[Federal Register Volume 78, Number 94 (Wednesday, May 15, 2013)]
[Notices]
[Pages 28671-28678]
[FR Doc No: 2013-11453]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69538; File No. SR-CHX-2013-10]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
to Consolidate All CHX Order Types, Modifiers, and Related Terms Under
One Rule and to Clarify the Basic Requirements of All Orders Sent to
the Matching System

May 8, 2013.
    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 May 6, 2013, the Chicago Stock Exchange, Inc. (``CHX'' or the
``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 self-regulatory
organization. The CHX has filed this

proposal pursuant to Rule 19b-4(f)(6) under the Act,\3\ which renders
the proposal effective upon filing with the Commission. 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.
    \3\ 17 CFR 240.19b-4(f)(6).
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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, namely Article 1, Rule 2; Article
17, Rule 1; Article 20, Rule 1; Article 20, Rule 2A; Article 20, Rule
4; Article 20, Rule 5; Article 20, Rule 6; and Article 20, Rule 8 to
consolidate all CHX order types, modifiers, and related terms
(collectively referred to as ``defined order terms'') under one rule
and to clarify the basic requirements of all orders sent to the CHX
Matching System (the ``Matching System''). 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.

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 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 certain CHX rules to consolidate all
defined order terms under one rule and to clarify the basic
requirements of all orders sent to the Matching System.
Proposed Consolidation of Defined Order Terms Amended Article 1, Rule 2
and Article 20, Rule 4(b)
    The Exchange proposes to consolidate the defined order terms found
under current Article 1, Rule 2 and Article 20, Rule 4(b) under
proposed Article 1, Rule 2, entitled ``Order Types, Modifiers, and
Related Terms'' (the ``consolidated list''). In doing, so, the Exchange
proposes to eliminate subparagraphs (1)-(25) under current Article 20,
Rule 4(b), as they will either be incorporated into the consolidated
list or deleted, as discussed in detail below.
    Moreover, the Exchange proposes to delete the following defined
order terms from the CHX rules, as they are either redundant of other
defined order terms or have never been implemented: ``IOC Market'' \4\;
``ISO Cross'' \5\; ``Non-Regular Way Cross'' \6\; ``Outbound ISO'' \7\;
and ``Post Only ISO.'' \8\ A discussion of each deletion is detailed
below.
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    \4\ Current Article 1, Rule 2(n) and Article 20, Rule 4(b)(13)
states as follows:
    ``IOC market'': a market order that is to be executed only
during the Regular Trading Session, either in whole or in part, at
or better than the Exchange's BBO (including any reserve size or
other undisplayed orders at or better than that price), with any
unexecuted balance of the order to be immediately cancelled. IOC
market orders shall not be accepted until (i) the primary market in
a security has opened trading in that security or (ii) two senior
officers of the Exchange have determined that it is appropriate for
the Exchange to accept IOC market orders. For purposes of this rule,
another exchange will be considered to have opened for trading in a
security when the first trade in that security occurs in that market
on or after 8:30 a.m.
    \5\ Current Article 1, Rule 2(o) and Article 20, Rule 4(b)(14)
states as follows:
    ``ISO cross'': any type of cross order marked as required by SEC
Rule 600(b)(30) that is to be executed without taking any of the
actions described in Rule 5 to prevent an improper trade-through.
These orders shall be executed because the Participant routing the
order to the Matching System has already satisfied the quotations of
other markets as required by Rule 600(b)(30). (This provision shall
become effective on the Trading Phase Date of Rule 611 of Reg NMS.)
    \6\ Current Article 1, Rule 2(u) and Article 20, Rule 4(b)(17)
states as follows:
    ``Non-regular way cross'': an order to buy and sell the same
security that is not for regular way settlement. A non-regular way
cross order may execute at any price, without regard to the NBBO or
any other orders in the Matching System, and may represent interest
of one or more Participants of the Exchange. Any non-regular way
cross that is for cash settlement must be received by the Matching
System by 2:00 p.m. or such other time that may be established by
the Exchange and communicated to Participants from time to time. A
non-regular way cross order may only be executed in an increment
permitted by Article 20, Rule 4(a)(7)(b).
    \7\ Current Article 1, Rule 2(z) and Article 20, Rule 4(b)(19))
states as follows:
    ``Outbound ISO'': an order marked as required by SEC Rule
600(b)(30)(i) that is to be executed at or better than its limit
price as soon as the order is received by the Matching System, with
any unexecuted balance of the order to be immediately cancelled,
coupled with one or more ISO orders designed to execute against any
protected bids or offers at other market centers as required by Rule
600(b)(30)(ii). Orders marked outbound ISO shall be executed against
any eligible orders in the Matching System (including any reserve
size or other undisplayed orders). Other than the routing of ISOs to
other market centers, no action shall be taken to prevent an
improper trade-through.
