[Federal Register Volume 60, Number 97 (Friday, May 19, 1995)]
[Notices]
[Pages 26909-26910]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12313]



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SECURITY AND EXCHANGE COMMISSION

[Release No. 34-35717; File No. SR-CSE-95-06]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the Cincinnati 
Stock Exchange, Inc. Relating to the Preferencing of Public Agency 
Market and Marketable Limit Orders by Approved Dealers and Other 
Proprietary Members

May 15, 1995.
    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 1, 1995, the Cincinnati Stock Exchange, Inc. (``CSE'' 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 self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.

    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\17 CFR 240.19b-4 (1994).
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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 the CSE's pilot program regarding 
preferencing until October 2, 1995. The pilot was initially approved by 
the Commission on February 7, 1991 and is currently extended until May 
18, 1995. (Securities Exchange Act Release No. 28866).

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 self-regulatory organization 
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 III below. The self-regulatory 
organization 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 purpose of the rule filing is to extend the existing pilot 
program of the Exchange relating to the preferencing of public agency 
market and marketable limit orders by approved dealers and other 
proprietary members until October 2, 1995. The Commission originally 
approved the pilot on February 7, 1991, (Securities Exchange Act 
Release No. 28866, 56 FR 5854 (Feb. 13, 1991)). The Commission has 
subsequently extended the pilot several times. (Securities Exchange Act 
Release Nos. 29524 (Aug. 5, 1991), 56 FR 38160; 30353 (Feb. 7, 1992), 
57 FR 5918; 31011 (Aug. 7, 1992), 57 FR 38704; 32280 (May 7, 1993), 58 
FR 28422; 33975 (April 28, 1994), 59 FR 23243 and 34493 (Aug. 5, 
1994)). The Commission staff has requested the Exchange seek a limited 
extension until the October date. [[Page 26910]] 
2. Statutory Basis
    The exchange believes that the proposed rule change is consistent 
with Sections 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 principles 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.

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

    The CSE solicited comments on the filing from other Intermarket 
Trading System participants. None were received.

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, N.W., Washington, D.C. 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 at the 
Commission's Public Reference Section, 450 Fifth Street N.W., 
Washington, D.C. 20549. Copies of such filing will also be available 
for inspection and copying at the principal office of the CSE. All 
submissions should refer to File No. SR-CSE-95-06 and should be 
submitted by [insert date 21 days from date of publication].
IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the CSE's proposal to extend its 
preferencing pilot program to October 2, 1995 is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange. Specifically, the 
Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act\3\ in that it will promote just and 
equitable principles of trade and remove impediments to and perfect the 
mechanism of a free and open market and a national market system. The 
pilot is extended under the same conditions set out in the prior pilot 
approval orders.\4\

    \3\15 U.S.C. 78f(b)(5) (1988).
    \4\The CSE preferencing program is limited by the following: (1) 
A designated dealer may preference up to a maximum of 350 stocks; 
(2) no payment for order flow; (3) no index arbitage. See letter 
from Fredrick Moss, Chairman of the Board of Trustees, CSE, to 
Richard G. Ketchum, Director, Division of Market Regulation, 
Commission, dated November 14, 1990.
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    The pilot modifies CSE's priority rules in order to permit one 
designated dealer to step ahead of another, at the same or better 
price, when trading with its own customer order. Public orders in the 
CSE book continue to have priority over all preferencing interest.
    The Commission notes that pursuant to its most recent pilot 
extension approval order, the CSE was required to submit quarterly data 
reports and a report analyzing such data.\5\ The CSE has submitted data 
to the Commission. In addition, the Commission has received extensive 
commentary on the CSE's request for permanent approval of its 
preferencing pilot, noticed for comment on March 13, 1995.\6\ The 
Commission is currently reviewing the comments and data submitted thus 
far, and believes that due to the complexity of the issues, the 
extensive comment letters, and the significant amount of data, the 
preferencing pilot should be extended to provide the Commission with 
adequate time to more thoroughly evaluate the data and the issues 
involved in the filing for permanent approval.

    \5\See Securities Exchange Act Release No. 34493 (Aug. 5, 1994), 
59 FR 41531 (Aug. 12, 1995).
    \6\See, File No. SR-CSE-95-03, Securities Exchange Act Release 
No. 35448 (March 7, 1995), 60 FR 13493 (March 13, 1995). The 
comments received on this proposal are available from the CSE or the 
Commission. (See Section III, supra.)
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    The Commission finds good cause for approving the proposed rule 
change prior the thirtieth day after the date of publication of notice 
of filing thereof in the Federal Register. The Commission believes that 
accelerated approval of the proposal is appropriate in order to avoid 
an unnecessary interruption to the existing pilot, while allowing the 
Commission to continue to evaluate the data and comments submitted in 
response to the solicitation of comments published in March.
    It is therefore ordered, pursuant to Section 19(b)(2)\7\ that the 
proposed rule change is hereby approved, and the preferencing pilot is 
extended through October 2, 1995.

    \7\15 U.S.C. 78s(b)(2) (1988).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\

    \8\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-12313 Filed 5-18-95; 8:45 am]
BILLING CODE 8010-01-M