[Federal Register Volume 60, Number 157 (Tuesday, August 15, 1995)]
[Notices]
[Pages 42209-42210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20251]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36092; File No. SR-CSE-95-03, Amendment No. 1]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by The Cincinnati Stock Exchange, Inc. Relating to Customer 
Order Executions

August 11, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on 
August 11, 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, II 
and III 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.

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

    The CSE hereby proposes to adopt certain order exposure and limit 
order protection policies for Exchange Rules 11.9(u) and 12.10.
    The text of the proposed rule change is as follows, where additions 
are italicized and deleations are [bracketed].
Rule 11.9(u)
No Change
    Interpretations and Policies:

.01 Price Improvement Opportunity

    Consistent with his or her agency responsibility to exercise due 
diligence, a member must comply with the following procedures which 
provide the opportunity for public agency buy/sell orders to receive a 
price lower/higher than the disseminated national best offer/bid.
    (a) Market Order Exposure--Except under unusual market conditions 
or if it is not in the best interest of the customer, when the spread 
between the national best bid and offer is greater than the minimum 
price variation, a member must either immediately execute the order at 
an improved price or expose the order on the Exchange for a minimum of 
thirty seconds in an attempt to improve the price.

.02 Limit Order Protection

    Public agency limit orders shall be filled if one of the following 
conditions occur:
    (a) the bid or offering at the limit price has been exhausted in 
the primary market (NOTE: orders will be executed in whole or in part, 
based on the rules of priority and precedence, on a share for share 
basis with trades executed at the limit price in the primary market);
    (b) there has been a price penetration of the limit in the primary 
market; or
    (c) the issue is trading at the limit price on the primary market 
unless it can be demonstrated that such order would not have been 
executed if it had been transmitted to the primary market or the 
customer and the Designated Dealer agree to a specific volume related 
or other criteria for requiring a fill.
    In unusual trading situations, a Designated Dealer may seek relief 
from the above requirements from two Trading Practices Committee 
members or a designated member of the Exchange staff who would have the 
authority to set execution prices.
Rule 12.10 Best Execution
No Change
Interpretations and Policies
    .01 As part of a member's fiduciary obligation to provide best 
execution for its customer orders, the member shall expose on the 
Exchange [to the national market system] all or a representative 
portion of any public agency limit order which is priced either on or 
between the national best bid and offer, unless:
    (i) such order is immediately executed; or
    (ii) the customer expressly requests that the order not be exposed.
    If a representative portion of his or her limit order is executed, 
a member must treat the remainder of the order as a new order for the 
purpose of compliance with the Exchange's limit order exposure policy.

[[Page 42210]]


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 IV 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 proposed rule change is to continue the efforts 
of The Cincinnati Stock Exchange to improve the quality of its market. 
Specifically, the Exchange is proposing to codify certain requirements 
with respect to order exposure and limit order protection. These 
requirements will ensure that customer orders receive (1) an 
opportunity to obtain an improved price, and (2) at a minimum, as good 
an execution as that which is provided by the primary markets.
    Exception language to specific exposure requirements has been 
included in order to assure the public that a broker-dealer will always 
act in a manner consistent with his or her fiduciary responsibility as 
agent. For example, it may not be in the best interest of the customer 
to always expose an order for thirty seconds in a fast market or to 
expose all of an order if such order is for a large size.
2. Statutory Basis
    The CSE believes that 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 principles of trade and remove impediments to and perfect the 
mechanism of a free and open market and a national market system.

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.

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

    On August 3, 1995, the Exchange solicited comments from the 
participants of the Intermarket Trading System. No comments were 
received prior to filing the proposed rule change with the Commission.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within 35 days of the publication of this notice in the Federal 
Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. 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. Sec. 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-95-03, Amendment No. # 1 
and should be submitted by September 5, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-20251 Filed 8-14-95; 8:45 am]
BILLING CODE 8010-01-M