    \8\ Current Article 20, Rule 4(b)(23) states as follows:
    ``Post Only ISO'': a type of ISO order that will be immediately
cancelled without execution if it is marketable against a contra-
side order in the Matching System when entered. If a Post Only ISO
is not immediately cancelled as described in the previous sentence,
it will be posted on the Exchange at the entered limit price. By
entering a Post Only ISO, a Participant represents that such
Participant has simultaneously routed one or more additional limit
orders marked ``ISO,'' as necessary, to away markets to execute
against the full displayed size of any protected quotation for the
security with a price that is superior or equal to the limit price
of the Post Only ISO entered in the Matching System. Consequently, a
Post Only ISO order will be displayed by the Exchange regardless of
whether it will lock or cross another market center's quote.
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    In addition, the Exchange proposes to adopt new definitions for
``Always Quote'' and ``Short Exempt,'' which are not currently defined
in the CHX rules, but are currently available in the Matching System. A
discussion of Always Quote and Short Exempt are detailed below.
    With respect to the current defined order terms that are being
incorporated into the consolidated list, the Exchange proposes to amend
each defined term to the extent necessary to clarify how the defined
order terms interact with each other within the context of the Matching
System. In doing so, the Exchange also proposes to make corresponding
grammatical amendments and technical amendments to improve logical
flow. It is important to note that the Exchange does not propose to
substantively modify the operation of any of the current defined order
terms or the operation of the Matching System.
    Thus, the Exchange proposes to classify each of the amended and
proposed defined order terms into seven distinct categories, as
proposed paragraphs (a)-(g):
    (a) General Order Types;
    (b) Order Execution Modifiers;
    (c) Order Display Modifiers;
    (d) Order Duration Modifiers;
    (e) Order Settlement Terms;
    (f) Order Size Attributes; and
    (g) Special Order Handling.
General Order Types
    Proposed Article 1, Rule 2(a) provides that limit, cross, and
market orders are called ``General Order Types'' and that each shall be
accepted by the Matching System, subject to the requirements of
proposed Article 20, Rule 4.\9\ This is consistent with proposed
Article 20, Rule 4(a)(1), which provides that any order entered into
the Matching System must be a limit, cross, or market order.\10\
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    \9\ The Exchange proposes to amend Article 20, Rule 4 to clarify
the basic requirements of all orders sent to the Matching System. A
detailed discussion of these amendments may be found below.
    \10\ Id.
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    Proposed paragraph (a)(1) is substantively identical to current
Article 1, Rule 2(p), which defines a ``limit''

order. In addition, the Exchange proposes to adopt additional language
that states that all limit orders, except for limit orders marked
``Price-Penetrating ISO,'' \11\ shall be deemed to have been received
``Day,'' \12\ if an order duration modifier is not specified. That is,
if an order sender does not attribute an order duration modifier to a
limit order, the Matching System will treat the limit order as Day, by
default.
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    \11\ As discussed below, proposed Article 1, Rule 2(b)(1)(E)
provides, inter alia, that a limit order marked ``Price-Penetrating
ISO'' is deemed to have been received IOC.
    \12\ Proposed Article 1, Rule 2(d)(1) defines ``Day'' as ``an
order that is in effect only for the day on which it is submitted to
the Exchange,'' which is substantively identical to current Article
20, Rule 2(i).
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    Proposed paragraph (a)(2) is substantively identical to current
Article 1, Rule 2(e), which defines a ``cross'' order. In addition, the
Exchange proposes to adopt additional language that states that all
cross orders shall be deemed to have been received Immediate Or Cancel
(``IOC''),\13\ which cannot be overridden by an order sender. This is
because cross orders do not rest on the CHX book since the contra-
parties to the transaction are identified.
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    \13\ Proposed Article 1, Rule 2(d)(4) defines ``IOC'' as, inter
alia, an order modifier that requires an order to be executed,
either in whole or in part and for limit orders, at or better than
its limit price, as soon as the order is received by the Matching
System, with any unexecuted balance of the order to be immediately
cancelled. Orders marked IOC shall be executed against any orders in
the Matching System at or better than the Exchange's BBO (including
any Reserve Size or undisplayed orders at or better than that
price). This definition is substantively identical to current
Article 1, Rule 2(m).
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    Proposed paragraph (a)(3) is substantively identical to both
current Article 1, Rule 2(n), which defines ``IOC market'' \14\ and
current Article 1, Rule 2(q), which defines ``market'' \15\ orders.
That is, the proposed definition consolidates these definitions and
adopts additional language that states that all market orders not
marked IOC will be rejected. This is because all CHX market orders must
be IOC and may not rest on the CHX book. In light of the proposed
definition of ``market'' orders, the Exchange submits that maintaining
a separate definition for ``IOC market'' is redundant and unnecessary
and proposes to delete it from the CHX rules.
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    \14\ Supra note 4.
    \15\ Current CHX Article 1, Rule 2(q) defines ``market'' as an
order to buy or sell a specific amount of a security at the best
price available once the order is presented in the market.
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    Since every order received by the Matching System is a limit,
cross, or market order, the Exchange submits that limit, cross, and
market orders are the only general order types offered by the Exchange.
