[Federal Register Volume 63, Number 73 (Thursday, April 16, 1998)]
[Notices]
[Pages 18945-18946]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-10045]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39847; File No. SR-CSE-97-13]


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

April 10, 1998.

I. Introduction

    On November 13, 1997, the Cincinnati Stock Exchange, Inc. (``CSE'' 
or ``Exchange'') filed with the Securities and Exchange Commission (`` 
Commission'') pursuant to Section 19(b)(1) of the Securities Exchange 
Act of 1934 (``Act''),\1\ a proposed rule change which was subsequently 
amended on February 25, 1998.\2\ The

[[Page 18946]]

proposed rule change relating to market order exposure requirements was 
published for comment in the Federal Register on March 11, 1998.\3\ No 
comments were received on the proposal. For the reasons discussed 
below, the Commission is approving the proposed rule change as amended.
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    \1\ 15 U.S.C. 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.
    \3\ Securities Exchange Act Release No. 39720 (March 4, 1998), 
63 FR 11942 (March 11, 1998).
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II. Description of the Proposal

    The CSE is proposing to amend its Rule 11.9(u), Interpretation .01, 
concerning customer market order exposure requirements. Currently, 
under Interpretation .01, with certain exceptions, when the spread 
between the national best bid and offer is greater than the minimum 
price variation, a member must either immediately execute a market 
order at an improved price or expose that order on the exchange for a 
minimum of thirty seconds in an attempt to improve the price. The 
Exchange has determined, based on its experience with specialists 
quoting and trading in finer increments (i.e., \1/16\ point), that 
exposing a market order for thirty seconds creates additional risks to 
the specialists. The Exchange therefore proposed to require members, 
when the spread between the national best bid and offer is greater than 
the minimum price variation, to either immediately execute a market 
order at an improved price or expose the market order on the Exchange 
for a minimum of fifteen seconds (rather than the current thirty 
seconds) in an attempt to improve the price. The Exchange believes that 
a fifteen second exposure strikes a balance between the risks to 
specialists and the need to provide customers a meaningful opportunity 
for price improvement.

III. Discussion

    The Commission believes that the proposed rule change is consistent 
with the Act and the rules and regulations thereunder applicable to a 
national securities exchange, and, in particular with Section 
6(b)(5),\4\ which requires that the rules of an exchange be designed, 
among other things, to promote just and equitable principles of trade, 
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.
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    \4\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that, although the Exchange is reducing the 
amount of time a specialist must expose an order for price improvement 
from thirty seconds to fifteen seconds, the proposal nevertheless 
benefits investors by mandating that they receive price improvement 
opportunities. The Commission believes that providing investors an 
opportunity for price improvement facilitates order interaction and 
enhances the execution of customer orders, which is consistent with 
Section 6(b)(5) of the Act.

IV. Conclusion

    For the foregoing reasons, the Commission believes that the 
proposed rule change is consistent with the Act and the rules and 
regulations thereunder applicable to a national securities exchange. In 
addition, in approving this rule, the Commission notes that it has also 
considered the proposed rule's impact on efficiency, competition, and 
capital formation.\5\
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    \5\ 15 U.S.C. 78c(f).
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    It is therefore, ordered, pursuant to Section 19(b)(2) of the 
Act,\6\ that the proposed rule change (SR-CSE-97-13) be, and hereby is, 
approved.
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    \6\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-10045 Filed 4-15-98; 8:45 am]
BILLING CODE 8010-01-M