act, the rules and regulations thereunder, and the 
rules of the Exchange, in furtherance of the objectives of Section 
6(b)(1),\18\ and it is designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
facilitating transaction in securities, to remove impediments to, and 
perfect the mechanisms of, a free and open market and, in general, by 
protecting investors and the public interest, in furtherance of the 
objectives of Section 6(b)(5).\19\
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(1).
    \19\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that the proposed unification 
of the Exchange's procedures regarding resting orders in a security 
subject to a trading halt, pause or suspension on the Exchange will 
simplify the Exchange's operational procedures, which will remove 
impediments to, and perfect the mechanisms of, a free and open market, 
in furtherance of the objectives of Section 6(b)(5). Moreover, the 
Exchange believes that the proposed unification and other clarifying 
amendments, will simplify CHX Rules, which will further enable the 
Exchange to be so organized as to have the capacity to be able to carry 
out the purposes of the Act and to comply, and to enforce compliance by 
its Participants and persons associated with its Participants, with the 
provisions of the Act, the rules and regulations thereunder, and the 
rules of the Exchange, in furtherance of the objectives of Section 
6(b)(1).

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. To the contrary, the 
Exchange believes that the proposed rule change does not implicate any 
competitive issues as it is intended to simplify and clarify CHX 
operational procedures with respect to trading halts, pauses and 
suspensions.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \20\ and Rule 19b-
4(f)(6) thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), CHX provided the Commission with written notice of its 
intent to file the proposed rule change, along with a brief 
description and the text of the proposed rule change, at least five 
business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    The Exchange has requested that the Commission waive the 
requirement that the rule change, by its terms, not become operative 
for 30 days after the date of the filing as set forth in Rule 19b-
4(f)(6)(iii),\22\ so that the proposal may become immediately operative 
upon filing. The Exchange anticipates its recently approved SNAP 
functionality will become operative during the thirty day pre-operative 
waiting period for this filing.\23\ The Commission believes that waiver 
of the operative delay is consistent with the protection of investors 
and the public interest because it eliminates a source of potential for 
confusion regarding the Exchange's rules governing SNAP-related trading 
halt, pause and suspension procedures. Therefore, the Commission hereby 
waives the thirty-day operative delay and designates the proposal 
effective upon filing.\24\
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    \22\ 17 CFR 240.19b-4(f)(6)(iii).
    \23\ See supra note 10.
    \24\ For purposes of waiving the 30-day operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or 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 email to rule-comments@sec.gov. Please include 
File NumberSR-CHX-2015-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

[[Page 67443]]

All submissions should refer to File Number SR-CHX-2015-05. This file 
number should be included on the subject line if email 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549-1090. Copies of the filing will also be available 
for inspection and copying at the Exchange's principal office. 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 Number SR-CHX-2015-05 and should be 
submitted on or before November 23, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
Robert W. Errett,
Deputy Secretary.
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    \25\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-27792 Filed 10-30-15; 8:45 am]
 BILLING CODE 8011-01-P