This is because limit, cross, and market orders are the only defined
order terms that primarily relate to the price of the order. As
discussed in detail below, virtually all of the other defined order
terms listed under proposed Article 1, Rule 2 modify how an order is to
be treated prior to order execution being completed (e.g. order
execution, duration, and display modifiers) or set the terms of how an
executed order is to be settled (e.g. order settlement terms).
Order Execution Modifiers
    Proposed Article 1, Rule 2(b) provides that one or more order
execution modifiers may be applied to a general order type, subject to
the requirements of proposed Article 20, Rule 4, so long as the
modifier is compatible with the general order type and other applicable
order modifiers/terms. Thereunder, proposed paragraph (b)(1) lists
order execution modifiers that may be attributed to limit orders only,
proposed paragraph (b)(2) lists order execution modifiers that may be
attributed to cross orders only, and proposed paragraph (b)(3) lists
order execution modifiers that may be attributed to multiple general
order types.
    With respect to the definition of each defined order term listed
under proposed Rule 2(b), the Exchange proposes a global amendment to
the definition of each order execution modifier so that each defines
itself as an ``order modifier'' and not merely as an ``order,'' as well
as any corresponding grammatical amendments. The purpose of this
amendment is to clarify that an order execution modifier is not a
distinct general order type.
    Proposed paragraph (b)(1) lists the order execution modifiers that
may be attributed to limit orders only, as proposed subparagraphs (A)-
(E):
    (A) BBO ISO;
    (B) Cancel On Halt;
    (C) CHX Only;
    (D) Post Only; and
    (E) Price-Penetrating ISO.
    Proposed paragraph (b)(1)(A) is substantively identical to current
Article 1, Rule 2(a), which defines ``BBO ISO,'' and adopts additional
language that states that a limit order marked BBO ISO shall be deemed
to have been received ``Do Not Route,'' \16\ which cannot be overridden
by the order sender. In addition, the Exchange proposes to omit the
word ``order'' and replace it with the more accurate ``limit order
modifier.''
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    \16\ Proposed Article 1, Rule 2(b)(3)(A) defines ``Do Not
Route'' as a limit or market order modifier that requires an order
to only be executed or displayed within the Exchange's Matching
System and not be routed to another market.
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    Proposed paragraph (b)(1)(B) is substantively identical to current
Article 1, Rule 2(c), which defines ``Cancel On Halt.'' Aside from the
amendment to the definition to refer to itself as a ``limit order
modifier,'' the Exchange does not propose to make any other amendments.
    Proposed paragraph (b)(1)(C) is substantively identical to current
Article 1, Rule 2(y), which defines ``CHX Only,'' and adopts additional
language that states that a limit order marked CHX Only shall be deemed
to have been received Do Not Route, which cannot be overridden by the
order sender. In addition, the Exchange proposes to omit the word
``order'' and replace it with the more accurate ``limit order
modifier.''
    Proposed paragraph (b)(1)(D) is substantively identical to current
Article 20, Rule 4(b)(18), which defines ``Post Only,'' and adopts
additional language that states that a limit order marked Post Only
shall be deemed to have been received Do Not Route, which cannot be
overridden by the order sender. In addition, pursuant to the global
amendment discussed above, the Exchange proposes to omit the word
``order'' and replace it with the more accurate ``limit order
modifier.''
    In light of this amended definition of Post Only, the Exchange
proposes to delete ``Post Only ISO'' \17\ from the CHX rules, because a
Post Only ISO is simply a limit order marked Post Only and BBO ISO and
not a distinct order modifier. As such, the Exchange submits that
maintaining a separate defined order term for ``Post Only ISO'' is
redundant and unnecessary.
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    \17\ Supra note 8.
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    Proposed paragraph (b)(1)(E) is substantively identical to current
Article 1, Rule 2(aa), which defines ``Price-Penetrating ISO,'' and
adopts additional language that states that a limit order marked Price-
Penetrating ISO shall be deemed to have been received IOC, which cannot
be overridden by the order sender. In addition, the Exchange proposes
to omit the word ``order'' and replace it with the more accurate
``limit order modifier.''
    Proposed paragraph (b)(2) lists the order execution modifiers that
may be attributed to cross orders only, as proposed subparagraphs (A)-
(E):
    (A) Benchmark;
    (B) Cross With Satisfy;
    (C) Cross With Yield;
    (D) Midpoint Cross;
    (E) Qualified Contingent Trade.
    Proposed paragraph (b)(2)(A) is substantively identical to current
Article 1, Rule 2(b), which defines

``Benchmark.'' Aside from the amendment to the definition to refer to
itself as a ``cross order modifier,'' the Exchange does not propose to
make any other amendments.
    Proposed paragraph (b)(2)(B) is substantively identical to current
Article 1, Rule 2(f), which defines ``Cross With Satisfy.'' \18\ Aside
from the amendment to the definition to refer to itself as a ``cross
order modifier,'' the Exchange does not propose to make any other
amendments.
