[Federal Register Volume 66, Number 144 (Thursday, July 26, 2001)]
[Notices]
[Pages 39068-39069]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-18644]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44579; File No. SR-CSE-2001-03]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Cincinnati Stock Exchange, 
Inc. Relating to Transaction and Book Fees

July 20, 2001.
    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 June 28, 2001, the Cincinnati Stock Exchange, Incorporated (``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 
Commission is publishing this notice to solicit comment 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.
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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 the Exchange's schedule of book and 
transaction fees. Below is the text of the proposed rule change. 
Proposed new language is italicized; proposed deletions are in 
brackets.
* * * * *

Chapter XI

Trading Rules

Rule 11.10  National Securities Trading System Fees

A. Trading Fees (No Change to Text)

    (k) Tape ``B'' Transactions. The CSE will not impose a 
transaction fee on Consolidated Tape ``B'' securities. In addition, 
Members will receive a 50 percent [per cent] pro rata transaction 
credit of Net Tape ``B'' revenue.
    (l) Tape ``C'' Transactions. Tape ``C'' Transactions is defined 
as transactions conducted in Nasdaq securities pursuant to unlisted 
trading privileges (``UTP''). Members will be charged $0.001 per 
share per side ($1.00/1000 shares), with a maximum charge of $37.50 
per firm per side, for Tape C Transactions.
    (m) DD Issue/Book Fees. Designated Dealers will be charged a 
monthly book fee based on the following incremental schedule:

------------------------------------------------------------------------
                   Number of issues                       Fee per issue
------------------------------------------------------------------------
0 to 150..............................................   [$20.00] $25.00
151 to 300............................................   [$10.00] $15.00
301 [and higher] to 500...............................    [$5.00] $10.00
500 and higher........................................             $1.00
------------------------------------------------------------------------

    [(m)] (n) NSTS Internal Customer Port Charge. For purposes of 
this charge, a ``Port'' shall be defined as a TCP/IP address. For 
each port utilized on the CSE mainframe, a [$200.00] $350.00 per 
month charge will be assessed the member.
    [(n)] (o) Technology Fee. Every member of the Exchange shall be 
assessed a fee of [$300.00] $500.00 per month to help offset 
technology expenses incurred by the Exchange.
    [(o)] (p) Clearing Related Fee Passed Through To Member. (No 
change to text).
    [(p)] (q) SEC Fee (No change to text).

B. Membership Fees. (No Change to Text) \3\

C. Transaction Credit De Minimis. For all rebates applicable to Tape A 
and Tape B Transactions, no member shall be eligible for a rebate for 
any quarter unless the total rebate calculation for that quarter 
exceeds $500.00.
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    \3\ The Exchange inadvertently excluded Section B from the 
proposed rule text, which reflects no change in the current rule 
text. Telephone conversation between Jeffrey T. Brown, Vice 
President, Regulation and General Counsel, CSE, and Lisa Jones, 
Attorney, Division of Market Regulation, Commission, July 12, 2001.
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* * * * *

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 parts 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 proposing several amendments to various book and 
transaction fees in keeping with recent trends in the securities 
industry. The first proposed amendment would make two clarifications to 
CSE Rule 11.10(A)(k) (``Tape ``B'' Transactions''). The first 
clarification proposed by the Exchange changes the term ``percent'' to 
``percent,'' and the second clarification would add the word ``Net'' 
before the term `Tape ``B'' Revenue.' In addition, the Exchange 
proposes to add a provision to CSE Rule 11.10(A) as new subsection (1) 
entitled ``Tape ``C'' Transactions.'' This proposed section establishes 
a fee schedule for transactions in Nasdaq securities.
    The second proposed amendment would be to CSE Rule 11.10(A)(l) 
(``DD Issue/Book Fees'') in which the monthly book fees would increase 
by five dollars ($5.00) for certain incremental number of issues traded 
and decrease the monthly book fee to one dollar ($1.00) for the highest 
increment. The Exchange also proposes to amend the increments of 
issues. Book fees are charged to Designated Dealers for each issue in 
which they are registered as a specialist. This increase is necessary 
to offset the recent rise in regulatory and

[[Page 39069]]

surveillance costs. This section will also be relabeled as 11.10(A)(m) 
to accommodate the new subsection (A)(I).
    The third proposed amendment would be to CSE Rule 11.10(A)(m) 
(``NSTS Internal Customer Port Charge'') in which the Exchange proposes 
to increase the port charge from $200.00 per month to $350.00 per 
month. This proposed increase is necessary to offset recent increases 
in Exchange expenditures. This section will also be relabeled as 
11.10(A)(n) to accommodate the new subsection (A)(l).
    The fourth proposed amendment would be to CSE Rule 11.10(A)(n) 
(``Technology Fee'') in which every CSE Member would be assessed a fee 
of five hundred dollars ($500.00) a month, up from three hundred 
dollars ($300.00) per month. The increase in the Technology Fee is 
necessary to offset the increase in expenditures the Exchange has 
incurred and that the Exchange will continue to incur in the CSE's 
continuing efforts to provide the highest level of technology to its 
Members and the investing public. This section will also be relabeled 
as 11.10(A)(o) to accommodate the new subsection (A)(l). Subsections 
(A)(o) (``Clearing Related Fee Passed Through To Member'') and (A)(p) 
(SEC Fee) will be relabeled as (A)(p) and (A)(q), respectively, to 
accommodate the inclusion of proposed CSE Rule 11.10(A)(1) (``Tape 
``C'' Transactions''). However, there will be no changes to the rule 
text.
    The final amendment adds a new provision to CSE Rules which is 
entitled ``Transaction Credit De Minimis'' and will be codified at Rule 
11.10(C) (``Transaction Credit De Minimis''). This provision would 
require members to conduct a minimal amount of transactions per quarter 
in order to be eligible for a transaction credit for Tape A and Tape B 
transaction revenue under current CSE rules. This de minimis 
requirement is necessary to secure the efficiency and cost savings that 
the CSE transaction credit program encourages.
2. Statutory Basis
    The proposed rule change is generally consistent with section 6(b) 
of the Act.\4\ The proposed rule also furthers the objectives of 
section 6(b)(5) of the Act,\5\ particularly, in that it is designed 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, generally, in that it protects investors 
and the public interest. The proposal also is consistent with section 
6(b)(4) of the Act \6\ in that it is designed to provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
Exchange members by crediting members on a pro rata basis.
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    \4\ 15 U.S.C. 78f(b).
    \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 that is 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

    The CSE has neither solicited nor received any written comments on 
the proposed rule change.

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

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \7\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\8\ because the proposal is establishing or changing a due, 
fee or other charge. 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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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(2).
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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-2001-03 and should 
be submitted by August 16, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to the delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-18644 Filed 7-25-01; 8:45 am]
BILLING CODE 8010-01-M