[Federal Register Volume 61, Number 245 (Thursday, December 19, 1996)]
[Notices]
[Pages 67086-67087]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-32233]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38046; File No. SR-CSE-96-05; Amendment No. 1]


Self-Regulatory Organizations; Notice of Filing of Amendment No. 
1 to Proposed Rule Change by The Cincinnati Stock Exchange Relating to 
Day Trading Margin Requirements

December 13, 1966.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on December 
5, 1996, the Cincinnati Stock Exchange (``CSE'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') Amendment 
No. 1 to 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

    On August 15, 1996, the CSE submitted to the Commission a proposing 
to implement Rule 6.2, Day Trading Margin.\1\ Amendment No. 1 
supplements proposed Rule 6.2 to add specific required maintenance 
margin for margin accounts. In addition, Amendment No. 1 amends Rule 
6.1(b) to make clear that the Exchange is only permitted to grant 
extensions of time under Regulation T of the Board of Governors of the 
Federal Reserve System\2\ for those firms for which the Exchange is the 
designated examining authority.\3\ The text of the proposed rule 
change, as revised by Amendment No. 1, is set forth below [new text is 
italicized; deleted text is bracketed]:
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    \1\ See Securities Exchange Act Release No. 37653 (September 6, 
1996), 61 FR 48185 (September 12, 1996).
    \2\ See 12 CFR 220.4(c)(3)(ii); and 12 CFR 220.8(d).
    \3\ The Commission notes that presently there are no firms for 
which the CSE is the designated examining authority.
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    Rule 6.1. (a) No change.
    (b) In Instances where the Exchange has been designated the 
appropriate examining authority, t[T]he Exchange is authorized to grant 
extensions of time under sections 220.4(c)(3)(ii) and 220.8(d) of 
Regulation T adopted by the Board of Governors of the Federal Reserve 
System as well as under Commission Rule 15c3-3(n).
    (c) The Margin which must be maintained in margin accounts of 
customers shall be as follows:
    (1) 25% of the current market value of all securities ``long'' in 
the account; plus
    (2) $2.50 per share or 100% of the current market value, whichever 
amount is greater, of each stock ``short'' in the account selling at 
less than $5.00 per share; plus
    (3) $5.00 per share or 30% of the current market value, whichever 
amount is greater, of each stock ``short'' in the account selling at 
$5.00 per share or above; plus
    (4) 5% of the principal amount of 30% or the current market value, 
whichever amount is greater, of each bond ``short'' in the account.
    Rule 6.2. Day Trading Margin
    (a) The term ``day trading'' means the purchasing and selling of 
the same security on the same day. A ``day trader'' is any customer 
whose trading shows a pattern of day trading.
    (b) Whenever day trading occurs in a customer's margin account the 
margin to be maintained shall be the margin on the ``long'' or 
``short'' transaction, whichever occurred first, as required pursuant 
to Exchange Rule 6.1(c). When day trading occurs in the account of a 
day trader, the margin to be maintained shall be the margin on the 
``long'' or ``short'' transaction, which ever occurred first, as 
required for initial margin by Regulation T of the Board of Governors 
of the Federal Reserve System, or as required pursuant to Exchange Rule 
6.1(c), whichever amount is greater.
    (c) No member shall permit a public customer to make a practice, 
directly or indirectly, of effecting transactions in a cash account 
where the cost of securities purchased is met by the sale of the same 
securities. No member shall permit a public customer to make a practice 
of selling securities which them in a cash account which are to be 
received against payment from another broker-dealer where such 
securities were purchased and are not yet paid for.

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 aspects of such statements.

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

    The purpose of the proposed rule change is to enhance the financial 
protections and therefore the integrity of the Exchange's markets by 
ensuring that customers maintain adequate margin reserves in their 
accounts. The proposed rule change requires day traders to maintain 
margins sufficient to cover their intraday ``long'' or ``short'' 
positions, depending upon which occurred first, for a particular day.
    In amendment No. 1 the Exchange sets forth the specific maintenance 
requirement for margin accounts. In addition, Amendment No. 1 revises 
the

[[Page 67087]]

Exchange's margin rules to conform with more recent amendments to 
Regulation T of the Board of Governors of the Federal Reserve System.
    Because the proposed rule change will enhance the financial 
protections and the integrity of the Exchange's markets, the Exchange 
believes that the proposed rule change, as amended, is consistent with 
Section 6 of the Act in general and with Section 6(b)(5) in particular 
in that it is designed to promote just and equitable principles of 
trade and to protect investors and the public interest.

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

    The Exchange believes the proposed rule change will impose no 
inappropriate burden on competition.

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

    One written comment was received with respect to the original 
proposed rule change. The Exchange believes that Amendment No. 1 
adequately addresses the concerns expressed in that written comment.

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-96-05 and should be 
submitted by January 9, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 96-32233 Filed 12-18-96; 8:45 am]
BILLING CODE 8010-01-M