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    \18\ Cross With Satisfy and Cross With Yield are not currently
enabled. The Exchange anticipates filing a proposed rule filing
pursuant to Rule 19b-4 under the Act to modify Cross With Satisfy
and Cross With Yield prior to enabling the modifiers.
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    Proposed paragraph (b)(2)(C) is substantively identical to current
Article 1, Rule 2(h), which defines ``Cross With Yield.'' \19\ Aside
from the amendment to the definition to refer to itself as a ``cross
order modifier,'' the Exchange does not propose to make any other
amendments.
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    \19\ Id.
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    Proposed paragraph (b)(2)(D) is substantively identical to current
Article 1, Rule 2(r), which defines ``Midpoint Cross.'' Aside from the
amendment to the definition to refer to itself as a ``cross order
modifier,'' the Exchange does not propose to make any other amendments.
    Proposed paragraph (b)(2)(E) is substantively identical to current
Article 1, Rule 2(bb), which defines ``Qualified Contingent Trade.''
Aside from the amendment to the definition to refer to itself as a
``cross order modifier,'' the Exchange does not propose to make any
other amendments.
    Proposed paragraph (b)(3) lists the order execution modifiers that
may be attributed to multiple general order types, as proposed
subparagraphs (A)-(E):
    (A) Do Not Route;
    (B) ISO;
    (C) Not Held;
    (D) Sell Short; and
    (E) Short Exempt.
    Proposed paragraph (b)(3)(A) is substantively identical to current
Article 1, Rule 2(k), which defines ``Do Not Route,'' except that the
proposed definition omits reference to IOC and Fill Or Kill (``FOK'')
orders having to be marked Do Not Route. As discussed below, the
Exchange proposes to include such language in the definition of IOC and
FOK, individually. Aside from the amendment to the definition to refer
to itself as a ``limit or cross order modifier,'' the Exchange does not
propose to make any other amendments.
    Proposed paragraph (b)(3)(B) is substantively identical to current
Article 20, Rule 4(b)(15), which defines ``Intermarket Sweep'' or
``ISO,'' and adopts additional language that states that orders marked
ISO shall be executed because the Participant routing the order to the
Matching System has already satisfied the quotations of other markets
as required by Rule 600(b)(30) and that a limit order marked ISO that
is not marked BBO ISO shall be deemed to have been received Price-
Penetrating ISO, which cannot be overridden by the order sender. The
main distinction between BBO ISO and Price-Penetrating ISO is that the
unexecuted portion of a BBO ISO may post to the CHX book, so long as it
is not marked IOC, whereas the unexecuted portion of a Price-
Penetrating ISO will always be immediately cancelled. That is, this
additional language clarifies that the Matching System treats all limit
orders marked ISO as Price-Penetrating ISO, and by extension IOC,
unless specifically marked otherwise. In addition, the Exchange
proposes to omit the word ``order'' and replace it with the more
accurate ``limit or cross order modifier.''
    In light of this amended definition of ISO, the Exchange proposes
to delete ISO Cross \20\ from the CHX rules, because an ISO Cross is
simply a cross order marked ISO and not a distinct order modifier. As
such, the Exchange submits that maintaining a separate defined order
term for ``ISO Cross'' is redundant and unnecessary.
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    \20\ Supra note 5.
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    Moreover, the Exchange proposes to delete Outbound ISO \21\ from
the CHX rules. The Exchange included Outbound ISO in its rules as part
of its migration to a new trading model in 2006.\22\ However, the
Exchange never adopted Outbound ISO, due to the fact that the Exchange
never implemented its routing functionality.\23\
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    \21\ Supra note 7.
    \22\ See Exchange Act Release No. 54550 (September 29, 2006), 71
FR 59563 (October 10, 2006) (SR-CHX-2006-05).
    \23\ The Exchange anticipates filing a proposed rule change
pursuant to Rule 19b-4 under the Act in connection with its
initiative to implement an order routing functionality. If the
Exchange elects to offer a routing order type, the Exchange will
submit a related rule filing(s) pursuant to Rule 19b-4 under the
Act.
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    Proposed paragraph (b)(3)(C) is substantively identical to current
Article 1, Rule 2(w), which defines ``Not Held,'' and adopts additional
language that clarifies that the Not Held instruction may only apply to
orders sent by a customer to an Exchange Participant and that any order
received by the Matching System marked Not Held shall be rejected. The
Exchange notes that this clarification represents the current operation
of the Not Held modifier.
    Proposed paragraph (b)(3)(D) is substantively identical to current
Article 1, Rule 2(ff), which defines ``Sell Short.'' Aside from the
amendment to the definition to refer to itself as an ``order
modifier,'' the Exchange does not propose to make other amendments.
    Proposed paragraph (b)(3)(E) defines ``Short Exempt'' similarly to
proposed paragraph (b)(3)(D) as an order modifier that marks any
security ``short exempt'' under Rule 200(g) of Regulation SHO. Since
the Exchange already requires order senders to mark sell orders to
comport with Rule 200(g) of Regulation, the Exchange proposes to adopt
``Short Exempt'' as a defined order term.
