[Federal Register Volume 65, Number 139 (Wednesday, July 19, 2000)]
[Notices]
[Pages 44843-44844]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18234]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43032; File No. SR-CSE-00-04]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Cincinnati Stock Exchange, 
Inc., Amending Its Rules To Mandate Decimal Pricing Testing

July 13, 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 July 10, 2000, 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 CSE. The CSE has 
designated this proposal as one concerned solely with the 
administration of the CSE under Section 19(b)(3)(A)(iii) of the Act,\3\ 
which renders the proposal effective upon filing with the Commission. 
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\ 15 U.S.C. 78s(b)(3)(A)(iii).
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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 its rules by adopting new CSE Rule 4.6 to 
mandate that member firms test computer systems in order to ensure 
preparedness for the industry's conversion to decimal pricing.
    The text of the proposed rule change is available upon request from 
the CSE or 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 regarding 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.

[[Page 44844]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    As the securities industry prepares for the conversion to decimal 
pricing, it will be necessary for various constituents of the 
securities industry to test their computer systems in order to avoid 
widespread problems. The CSE, in cooperation with the Commission and 
other self-regulatory organizations, has been working toward a 
successful transition to decimal pricing. The purpose of the proposed 
rule change is to require CSE member firms to participate in tests of 
computer systems designed to prepare for the industry's conversion to 
decimal pricing.
    The proposed rule change would create new CSE Rule 4.6 to require 
CSE members to participate in the testing of computer systems in a 
manner and frequency to be prescribed by the Exchange. It is the CSE's 
understanding that other self-regulatory organizations, including the 
National Association of Securities Dealers, Inc., the New York Stock 
Exchange, the American Stock Exchange, and the Chicago Board Options 
Exchange are also proposing rule changes to require testing by their 
members in connection with the industry's conversion to decimal 
pricing.
    The Securities Industry Association has undertaken to coordinate 
industry-wide computer testing to ensure that the securities industry 
is adequately prepared to convert to decimal pricing. Industry 
constituents to participate in the testing will include, among others, 
national securities exchanges, registered clearing corporations, data 
processors, and broker-dealers. Several industry-wide tests have been 
planned, the first of which took place in April 2000.
    The CSE will employ its new rule 4.6 to require that its members 
participate in these tests. New CSE Rule 4.6 further provides that any 
firm having an electronic interface with the Exchange would be required 
to conduct point-to-point testing with the Exchange. Point-to-point 
testing refers to tests conducted between two entities, in this case a 
member having an electronic interface and the Exchange.\4\
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    \4\ A member that has its electronic interface with the Exchange 
through a service provider may be exempted from this requirement if 
such service provider conducts successful tests with the Exchange on 
behalf of the firms its serves, and if the member conducts 
successful point-to-point testing with the service provider by a 
time to be designated by the Exchange.
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    Under the proposal, the Exchange would require member firms to 
participate in industry-wide testing to the extent such firms can be 
accommodated by the testing schedule. The Exchange would exercise its 
authority under new CSE Rule 4.6 to the extent it deems that the 
participation of particular members in the testing is important, and to 
the extent those members would otherwise not voluntarily choose to 
participate.
    The proposed rule change would also allow the CSE to require 
members to file reports with the CSE concerning the required tests in 
the manner and frequency determined by the Exchange. A member subject 
to new CSE Rule 4.6. who failed to participate in the mandatory tests 
or who failed to file any required reports, would be subject to 
disciplinary action pursuant to Chapter VIII of the Exchange's 
rules.\5\
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    \5\ See CSE Rules, Chapter VIII, ``Discipline.''
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    The proposed new CSE Rule 4.6 would expire automatically upon the 
completion of decimal pricing implementation.
2. Statutory Basis
    The CSE believes proposed new CSE Rule 4.6, whose purpose is to 
ensure the participation of Exchange members in important testing prior 
to the securities industry's conversion to decimal pricing, is 
consistent with section 6(b) of the Act \6\ in general and further the 
objectives of section 6(b)(5) \7\ in particular in that it is designed 
to promote just and equitable principles of trade and to protect 
investors and the public interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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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 burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Because the foregoing rule change is concerned solely with the 
administration of the Exchange, it has become effective pursuant to 
section 19(b)(3)(A)(iii) of the Act \8\ and subparagraph (f)(3) of Rule 
19b-4 thereunder.\9\ At any time within 60 days of the filing of such 
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.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(3).
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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 20549-0609. 
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 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 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 
Exchange. All submissions should refer to File No. SR-CSE-00-04 and 
should be submitted by August 11, 2000.

    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. 00-18234 Filed 7-18-00; 8:45 am]
BILLING CODE 8010-01-M