Daily Rules, Proposed Rules, and Notices of the Federal Government
The CHX proposes to amend its rules to allow Exchange-registered Institutional Brokers to enter two new order types, known as Quote@CHX and Reprice@CHX, when using the Brokerplex(r) order entry system. The text of this proposed rule change is available on the Exchange's Web site at (
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 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.
The Exchange proposes to add Interpretations and Policies .04 to the Article 17 obligations of CHX-registered Institutional Brokers to permit the entry of two new order types within Brokerplex for Institutional Brokers to use when submitting orders to the CHX Matching System for display and potential execution. The new order types are known as "Quote@CHX" and "Reprice@CHX."
The Brokerplex system is an order entry and management system developed and operated by the Exchange for use on a non-exclusive basis by CHX-registered Institutional Brokers to receive and hold orders from their clients while seeking execution on the CHX or elsewhere in the National Market System. The Exchange seeks to add two new order types within Brokerplex for Institutional Brokers to use when submitting orders to the CHX Matching System for display and potential execution.
In many instances, Institutional Brokers would like to display orders in the CHX Matching System when seeking trade execution rather than simply hitting bids or lifting offers already displayed in the marketplace. By doing so, they could achieve a level of price improvement for their customers. Rapidly changing quotes in today's market environment often make it difficult to successfully post a bid or offer, however, since a standard limit order entered by the Institutional Broker may lock or cross the National Best Bid or Offer ("NBBO") by the time that order entry is complete (by our rules, the Matching System automatically rejects orders in such circumstances).
The new Quote@CHX order type would allow the Institutional Broker to submit an order to be priced within Brokerplex at a defined limit price which is one minimum price increment (normally 1 cent for most securities) from the relevant side of the National Best Bid or Offer ("NBBO") at the time of order submission. For buy orders, the relevant side of the NBBO is the offer; for sell orders it is the bid. The pricing of the Quote@CHX (and Reprice@CHX) order is done solely within Brokerplex and the order is then sent as a limit order by Brokerplex to the Matching System. For example, if the Institutional Broker has set the incremental offset at 1 cent and the NBBO was 20.10 x 20.13, a Quote@CHX buy order would be automatically priced and submitted by Brokerplex to the Matching System as a 20.12 limit order. The systematic pricing of the Quote@CHX (and Reprice@CHX) orders is non-dynamic, i.e., the order does not automatically reprice upon changes to the NBBO once it has been accepted by the Matching System.
The Reprice@CHX order type allows an Institutional Broker to change an existing limit order residing in the Matching System and replace it with an order generated in the same manner as a Quote@CHX order type. Submission of a Reprice@CHX order would generate an instruction to (1) cancel a limit order previously submitted by an Institutional Broker to the Matching System and (2) generate a new order to either buy or sell (priced by Brokerplex in the same manner as for Quote@CHX orders as described above) and send it to the Matching System as a limit order.
Generally, usage of an agency Quote@CHX or Reprice@CHX order by an Institutional Broker should be confined to situations in which it is handling a non-marketable or "not held" limit order on behalf of a customer.
Our standard Matching System validations for locked and crossed markets would apply equally to these orders upon receipt. Neither the Quote@CHX nor Reprice@CHX order type would be available for Institutional Brokers submitting orders to destinations other than the CHX Matching System. The Matching System itself will not be eligible to receive these order types. As the owner and operator of the Brokerplex system, the Exchange would collect and maintain all of the order records relating to these two order types required by our rules, although the responsibility for the accurate entry of transaction-related information lies with the Brokerplex user.
Our belief is that these two order types will permit Institutional Brokers to enter displayable orders in a more efficient manner and avoid the delays associated with reentering a rejected order at a new price. This functionality is optional, so an Institutional Broker which does not want its order priced by Brokerplex can simply enter a traditional limit order.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act in general,
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.
No written comments were solicited or received.
Within 35 days of the date of publication of this notice in the
(A) By order approve such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
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:
* Use the Commission's Internet comment form (
* Send an e-mail to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090.