Order Display Modifiers
    Proposed Article 1, Rule 2(c) provides that one or more display
modifiers may be applied to a limit order, subject to the requirements
of Article 20, Rule 4, so long as the modifier is compatible with the
general order type and other applicable order modifiers/terms. Since
market and cross orders are never posted as they are always IOC, order
display modifiers are not applicable to those general order types. If
an order display modifier is not selected, the order is considered to
be fully-displayable.
    Similar to the amendments to the defined order terms under proposed
paragraph (b), the Exchange proposes a global amendment to the
definition of each order display modifier so that each defines itself
as an ``order modifier'' and not merely as an ``order,'' as well as any
accompanying grammatical amendments.
    Proposed paragraph (c)(1) defines ``Always Quote'' as a limit order
modifier which will cause the CHX Matching System to cancel the
unexecuted balance of an otherwise displayable order, where the
unexecuted balance is an odd lot and priced at the CHX best bid or best
offer (``CHX BBO'') \24\ and the order cannot be displayed as part of
an aggregated quote because there are no other orders on the CHX book
with which such an order can be aggregated, pursuant to Article 20,
Rule 8(d)(3).\25\ That is, if an odd lot

remainder of an order meets the above definition, but the order is not
marked Always Quote, the order will remain on the CHX book, as a
displayable order that is undisplayed. It is important to note that
although the Exchange does not currently define ``Always Quote,'' the
``Participant's instruction'' specifically referred to in Article 20,
Rule 8(d)(3) implies the functionality of the Always Quote modifier
under current CHX rules.
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    \24\ The CHX BBO may be displayed or undisplayed. For example, a
fully-displayable odd lot order that is not displayed may be at the
CHX BBO.
    \25\ Current Article 20, Rule 8(d)(3) states as follows:
    Odd-lot orders and unexecuted odd-lot remainders that are unable
to be immediately displayed according to Rule 8(b)(6) above (because
they are at a price that is better than the current CHX quote) shall
either remain in, or be rejected from, the Exchange's Matching
System according to each Participant's instructions. Orders
remaining in the Matching System will continue to be ranked at the
price and time at which they were originally received. Orders that
are rejected from the Matching System shall be routed away according
to Rule 8(h) below or, if designated ``do not route,'' automatically
cancelled.
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    Proposed paragraph (c)(2) is substantively identical to current
Article 1, Rule 2(j), which defines ``Do Not Display.'' Aside from the
amendment to the definition to refer to itself as a ``limit order
modifier,'' the Exchange does not propose to make any other amendments.
    Proposed paragraph (c)(3) is substantively identical to current
Article 1, Rule 2(dd), which defines ``Reserve Size.'' Aside from the
amendment to the definition to refer to itself as a ``limit order
modifier,'' the Exchange does not propose to make any other amendments.
Order Duration Modifier
    Proposed Article 1, Rule 2(d) provides that an order duration
modifier may be applied to a general order type, subject to the
requirements of proposed Article 20, Rule 4, so long as the modifier is
compatible with the general order type and other applicable order
modifiers/terms. However, since market and cross orders are always IOC,
such orders may not be attributed any other order duration modifier,
whereas limit orders may be marked with any order duration modifier to
the extent compatible.
    Similar to the amendments to the defined order terms under proposed
paragraph (b) and (c), the Exchange proposes a global amendment to the
definition of each order duration modifier so that each defines itself
as an ``order modifier'' and not merely as an ``order,'' as well as any
accompanying grammatical amendments.
    Proposed paragraph (d)(1) is substantively identical to current
Article 1, Rule 2(i), which defines ``Day.'' Aside from the amendment
to the definition to refer to itself as a ``limit order modifier,'' the
Exchange does not propose to make any other amendments.
    Proposed paragraph (d)(2) is substantively identical to current
Article 1, Rule 2(l), which defines ``Fill Or Kill'' or ``FOK,'' and
adopts additional language that states an order marked FOK shall be
deemed to have been received Do Not Route, which cannot be overridden
by an order sender. In addition, the Exchange proposes to omit the word
``order'' and replace it with the more accurate ``limit order
modifier.''
    Proposed paragraph (d)(3) is substantively identical to current
Article 1, Rule 2(ii), which defines ``Time In Force.'' Currently, the
CHX rules use the term ``Time In Force'' to refer to order duration
modifiers generally \26\ and the specific modifier currently defined
under current Article 1, Rule 2(ii) and Article 20, Rule 4(b)(24).
Thus, for the sake of clarity, the Exchange proposes to rename the
specific order modifier ``Good `Til Date'' or ``GTD.'' In addition to
the name change, the Exchange proposes to omit the word ``order'' and
replace it with the more accurate ``limit order modifier.''
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    \26\ See Article 11, Rule 3(b)(14); see also paragraph .01(13)
of the Interpretations and Policies of Article 11, Rule 4.
