Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by The Chicago Stock Exchange, Inc. Relating to Operating Times of Price Improvement Programs

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), and Rule 19b-4 thereunder, notice hereby is given that on April 10, 2000, the Chicago Stock Exchange, Inc. (“CHX” or “Exchange”) filed with the Securities and Exchange Commission (the “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.

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

The Exchange proposes to amend Article XX, rule 37 of the Exchange's rules to change the starting time of each of the Exchange's automatic price improvement programs from 8:45 a.m., Central Time to the beginning of the Exchange's primary trading session, which occurs at 8:30 a.m., Central Time. The text of the proposed rule change is as follows:

Additions are italicized; deletions [bracketed]

ARTICLE XX

Regular Trading Sessions

Guaranteed Execution System and Midwest Automated Execution System

Rule 37.

(b) Automated Executions. The Exchange's Midwest Automated Execution System (the MAX System) may be used to provide an automated delivery and execution facility for orders that are eligible for execution under the Exchange's BEST Rule (Article XX, Rule 37(a)) and certain other orders. In the event that an order that is subject to the BEST Rule is sent through MAX, it shall be executed in accordance with the parameters of the BEST Rule and the following. In the event that an order that is not subject to the BEST Rule is sent through MAX, it shall be executed in accordance with the parameters of the following:

(d) Super MAX Plus. Super MAX Plus shall be a voluntary automatic execution program within the MAX System. SuperMax Plus shall be available for Dual Trading System securities and Nasdaz/NM Securities. * * *

(3) Operating Time. SuperMax Plus will operate each day that the Exchange is open for trading from [8:45 a.m. (C.T.)] the commencement of the Primary Trading Session until the close of the Primary Trading Session; provided, however, that preopening orders shall not be eligible for SuperMax Plus price improvement. * * *

(e) SuperMAX. Except as provided below where SuperMAX is required to be enabled, SuperMAX shall be a voluntary automatic execution program within the MAX system. SuperMAX shall be avaiable for Dual Trading System securities for which SuperMAX plus has been enabled. In the event that SuperMAX Plus has been enabled for a particular Dual Trading System security and the maximum order size has been set at an amount that is less than 499 shares, SuperMAX shall be automatically enabled. * * *

(2) Operating Time. SuperMAX will operate each day that the Exchange is open for trading from [8:45 a.m. (C.T.)] the commencement of the Primary Trading Session until the close of the Primary Trading Session ; provided, however, that preopening orders shall not be eligible for SuperMAX price improvement. * * *

(f) Enhanced SuperMAX. Enhanced SuperMAX shall be a voluntary automatic execution program within the MAX System. Enhanced SuperMAX shall be available for (i) any Dual Trading System security in which SuperMAX Plus and SuperMAX have both been enabled, or (ii) any Dual Trading System security in which SuperMAX Plus has been enabled for 499 shares or greater. * * *

(3) Operating Time. Enhanced SuperMAX will operate each day that the Exchange is open for trading from [8:45 a.m. (C.T.)] the commencement of the Primary Trading Session until the close of the Primary Trading Session ; provided, however, the preopening orders shall not be eligible for Enhanced SuperMAX price improvement. * * *

(g) Derivative SuperMAX. Derivative SuperMAX shall be a voluntary automatic execution program within the MAX System. Derivative SuperMAX shall be available for securities that trade on the Exchange in minimum price variations of 1/64 of $1.00. A specialist may choose to enable this voluntary program within the MAX system on a security-by-security basis. If Derivative SuperMAX has been enabled for a particular security and the maximum order has been set at an amount that is less than or equal to 599 shares (or such greater amount designated by the specialist and approved by the Exchange), Derivative SuperMAX shall be automatically enabled. If the security is eligible for Derivative SuperMAX and the specialist in such security has chosen to engage Derivative SuperMAX for such security, all small agency market orders in that security will automatically be executed in accordance with the Derivative SuperMAX algorithm set forth below. For purposes of this subsection (g), the term “small agency market order” shall mean an agency order from 100 shares up to and including 599 shares (or such greater amount designated by the specialist and approved by the Exchange).

(2) Operating Time. Derivative SuperMAX will operate each day that the Exchange is open for trading from [8:45 a.m. (Central Time)] the commencement of the Primary Trading Session until the close of the Primary Trading Session ; provided, however, that preopening orders shall not be eligible for Derivative SuperMAX price improvement. A specialist may enable or remove Derivative SuperMAX for a particular security only on one given day each month, as determined by the Exchange from time to time. Notwithstanding the previous sentence, during unusual market conditions, individual securities or all securities may be removed from Derivative SuperMAX with the approval of two members of the Committee on Floor Procedure.

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 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 Article XX, Rule 37 of the Exchange's rules to allow the Exchange's automatic price improvement programs to begin operating when CHX trading begins. The Exchange proposes that this change take effect on May 10, 2000.

Under the Exchange's current rules, each of the Exchange's automatic price improvement programs, SuperMAX, SuperMAX Plus, Enhanced SuperMAX and Derivative SuperMAX, become available to specialists at 8:45 a.m., Central Time, fifteen minutes after the Exchange begins trading. The Exchange believes that the proposed rule change, which would permit automated price improvement during the first fifteen minutes of trading, will enhance CHX specialists' efficiency by automating a previously-manual process. This change will permit the CHX to better complete with other market centers at a critical juncture in the trading day by giving its specialists the opportunity to provide price improvement to a greater number of investors. Further, the Exchange represents that the 8:45 a.m., Central Time was originally chosen as the starting time for the price improvement programs to allow the Exchange to gain experience with the operation of such programs before extending their application to the first fifteen minutes of Exchange trading, which are ordinarily quite busy. Now that the Exchange has gained experience, and seen the benefits of the continuing evolution of technology, the Exchange is confident that the automatic price improvement programs can successfully operate during the opening of Exchange trading.

2. Statutory Basis

The proposed rule 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). In particular, the proposed rule 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 to 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.

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

The Exchange does not believe that the proposed rule change will impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments Regarding 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 should increase the CHX's ability to provide customers with price improvement, and to compete with other market centers, and: (1) Does not significantly affected the protection of investors or the public interest; (2) does not impose any significant burden on competition; and (3) does not become operative for 30 days from April 10, 2000, the date on which it was filed, and the Exchange provided the Commission with written notice of its intent to file the proposed rule change at least five business days prior to the filing date, it has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Committee that such action is necessary or appropriate in the public interest, for the protection of investor, or otherwise in the furtherance of the purposes of the Act.

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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington DC 20549-0609. 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 maybe 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 in Washington, DC. Copies of the filing will also be available for inspection and copying at the principal office of the Exchange. All submissions should refer to File No. SR-CHX-00-09 and should be submitted by May 17, 2000.