[Federal Register Volume 65, Number 18 (Thursday, January 27, 2000)]
[Notices]
[Pages 4455-4457]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1971]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42352; File No. SR-CSE-99-05]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Cincinnati Stock Exchange Enabling Members to Trade 
NASDAQ/NM Securities

January 20, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 10, 1999, the Cincinnati Stock Exchange, Inc, (``CSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.

1. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The Exchange proposes to amend its rules to enable members to trade 
NASDAQ National Market (``NASDAQ/NM'') securities on the Exchange 
pursuant to unlisted trading privileges (``UTP'') under Section 12(f) 
of the Act. The text of the proposed rule change is available at the 
Office of the Secretary, the Exchange, 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 Exchange 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 Exchange 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 purpose of the proposed rule change is to amend the CSE Rules 
to permit members to trade NASDAQ/NM

[[Page 4456]]

securities on an UTP basis. This filing is made in conjunction with the 
Exchange joining the Unlisted Trading Privileges Plan (``UTP Plan'') 
governing the collection, consolidation and dissemination of quotation 
and transaction information for NASDAQ/NM securities.\3\ The majority 
of the proposed rule change relates to amendments to CSE Rules to 
accommodate the trading of NASDAQ securities, however, certain rule 
changes are housekeeping in nature.
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    \3\ See Securities Exchange Act Release No. 42269 (December 23, 
1999), 65 FR 799 (January 6, 2000).
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    The following is a list of the substantive rule changes to Chapter 
XI, ``Trading Rules,'' along with a statement of the purpose for the 
proposed change:
    1. Rule 11.1, ``Hours of Trading'' The changes to Rule 11.1 convert 
the hours of trading on the Exchange from Cincinnati local time to 
Chicago local time and provide in subparagraphs (b) and (c) for the 
inclusion of securities traded on a national securities association in 
the determination of trading hours for dually or multiply-traded 
securities.
    2. Rule 11.2. ``Unit of Trading'' The changes to Rule 11.2 reflect 
the inclusion of securities trading on a national securities 
association in determining the appropriate unit of trading.
    3. Rule 11.3. ``Price Variations'' The changes amend the stated 
minimum variation to reflect the current primary market practice, i.e., 
\1/16\ of $1.00 per share in stocks trading at or above $.50 per share 
and \1/32\ of $1.00 per share in stocks trading below $.50 per share. 
These variations will be revisited in any proposed rule changes to 
accommodate decimal pricing. The changes also include securities traded 
on a national securities association in determining the appropriate 
variation.
    4. Rule 11.4. ``Trading Ex-Dividend, Etc.'' The changes include 
securities traded on a national securities association in the exception 
language of the rule.
    5. Rule 11.5. ``Orders to be Reduced and Increased on Ex-Date'' The 
changes include securities traded on a national securities association 
in the exception language of the rule.
    6. Rule 11.7. ``Cabinet Trading'' The change amends the rule to 
reflect that the facilities are now located in Chicago, Illinois.
    7. Rule 11.9. ``National Securities Trading System'' (``System'')
    (a) The amendments to this subparagraph define the terms ``NASDAQ/
NM Security,'' ``NASDAQ System,'' and ``NASDAQ System BBO'' and include 
the term ``national securities association'' in the definition of 
``Approved Dealer.''
    (c) The changes to this subparagraph add the term ``NASDAQ System 
BBO'' to the definition of marketable limit order, except NASDAQ/NM 
securities from the opening guarantee of 1099 shares, and implement a 
NASDAQ/NM opening guarantee up to 1099 shares at an opening price that 
is on or between the first unlocked/uncrossed NASDAQ System BBO.
    (e) The changes to this subparagraph add specialists or market 
makers on other national securities associations to the entities that 
may submit bids or offers to the System.
    (h) The changes to this subparagraph ensure that the System 
displays the NASDAQ System BBO and permits NASDAQ System market makers 
telephonic, or other such access to the System as may be established 
between the Exchange and the NASDAQ System, and conversely, permits 
Designated Dealers to send orders from the Exchange via telephone, or 
by other such access as may be established between the Exchange and the 
NASDAQ System, to NASDAQ market makers.
    (j) This subparagraph is amended to include the NASDAQ System and 
the NASDAQ System BBO in the prohibition of executing a limit order 
only after a regular way transaction occurs in another market at a 
price equal or inferior to the limit price of the order.
    (n) The amendment to this subparagraph clarify that the public 
agency guarantee for 1099 shares at the opening price applies to 
securities other than NASDAQ/NM securities. However, the public agency 
guarantee applies to those market and marketable limit orders priced 
better than the first unlocked/uncrossed NASDAQ System BBO. In 
addition, the amendments add the NASDAQ System BBO to the obligations 
to execute on the basis of the ITS BBO. Finally, the amendments to this 
subparagraph clarify that the execution guarantees and requirements of 
CSE Rule 12.6, Customer Priority, apply only during the hours of 
trading on the Exchange (8:30 a.m. to 3:05 p.m. local Chicago time) 
during normal business days.
Interpretations and Policies
    .01  The amendment to the Market Order Exposure Requirement 
clarifies that the obligations of the interpretation apply to 
securities other than NASDAQ/NM securities.
    .02  The amendment to the Limit Order Protection Requirement 
clarifies that obligations of the interpretation apply to securities 
other than NASDAQ/NM securities.
2. Statutory Basis
    The Exchange believes the basis under the Act for the proposed rule 
change is the requirement under Section 6(b)(5) \4\ that an exchange 
have rules that are designed to promote just and equitable principles 
of trade, to remove impediments to, and perfect the mechanism of a free 
and open market 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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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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

    The Exchange has neither solicited nor received any written 
comments with respect to 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 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, 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, D.C. 20549-
0609. 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

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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 
available for inspection and copying at the Commission's Public 
Reference Room. Copies of such filing will also be available for 
inspection and copying at the principal office of the Exchange. All 
submissions should refer to File No. SR-CSE-99-05 and should be 
submitted by February 17, 2000.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-1971 Filed 1-26-00; 8:45 am]
BILLING CODE 8010-01-M