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    Proposed paragraph (d)(4) is substantively identical to current
Article 1, Rule 2(m), which defines ``Immediate Or Cancel'' or ``IOC,''
and adopts additional language that states that an order marked IOC
shall be deemed to have been received Do Not Route, which cannot be
overridden by the order sender. In addition, the Exchange proposes to
omit the word ``order'' and replace it with the more accurate ``order
modifier.''
Order Settlement Terms
    Proposed paragraph (e) provides that one order settlement term
shall be applied to a general order type, subject to the requirements
of Article 20, Rule 4, so long as the term is compatible with the
general order type and other applicable order modifiers.
    Proposed paragraph (e)(1) is substantively identical to current
Article 1, Rule 2(cc), which defines ``Regular Way Settlement,'' and
adopts additional language that states that, by default, all contracts
are subject to Regular Way Settlement. This is consistent with current
Article 20, Rule 4(a)(3) that requires all orders to be for Regular Way
Settlement and Article 20, Rule 4(a)(7)(a), which permits only non-
regular way cross orders to be marked for non-regular way settlement.
    Proposed paragraph (e)(2), which defines ``Non-Regular Way
Settlement'' is a consolidation of few current defined order terms each
of which are a subtype of Non-Regular Way Settlement. The proposed
paragraph is substantively identical to current Article 1, Rule 2(v),
which defines ``Non-Regular Way Settlement.'' Moreover, the proposed
paragraph clarifies that only cross orders are eligible for Non-Regular
Way Settlement, which is consistent with current Article 20, Rule
4(a)(7)(a), and that cross orders marked for Non-Regular Way Settlement
may execute at any price, without regard to the NBBO or any other
orders in the Matching System, which is substantively identical to
similar language in current Article 1, Rule 2(u), which defines ``non-
regular way cross.''
    Thereunder, proposed paragraph (e)(2)(A) is substantively identical
to current Article 1, Rule 2(d), which defines ``Cash Settlement,''
with additional language that incorporates current Article 1, Rule
2(u), which defines ``Non-Regular Way Cross.'' Specifically, the
additional language provides that any cross order that is for Cash
Settlement must be received by the Matching System by 2:00 p.m.\27\ or
such other time that may be established by the Exchange and
communicated to Participants from time to time. Given the fact that the
proposed definitions of ``cross,'' ``Non-Regular Way Settlement,'' and
``Cash Settlement'' fully incorporate the current definition of ``non-
regular way cross,'' \28\ the Exchange proposes to omit ``non-regular
way cross'' from the CHX rules. Similar to IOC market, Post Only ISO,
and ISO Cross, a ``non-regular way cross'' is not a distinct order
type, as it is simply a cross order marked for Non-Regular Way
Settlement. As such, the Exchange submits that maintaining a separate
defined order term for ``non-regular way cross'' is redundant and
unnecessary.
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    \27\ All times referred to in the CHX rules are in Central
Standard Time, unless explicitly stated otherwise.
    \28\ Supra note 6.
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    Proposed paragraph (e)(2)(B) is substantively identical to current
Article 1, Rule 2(t), which defines ``Next Day,'' whereas proposed
paragraph (e)(2)(C) is substantively identical to current Article 1,
Rule 2(gg), which defines ``Seller's Option.''
Order Size Attributes
    Proposed paragraph (f) lists defined order terms related to order
size. Specifically, proposed paragraph (f)(1) is substantively
identical to current Article 1, Rule 2(j), which defines ``Mixed Lot;''
proposed paragraph (f)(2) is substantively identical to current Article
1, Rule 2(x), which defines ``Odd Lot;'' and proposed paragraph (f)(3)
is substantively identical to current Article 1, Rule 2(ee), which
defines ``Round Lot.''
    It is important to note that these order size attributes are not
modifiers or terms

in the same sense as the defined order terms listed under proposed
paragraphs (a)-(e). Rather, they are defined order terms that describe
the size of an order received by the Matching System, which are most
notably useful in the context of order aggregation for order display
purposes, pursuant to current Article 20, Rule 8.
Special Order Handling
    Proposed paragraph (g) provides that an order may be subject to
special handling under certain circumstances. Thereunder, proposed
paragraph (g)(1) is substantively identical to current Article 1, Rule
2(g), which defines ``Cross With Size,'' with organizational amendments
to improve logical flow and deletions to update the language to comport
with the current operation of the Matching System.
    Specifically, the proposed paragraph (g)(1) provides that a cross
order (except a Cross With Yield, any cross order subject to Non-
Regular Way Settlement or a cross order marked ISO) to buy and sell at
least 5,000 shares of the same security with a total value of at least
$100,000 will execute, notwithstanding resting orders in the CHX book
at the same price, where (A) the order is at a price equal to or better
than the best bid or offer displayed in the Matching System and would
not constitute a trade-through under Regulation NMS (including all
applicable exceptions and exemptions); and (B) the size of the order
must be larger than the largest order displayed in the Matching System
at that price. Moreover, the Matching System will execute any cross
order or modified cross order (except a Cross With Yield, any cross
order subject to Non-Regular Way Settlement or a cross order marked
ISO) as a Cross With Size if the order meets the requirements for a
Cross With Size. A Cross With Size may represent interest of one or
more Participants of the Exchange. A Cross With Size order may only be
executed in an increment permitted by Article 20, Rule 4(a)(7)(b).
