[Federal Register Volume 63, Number 47 (Wednesday, March 11, 1998)]
[Notices]
[Pages 11942-11943]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6173]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39720; File No. SR-CSE-97-13]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 by The Cincinnati Stock Exchange, Inc. 
Relating to Market Order Exposure Requirements

March 4, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ notice is hereby given that on November 13, 1997, The 
Cincinnati Stock Exchange, Inc. (``CSE'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') a proposed rule 
change relating to market order exposure requirements. On February 25, 
1998, the CSE filed

[[Page 11943]]

Amendment No. 1 to the proposed rule change.\2\ The proposal, as 
amended, is described in Items I and II 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.
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    \1\ 15 U.S.C. Sec. 78s(b)(1).
    \2\ See letter from Adam W. Gurwitz, Vice President Legal and 
Corporate Secretary, CSE, to Richard Strasser, Assistant Director, 
Division of Market Regulation, Commission, dated February 25, 1998.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The CSE proposes to amend Rule 11.9(u), Interpretation .01, 
concerning customer market order exposure requirements. Proposed new 
text is in italics; deleted text is in brackets.

Rule 11.9  National Securities Trading System

    (a) through (u) No Change.

Interpretations and Policies

.01  [Price Improvement Opportunity] Market Order Exposure Requirement

    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 market 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 interests 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 market order at an improved price or expose the market 
order on the Exchange for a minimum of [thirty] fifteen seconds in 
an attempt to improve the price.

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 statutory 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
    On June 17, 1997, the Exchange issued Regulatory Circular 97-07 
which, among other things, clarified a Member's obligations under Rule 
11.9 in light of the securities industry's move to finer trading 
increments (i.e., \1/16\ point). The Exchange has now determined, based 
on its experience with specialists quoting and trading in finer 
increments, that exposing a market order for thirty seconds creates 
additional risks to the specialists. The Exchange believes that a 
fifteen second exposure will balance the risks to specialists and the 
need to provide customers a meaningful opportunity for price 
improvement.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act in general,\3\ and furthers the objectives 
of Section 6(b)(5) \4\ in particular. The proposed rule change is 
designed to balance certain risks to specialists thereby promoting just 
and equitable principles of trade. In addition, the proposal will 
provide customers an opportunity for price improvement thereby 
furthering the mechanism of a free and open market and a national 
market system.
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    \3\ 15 U.S.C. Sec. 78f.
    \4\ 15 U.S.C. Sec. 78f(b)(5).
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B. 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

    Comments were neither solicited nor received 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 reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such 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, including whether the proposed rule 
change is consistent with the Act. 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 in 
the Commission's Public Reference Room. Copies of such filings will 
also be available for inspection and copying at the principal office of 
the CSE. All submissions should refer to the File No. SR-CSE-97-13 and 
should be submitted by April 1, 1998.

    For the Commission by the Division of Market Regulation, 
pursuant to the delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-6173 Filed 3-10-98; 8:45 am]
BILLING CODE 8010-01-M