[Federal Register Volume 62, Number 159 (Monday, August 18, 1997)]
[Notices]
[Pages 44024-44025]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21749]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38922; File No. SR-CSE-97-07]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by The Cincinnati Stock Exchange, Inc. Relating to Minor Rule 
Plan Violations

August 11, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on August 5, 1997, The Cincinnati Stock Exchange, Incorporated 
(``CSE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the Exchange.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. Sec. 78s(b)(1) (1998).
    \2\ 17 CFR 240.19b-4 (1991).
    \3\ This proposed rule change was originally filed on June 24, 
1997. The CSE subsequently submitted Amendment No. 1 which altered 
minor technical language in Item II. Letter from Adam W. Gurwitz, 
Vice President Legal and Secretary, CSE, to Karl J. Varner, Esq., 
SEC, dated August 4, 1997. This proposed rule change replaces SR-
CSE-97-06, which has been withdrawn. Letter from Adam W. Gurwitz, 
Vice President Legal and Secretary, CSE, to Katherine England, 
Assistant Director, SEC, dated June 23, 1997.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CSE hereby proposes to amend Exchange Rule 8.14 to expand its 
Minor Rule Violation Program. The text of the proposed rule change is 
below. Additions are italicized.

The Cincinnati Stock Exchange, Incorporated

Rule 8.14 Imposition of Fines for Minor Violation(s) of Rules
    No Change.
Interpretations and Policies
    .01 List of Exchange Rule Violations and Fines Applicable thereto 
Pursuant to Rule 8.14:
    (a)-(d) No Change.

[[Page 44025]]

    (e) Rule 4.2 and Interpretations thereunder related to the 
requirement to furnish Exchange-related order, market and transaction 
data, as well as financial or regulatory records and information.
    (f) Rule 11.9(c) related to the requirement to comply with 
quotation policies.

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 proposed rule change is to enhance the 
Exchange's Minor Rule Violation Program. Exchange Rule 8.14 provides 
for an alternative disciplinary regime involving violations of Exchange 
Rules that the Exchange determines are of a minor nature. The Minor 
Rule Violation Program provides the Exchange with the ability, but not 
the obligation, to address minor rule violations by imposing a fine, 
not to exceed $2500, on any member that the Exchange determines has 
violated such rule. Adding a particular rule violation to the Minor 
Rule Violation Program in no way circumscribes the Exchange's ability 
to treat violations of those rules through more formal disciplinary 
measures. The Minor Rule Violation Program simply provides the Exchange 
with greater flexibility in addressing rule violations appropriately. 
Section (e) of Rule 8.14 requires the Exchange from time to time to 
prepare a list of minor rule violations.
    As part of its ongoing effort to improve its regulatory program, 
the Exchange has determined that certain rule violations should be 
added to the Minor Rule Violation Program. The Minor Rule Violation 
Program currently includes the requirements of Exchange Rules 4.1 and 
4.2, concerning books and records, to submit trade data to the 
Exchange. The Exchange intends to clarify that a member must also 
provide financial and regulatory records in accordance with Rule 4.2 
and Interpretation thereunder as well as trade-related information.
    Similarly, the proposed rule change will include quotation policies 
set by the Exchange's Securities and Market Performance Committee and 
delineated by Regulatory Circular. Exchange Rule 11.9(c) requires 
Designated Dealers, the Exchange's multiple, competing specialists, to 
maintain continuous quotations throughout the trading day. Including 
these quotation requirements in the Minor Rule Violation Program will 
help the Exchange ensure compliance with its quotation requirements and 
spread parameters because the Exchange will have adequate regulatory 
flexibility in dealing with potential violations. This, in turn, will 
enhance the value of quotations made by the Exchange's multiple, 
competing specialists.
(2) 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 is designed to promote just and equitable 
principles of trade and to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Specifically, 
the proposed rule change will augment the Exchange's ability to police 
its market and will increase the Exchange's flexibility in responding 
to minor rule violations. The Exchange will be able to address 
appropriate minor rule violations promptly and efficiently through the 
minor rule procedures, without the need to initiate formal disciplinary 
proceedings.

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

    No comments were solicited in connection with the proposed rule 
change.

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

    Within 35 days of the date of 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 reason for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) by order approve such proposed rule change, or
    (B) institute proceedings to determined 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. People 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 in 
the Commission's Public Reference Room. Copies of the filing will also 
be available for inspection and copying at the CSE's principal offices. 
All submissions should refer to File No. SR-CSE-97-07 and should be 
submitted by September 8, 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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-21749 Filed 8-15-97; 8:45 am]
BILLING CODE 8010-01-M