    Aside from various amendments to replace the term ``Non-Regular Way
Cross,'' with the more accurate ``cross order subject to Non-Regular
Way Settlement,'' the Exchange proposes to delete from the proposed
paragraph (g)(1)(B) language that requires the cross order to be of a
size that is one round lot larger than the aggregate size of all
interest displayed at that price. Since the Exchange now provides a
constant book feed, the distinction between order size prior to and
after dissemination of a feed of all displayable orders is moot. Thus,
the Exchange submits that the remaining language requiring, inter alia,
the size of the Cross With Size order to be larger than the largest
order displayed in the Matching System at that price, is sufficient to
ensure orders handled as Cross With Size meet the requisite size
requirement.
Proposed Basic Requirements of Orders Sent to the Matching System
Amended Article 20, Rule 4(a)
    The Exchange proposes to amend Article 20, Rule 4(a) to clearly
enunciate the basic requirements of orders sent to the Matching System.
The following amendments clarify what is already required or implied by
current CHX rules and does not substantively modify the operation of
the Matching System.
    The Exchange proposes to amend Article 20, Rule 4(a)(1) to provide
that an order sent to the Matching System must be a limit, cross, or
market order and that these eligible general order types are listed and
defined under proposed Article 1, Rule 2(a). This requirement may be
currently found via three separate provisions read together.
Specifically, current Article 20, Rule 4(a)(1) provides that all orders
must be limit orders; current Article 20, Rule 4(a)(7)(b) provides that
cross orders may be submitted; and current Article 20, Rule 4(a)(7)(c)
provides that IOC market orders may be submitted. Given this lack of
clarity in the current rules, the Exchange submits that the amendment
to Rule 4(a)(1) is appropriate.
    The Exchange also proposes to amend Article 20, Rule 4(a)(2) to
provide that all orders must be attributed an order duration modifier
and that these order duration modifiers are listed under proposed
Article 1, Rule 2(d). This amendment is necessary because current Rule
4(a)(2) states that all order must be Day orders, which is partially
accurate and incomplete. That is, the current language is accurate to
the extent that orders resting on the CHX book will not be carried over
to the following trading day and that all limit orders are defaulted to
Day, pursuant to proposed Article 1, Rule 2(a)(1). However, the current
rule does not make clear that an order may be attributed a more a
restrictive order duration modifier, such as IOC or FOK. Given this
lack of clarity in the current rules, the Exchange submits that the
amendment to Rule 4(a)(2) is also appropriate.
    The Exchange proposes to make various amendments throughout the
rest of Article 20, Rule 4 to update citations and references to
certain amended/omitted defined order terms. Notably, the Exchange
proposes to amend Article 20, Rule 4(a)(3) to insert a citation to
proposed Article 1, Rule 2(e)(1), discussed in detail below, which
defines ``Regular Way Settlement.'' The Exchange also proposes to amend
Article 20, Rule 4(a)(7)(a) to replace the term ``non-regular way
cross'' with ``cross.'' As discussed in detail above, the term ``non-
regular way cross'' is redundant and, as such, the Exchange proposes to
omit that term from the consolidated list. Similarly, the Exchange
proposes to amend Rule 4(a)(7)(b) to remove the term ``non-regular way
cross'' and replace it with the more accurate phrase, ``cross order
designated for Non-Regular Way Settlement.'' Moreover, the Exchange
propose to amend Rule 4(a)(7)(c) to remove the term ``IOC market'' and
to clarify that market orders must be marked IOC. As discussed above,
the term ``IOC market'' is redundant and, as such, the Exchange
proposes to omit that term from the consolidated list.
    Given the consolidated list, the Exchange proposes to delete all of
the defined order terms listed under current Article 1, Rule 4(b) as
current subparagraphs (1)-(25). In addition, the Exchange proposes to
amend current Rule 4(b) to provide that as designated by the Exchange,
the general order types, modifiers, and related terms listed under
proposed Article 1, Rule 2 may be eligible for entry to and acceptance
by the Matching System, at the discretion of the Exchange. Proposed
Rule 4(b) further provides that announcements regarding order
eligibility under this paragraph shall be made by the Exchange via
Regulatory Circular and will be provided in a manner to give reasonable
advance notice to its market participants.
Various Other Updates
    Given the numerous changes to citations and deletions and/or
consolidation of some current defined order terms, the Exchange
proposes the following amendments throughout the CHX rules.
    The Exchange proposes to amend paragraph .02 of the Interpretations
and Policies of Article 17, Rule 1 to update the citation for
``Benchmark'' orders to proposed Article 1, Rule 2(b)(2)(A).
    The Exchange proposes to amend paragraph .03 of the Interpretations
and Policies of Article 20, Rule 1 to replace ``non-regular way cross''
with ``cross orders marked for Non-Regular Way Settlement,'' given the
proposed deletion of ``non-regular way cross'' from the CHX rules,
discussed in detail above.
