[Federal Register Volume 63, Number 150 (Wednesday, August 5, 1998)]
[Notices]
[Pages 41880-41882]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20871]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40274; File No. SR-CSE-98-01]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the Cincinnati Stock Exchange, Inc. To Amend Existing and to Institute 
New Trading Fees

July 29, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 41881]]

(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 2, 1998, 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 Exchange. On July 
15, 1998, the Exchange submitted to the Commission Amendment No. 1 to 
the proposed rule change.\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. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 corrected typographical errors in the 
filing. Letter from Adam W. Gurwitz, Vice President Legal, CSE to 
Kelly McCormick, Attorney, Division of Market Regulation. 
Commission, dated July 14, 1998.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to amend CSE Rule 11.10, which contains the 
Exchange's schedule of fees, to more equitably distribute technology 
enhancement costs amoung its members. The text of the proposed rule 
change is available at the Office of the Secretary, CSE and at the 
Commission.

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

1. Purpose
    The Exchange is revising its fee structure, delineated in CSE Rule 
11.10, to more equitably distribute technology costs among members. The 
CSE has incurred significant expense in enhancing its computer systems, 
including a migration to the TCP/IP protocol. The Exchange believes 
that these enhancements will improve the CSE's electronic trading 
environment and provide members with improved services. The new fee 
structure will partially offset these expenses and is intended to 
apportion the enhancement costs fairly.
    Specifically, the proposed rule change will increase the Designated 
Dealer Book fee from $15.00 to $25.00 per issue. This is a per issue 
fee paid by specialists to make markets on the CSE. By increasing the 
fee, the Exchange intends partially to offset increased technology 
costs by charging specialists who enjoy the benefits of this new 
technology on an issue by issue basis. To create an incentive for 
Designated Dealer to increase the number of issues traded on the 
Exchange, however, this fee will be lowered to $5.00 per issue where a 
Designated Dealer is the sole specialist. Moreover, the fee will 
decrease as a Designated Dealers increases the number of issues it 
trades on the Exchange.
    The proposed rule change will also alter the Exchange's port fee. 
In light of the Exchange's migration to the TCP/IP protocol, the 
proposed rule change will define the term ``Port'' as a TCP/IP address 
for purposes of the CSE's port charge. This charge will change from 
$100.00 to $200.00 per month to partially offset the software and 
hardware expenses incurred by the Exchange in the conversion.
    In addition, the CSE will add a new ``technology fee'' of $300.000 
per month applicable to all members. As the nation's only entirely 
electronic exchange, the CSE devotes significant resources to improving 
and enhancing its computerized environment. This fee will help offset 
expenses incurred by the Exchange in implementing new and improved 
technology, including migration to the TCP/IP protocol.
    Finally, the proposed rule change will increase the Exchange's 
transaction fee caps, that is, the level above which a member's 
transactions are no longer charged, for both agency and preferenced 
transactions, from 1,750,001 shares per day to 2,000,001 shares per day 
and will eliminate the $3.75 cap on non-preferenced Designated Dealer 
activity. Like other fee changes, additional revenue from these charges 
will partially offset the CSE's technology expenses.
2. Basis
    The proposed rule change is consistent with section 6(b) of the Act 
\4\ in general, and furthers the objectives of section 6(b)(5) \5\ in 
particular in that it is designated 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. It is also 
consistent with section 6(b)(4) \6\ in that it is designed to provide 
for the equitable allocation of reasonable dues, fees, and other 
charges among Exchange members by apportioning technology costs more 
fairly.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 15 U.S.C. 78f(b)(4).
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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 written comments were either solicited or received.

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

    The proposed rule change has become effective on filing, pursuant 
to section 19(b)(3)(A) of the Act \7\ and Rule 19b-4(e)(2) \8\ 
thereunder because it revises member fees. At any time within 60 days 
of the filing of the proposed rule change, the Commission may summarily 
abrogate such rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.\9\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(e)(2).
    \9\ In reviewing this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
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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, NW., Washington, DC 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. 552, will be

[[Page 41882]]

available for inspection and copying in the Commission's Public 
Reference Room. 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-98-01 and should be 
submitted by August 26, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-20871 Filed 8-4-98; 8:45 am]
BILLING CODE 8010-01-M