[Federal Register Volume 59, Number 86 (Thursday, May 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10750]


[[Page Unknown]]

[Federal Register: May 5, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33975; File No. SR-CSE-94-03]

 

Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Amendment No. 
1 To Extend the Pilot of The Cincinnati Stock Exchange, Inc., Relating 
to the Preferencing of Public Agency Market and Marketable Limit Orders 
by Approved Dealers and Other Proprietary Members

April 28, 1994.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 
1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on April 25, 
1994, the Cincinnati Stock Exchange, Incorporated (``CSE or Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II and III below, which 
Items have been prepared by the CSE. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons and to grant accelerated approval of the proposed rule change.

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

    The Cincinnati Stock Exchange, Inc. (``CSE'' or ``Exchange'') 
hereby proposes to extend for an additional 90 days, ending August 6, 
1994, the CSE's pilot program regarding preferencing. The pilot was 
initially approved by the Commission on February 7, 1994.\1\ The 
exchange requests, in Amendment No. 1, that the Commission find good 
cause, pursuant to section 19(b)(2) of the Act, for approving the 
proposed rule change prior to the thirtieth day after publication in 
the Federal Register.\2\
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    \1\Securities Exchange Act Release No. 28866 (February 13, 
1991), 56 FR 5854.
    \2\See letter from Robert Ackermann, Vice President, Regulation, 
Cincinnati Stock Exchange to Jill Ostergaard, Attorney, Division of 
Market Regulation, SEC, dated April 26, 1994 (``Amendment No. 1'').
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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 CSE included statements 
concerning the purpose of and basis for the proposed rule change 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 CSE has prepared summaries, set forth in sections 
(A), (B), and (C) below, of the most significant parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the rule filing is to extend for 90 days the 
Exchange's pilot program governing preferenced trading. The Commission 
originally approved the pilot in February 1991, and subsequently 
extended the pilot several times. The pilot is currently approved 
through May 7, 1994.\3\
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    \3\See Securities Exchange Act Release Nos. 29524 (August 5, 
1991), 56 FR 38160; 30353 (February 7, 1992), 57 FR 5918; 31011 
(August 7, 1992), 57 FR 38704; and 32280 (May 7, 1993), 58 FR 28422.
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    On February 25, 1994, the CSE filed a rule change containing 
certain proposals to further enhance the quality of its market, 
including a proposed prohibition against ``auto-quoting'' and 
limitations on the maximum spread which exchange specialists could 
quote in the stocks in which they make markets.\4\ Further, on March 
31, 1994, the CSE filed a rule change which would make its preferencing 
pilot permanent.\5\ The Commission's staff has requested that the 
Exchange seek an interim 90 day extension of the preferencing pilot in 
order to afford the Commission the opportunity to consider the 
relationship between the quality of markets proposal and the 
preferencing program.\6\
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    \4\See SR-CSE-94-01; Securities Exchange Act Release No. 33849 
(April 1, 1994), 59 FR 16870.
    \5\See SR-CSE-94-01. In its filing for permanent approval, the 
Exchange requests that two restrictions of the pilot be lifted: 
first, the number of preferred securities be expanded beyond the 
current 350 limitation; and second; a lifting of the ban on cash 
payments to preferencing dealers for preferenced orders.
    \6\Conversation between David Colker, Executive Vice President 
and Chief Operating Officer, Cincinnati Stock Exchange, and Jill W. 
Ostergaard, Attorney, Division of Market Regulation, SEC, on April 
25, 1994.
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    Accordingly, this rule filing would extend the existing pilot 
program form its current expiration date of May 7, 1994 until August 6, 
1994. During this interim extension, the pilot will continue to operate 
in accordance with all existing conditions.\7\
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    \7\These conditions include the two cited above regarding the 
number of preferenced securities and cash payment for order flow, as 
well as the requirement that the Exchange provides certain 
information to the Commission.
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2. Statutory Basis
    The proposed rule change is consistent with section 6(b) of the Act 
in general and furthers the objectives of section 6(b)(5) in particular 
in that it will promote just and equitable principals of trade and 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system.

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

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

B. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The CSE solicited comments on the original filing from other 
Intermarket Trading System participants.\8\
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    \8\See File No. SR-CSE-90-6.
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III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
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 inspection and copying in the 
Commission's Public Room. Copies of the filing will also be available 
for inspection and copying at the principal office of the CSE. All 
submissions should refer to the file number in the caption above and 
should be submitted by May 26, 1994.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change and Amendment No. 1

    The CSE filed this interim extension at the Commission staff's 
request to enable the Commission to review the impact of the Exchange's 
quality of markets filing on the preferencing program. Under the 
circumstances, the Commission finds that allowing the preferencing 
pilot to continue for an additional 90 days is necessary.
    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to the CSE and, in particular, the requirements 
of section 6(b)(5).
    The Commission finds good cause for approving the proposed rule 
change prior to the 30th day after the date of publication of notice of 
filing thereof. Accelerated approval will avoid an unnecessary 
interruption of the preferencing pilot. Accordingly, under these 
circumstances, the Commission believes the CSE's preferencing pilot 
should be permitted to continue operating for 90 days, ending August 6, 
1994.
    It is therefore Ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change be, and hereby is, approved for an 
additional period, ending August 6, 1994.

    For the Commission by the Division of Market Regulation, 
pursuant to the delegated authority.\9\
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    \9\17 CFR 200.30-3(a)(12)(1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-10750 Filed 5-4-94; 8:45 am]
BILLING CODE 8010-01-M