    The Exchange proposes to amend Article 20, Rule 2A(a)(4)(A) to
update the citations for ``limit,'' ``market,'' and ``cross'' orders to
Article 1 Rule 2(a)(1),

Rule 2(a)(3), and Rule 2(a)(2), respectively. The Exchange proposes to
amend paragraph (b)(1) to update citations to ``Reserve Size'' and ``Do
Not Display'' to Article 1, Rule 2(c)(3) and Article 1, Rule 2(c)(2),
respectively. The Exchange proposes to amend paragraph (b)(2) to update
the citation for ``CHX Only'' to Article 1, Rule 2(b)(1)(C).
    The Exchange proposes to delete the substance of paragraph .01(e)
of the Interpretations and Policies of Article 20, Rule 5 and replace
it with a ``Reserved'' marker. As discussed above, the Exchange
proposes to delete the order execution modifier ``Outbound ISO'' from
the CHX rules because the modifier has never been adopted since it was
included in the CHX rules in 2006. For the same reason, the Exchange
proposes to amend paragraph .03(a) of the Interpretations and Policies
of Article 20, Rule 5 to omit reference to ``Outbound ISO.'' \29\
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    \29\ The Exchange anticipates filing a proposed rule change
pursuant to Rule 19b-4 under the Act in connection with its
initiative to implement an order routing functionality. In
submitting such a filing, the Exchange will propose a new order
modifier(s) to replace ``Outbound ISO'' and will propose a new
corresponding paragraph .01(e) and .03(a).
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    The Exchange proposes to amend paragraph .01(h) of the
Interpretations and Policies of Article 20, Rule 5 to update the
citation for the definition of ``Qualified Contingent Trades'' to
proposed Article 1, Rule 2(b)(2)(E).
    The Exchange proposes to amend Article 20, Rule 6(d) to update the
citation for ``CHX Only'' to Article 1, Rule 2(b)(1)(C).
    The Exchange proposes to amend Article 20, Rule 8(e)(1) to update
the citations for ``cross'' and ``Cross With Satisfy'' to Article 1,
Rule 2(a)(2) and Rule 2(g)(1), respectively. The Exchange also proposes
to amend Rule 8(e)(3) to update the citation for ``Non-Regular Way
Settlement'' to Article 1, Rule 2(e)(2).
    The Exchange proposes to amend paragraph .02 of Article 20, Rule 8
to update the citation for ``Cross With Satisfy'' to Article 1, Rule
2(b)(2)(B).
2. Statutory Basis
    The Exchange believes that its proposal to consolidate all defined
order terms and to clarify the basic requirements of all orders sent to
the Matching System 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.\30\ In particular, the proposal is consistent
with Section 6(b)(5) of the Act,\31\ because it 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. The
Exchange believes that the consolidated list of defined order terms and
the clarification of the basic requirement of order sent to the
Matching System promote just and equitable principles of trade by
enhancing transparency concerning the structure of order types utilized
by the Exchange. For the same reasons, the Exchange believes that the
proposed amendments will contribute to the protection of investors and
the public interest by making the CHX rules easier to understand.
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    \30\ 15 U.S.C. 78f(b).
    \31\ 15 U.S.C. 78f(b)(5).
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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. The proposed changes to
consolidate all defined order terms under one rule and to clarify the
basic requirements of all orders sent to the Matching System contribute
to the protection of investors and the public interest by making the
CHX rules easier to understand. Since the Exchange does not propose to
substantively modify the operation of the Matching System, the proposed
changes will not 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

    Because the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \32\ and Rule 19b-
4(f)(6) thereunder.\33\
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    \32\ 15 U.S.C. 78s(b)(3)(A).
    \33\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and 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.
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \34\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\35\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay and allow the
proposed rule change to be immediately operative, noting that doing so
would allow the Exchange to immediately offer Participants a more
organized CHX rulebook and clarity with respect to the basic
requirements of orders sent to the Matching System. The Exchange
further notes that the proposed clarification to the basic requirements
of an order sent to the Matching System and the consolidation of all
general order types, modifiers, and related terms offered by the
Exchange under one list will make the operation of the Matching System
more transparent to Participants and will, in turn, encourage market
participants to utilize the Exchange's services over its competitors.
The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest
\36\ because it will allow the Exchange to immediately provide
increased transparency regarding the operation of the Matching System.
The Commission believes that this increased transparency will benefit
CHX market participants and therefore waives the 30-day operative delay
and designates the proposal operative upon filing.
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    \34\ 17 CFR 240.19b-4(f)(6).
    \35\ 17 CFR 240.19b-4(f)(6)(iii).
    \36\ For purposes only 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.

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<EMAIL_ADDRESS>Please include
File Number SR-CHX-2013-10 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CHX-2013-10. 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, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. 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-2013-10 and
should be submitted on or before June 5, 2013.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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    \37\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-11453 Filed 5-14-13; 8:45 am]
BILLING CODE 8011-01-P